Class Action Defense

December 7, 2022 by Gerald L. Maatman, Jr.

The 2022-2023 Judicial Hellholes Report From The American Tort Reform Association On The Worst Jurisdictions For Defendants

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

Duane Morris Takeaways: Every year the American Tort Reform Association (“ATRA”) publishes its “Judicial Hellholes Report,” focusing on litigation issues and identifying jurisdictions likely to have unfair and biased administration of justice. The ATRA recently published its 2022-2023 Report and Georgia is identified as the most disadvantageous jurisdiction in the country for corporate defendants, the highest ever ranking for the state. Readers can find a copy here and the executive summary here.

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

The 2022 Hellholes

In its recently released annual report, the ATRA identified 8 jurisdictions on its 2022 hellholes list – which, in order, include: (1) Georgia (with massive verdicts bogging down business and third-party litigation financing is playing an increasing role in litigation); (2) Pennsylvania (especially in the Philadelphia Court of Common Pleas and the Supreme Court of Pennsylvania); (3) California (with Proposition 65 lawsuits thriving and a huge overall volume of lawsuits, in addition to Private Attorney General Act (PAGA) litigation and Americans with Disability Act (ADA) accessibility lawsuits; (4) New York (with “no-injury” consumer class action lawsuits and the highest volume of lawsuits under the ADA); (5) Illinois (particularly in Cook County as another “no-injury required” hotspot and lawsuits stemming from the Illinois Biometric Information Privacy Act); (6) South Carolina (particularly in asbestos litigation); (7) Louisiana (including deceptive lawsuit advertising practices, coastal litigation, and COVID-19 litigation); and (8) St. Louis, Missouri (with focuses on asbestos litigation and “phantom damages”).

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

The 2023 “Watch List”

The ATRA also included 3 jurisdictions on its “watch list,” including Florida (the ATRA noted that Florida has been making strides to mitigate lawsuit abuse, but issues of inflated medical damages and deceptive trial lawyer advertising still remain); New Jersey (with a powerful trial bar), and Texas (particularly the Court of Appeals for the Fifth District, which the ATRA opined has developed a reputation for being pro-plaintiff and pro-liability expansion).

In addition, the ATRA recognized that several jurisdictions made significant positive improvements this year, highlighting decisions issued by Florida Supreme Court, the U.S. Court of Appeals for the Fourth Circuit, and the Arizona Supreme Court. The ATRA also noted that nine state legislatures enacted positive civil justice reforms this year.

Implications For Employers

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

November 30, 2022 by Class Action Defense

California Attorney General Utilizes Novel Nuisance Theory From Opioid Litigation Against Manufacturers Of “Forever” Chemicals In New Government Enforcement Action

By Sharon L. Caffrey and Gerald L. Maatman, Jr.

Duane Morris Synopsis—The Attorney General of California has filed a first of its kind lawsuit against several named manufacturers and “John Doe” manufacturers of per- and polyfluoroalkyl substances (commonly known as PFAS and PFOA) based upon the same public nuisance theory used by several attorneys general and local governments against opioid manufacturers, distributors, and pharmacies in nationwide class action litigation. Claiming that defendants knew PFAS, PFOA, and related chemicals were harmful but put the chemicals into the market and into the environment with insufficient testing, and claiming the PFAS can be found in the bloodstreams of virtually every Californian, the Attorney General is seeking both equitable and financial relief, including an injunction against further sales of products containing PFAS and PFOA, remediation, and monetary damages. The lawsuit is a blockbuster of ambitious claims, and given the ubiquitous nature of PFAS and PFOA, this case is one of potential concern for any manufacturer whose products or processes may result in the ingestion or release of PFAS and PFOA.

Case Background

On behalf of the People of California, the California Attorney General is seeking remediation and damages of soil and groundwater allegedly contaminated with PFAS and PFOA. PFAS and PFOA are sometimes referred to as “forever chemicals” because of their bio-durability in soil, groundwater, and in the human body. In a nod to the playbook of successful class actions against another industry, the Attorney General’s action relies on the same public nuisance theory used in the opioid litigation, as well as traditional product liability failure to warn theories of liability.

PFAS and PFOA are found in a “wide array of products and industrial processes,” including products as common as food packaging, carpet and fabric coatings and cleaning products. The claim centers on the release of PFAs and PFOA into drinking water sources, including bays, lakes and streams. Claiming exposure to PFAS and PFOA contributes to certain cancers, adverse pregnancy outcomes, delayed puberty, and infertility, among other harms, the Attorney General’s suit notes that PFAS and PFOA are ingested orally and persist in the body because they are not readily broken down.

In support of his claims, the Attorney General relies primarily on toxicology studies and some in vitro studies, as well as very limited human epidemiologic evidence that PFAS and PFOA are associated with certain adverse health outcomes. The complaint also notes that the California Office of Environmental Health Hazard Assessment (OEHHA) listed PFOA and PFOS as chemicals known to cause reproductive toxicity under the Safe Drinking Water and Toxic Enforcement Act of 1986, commonly known as “Prop 65.” The Complaint further asserts that the EPA intends to issue enforceable National Primary Drinking Water Regulations (NPDWRs) for drinking water contaminants, to include PFAS and PFOA by the end of 2022. Because PFAS and PFOA are not readily broken down in soil, water or the human body, they are found in over 97 percent of all Californians’ bloodstreams. Finally, the Attorney General’s lawsuit claims that defendants put products containing PFAS and PFOA in the stream of commerce without adequate testing or warnings of the harms they could cause, or while being aware of the potential harms and not warning the public.

Implications For Manufacturers

At present California is the only state that has filed a claim against manufacturers who allegedly put PFAS and PFOA into groundwater and soil. California’s unique Prop 65 is part of the basis for the Attorney General’s claim. However, if the U.S. Environmental Protection Agency issues enforceable limits on PFAS and PFOA in drinking water, similar suits will inevitably arise in other jurisdictions. Companies who believe they may be at risk for similar claims should consult with counsel about the best way to mitigate any exposure for such litigation.

November 30, 2022November 30, 2022 by Class Action Defense

Just In Time For The Holidays: New York Federal Court Gifts The Denial Of Plaintiffs’ Rule 23 Class Certification Motion In FDNY Bias Lawsuit

By Gerald L. Maatman, Jr., Katelynn Gray and Elizabeth M. Lacombe

Duane Morris Takeaways – In Local 3621 Of The EMS Officers Union, et al. v. City Of New York, Case No. 18 Civ. 4476, 2022 U.S. Dist. LEXIS 212218 (S.D.N.Y. Nov. 22, 2022), the City successfully defeated a Rule 23 motion for class certification brought by a group of EMS officers and Unions who alleged that the promotional process to leadership positions resulted in disparate and discriminatory promotional practices in violation of federal, state, and local law. The ruling is a primer for employers on how to dismantle employment discrimination class claims.

Background Of The Case

Plaintiffs Renae Mascol, Luis Rodriguez, Local 3621, EMS Officers Union, DC-37, AFSCME and AFL-CIO (collectively, “Plaintiffs”) brought a class action on behalf of its members and all other similarly-situated individuals against Defendants, the City of New York, the New York City Fire Department, and the Department of Citywide Administrative Services (collectively, the “City”), alleging Defendants’ subjective promotional policies and practices led to the denial of promotions to qualified applicants based on their race, sex, gender and/or disability and/or circumstances that led to the applicant taking a leave of absence.

Plaintiffs sought class certification pursuant to Rule 23(a) and (b)(2) of the Federal Rules of Civil Procedure on behalf of three classes, including: (1) EMS officers who are non-white, female, have received a reasonable accommodation, or have taken a leave of absence due to a disability or pursuant to FDNY time and leave policies; (2) non-white and/or female EMS officers; and (3) EMS officers who have received a reasonable accommodation or taken a leave of absence because of a disability and/or have taken a leave of absence pursuant to FDNY time and leave policies.

In support of their motion, Plaintiffs submitted an expert report from a forensic labor economist who concluded there was “statistically significant evidence of discriminatory promotional disparities” and that the statistical evidence showed that the common promotional policy “resulted in disparities that commonly disadvantaged the class.” Id. at *7. Plaintiffs also submitted anecdotal evidence in the form of declarations from EMS officers testifying to their experiences with the City’s promotional processes.

Defendants opposed these theories and submitted rebuttal evidence with their own expert report. They argued that Plaintiffs’ expert’s analysis was flawed, largely because it was based in part on data that was irrelevant to the analysis and in other instances because it failed to consider other, relevant data. Moreover, Defendants’ expert concluded that the relevant data led to a determination that, when evaluating promotions over the same time period, white men were actually less likely to be promoted than similarly-situated non-white officers; men were less likely to be promoted than women; and whites were less likely to be promoted than non-whites.

The Court’s Ruling Denying Class Certification

In denying Plaintiffs’ motion for class certification, Judge Lewis J. Liman of the U.S. District Court for the Southern District of New York conducted an extensive review of the promotional process at issue, as well as the expert reports and anecdotal evidence offered by the parties. Ultimately, the Court concluded that Plaintiffs had failed to sufficiently demonstrate the element of commonality under Rule 23(a)(2).

With respect to Plaintiffs’ disparate impact claims, the Court explained that Plaintiffs cannot simply point to the promotional process generally as the basis for the disparate impact, but must identify the “specific” employment practices allegedly responsible for the at-issue disparities. In this case, there were several distinct steps in the promotional process, which combined subjective criteria with standardized eligibility criteria. Significantly, an applicant could fail to be promoted at any one of these steps. As such, the Court opined that in order to state a disparate impact claim based on a failure to promote, Plaintiffs were required to identify which specific employment practice was responsible for the statistical disparities.

The Court reasoned that Plaintiffs’ expert’s analysis did not help them win the day, where it merely showed a racial and gender disparity with respect to the individuals holding leadership positions but failed to identify what aspect of the promotional process, if any, resulted in those disparities. Moreover, the Court found that Plaintiffs’ anecdotal evidence did more harm than good, underscoring the individualized nature of each alleged incident of discrimination where each declaration identified a different form of discrimination and a different course of conduct. The Court ultimately determined that Plaintiffs had failed to show that Defendants had used any of the cited employment practices to discriminate against the proposed class or that such practices had a discriminatory impact, holding that “the question of which of these specific employment practices has a discriminatory impact on the applicant is largely an individualized inquiry.” Id. at *25.

Plaintiffs’ disparate treatment claim fared no better for similar reasons, as the Court again noted that the statistical evidence from Plaintiffs’ expert did not offer “significant proof of a pattern or practice of unlawful discrimination” and failed to account for non-discriminatory explanations for any disparities. Plaintiffs’ primary evidence, that of anecdotal evidence from declarants, was similarly insufficient to salvage their claims because it raised “individual rather than common questions.” Id. at *26.

Implications For Employers

The ruling in Local 3621 Of The EMS Officers Union emphasizes the value of crafting and implementing detailed and thoughtful employment policies and procedures that utilize both objective and subjective measures in an effort to reduce or eliminate the influence of potential bias (implicit or otherwise) when evaluating employees for promotional opportunities. Moreover, ensuring that those policies and procedures are reduced to writing, provided to those employees who might have occasion to evaluate others for promotional opportunities, and implemented appropriately will provide a strong defense to discrimination claims and may, as it did here, serve to dismantle a potential class claim based on generalized allegations of process-based discriminatory conduct.

November 29, 2022December 1, 2023 by Gerald L. Maatman, Jr.

Sixth Circuit Denies Writ Of Mandamus In Opioid Class Actions For District Court’s Order That Pushes Discretion Under Rule 16(b) to the Edge

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

Duane Morris Takeaways: In the proceeding entitled In Re National Prescription Opiate Litigation, No. 21-4051, 2022 U.S. App. LEXIS 31328 (6th Cir. Nov. 10, 2022), the Sixth Circuit denied a petition for writ of mandamus regarding a District Court’s Scheduling Order in the giant opioid multidistrict class action and its allowance of the late pleadings amendments as to new defendants, Meijer Distribution, Inc., and Meijer Stores Limited Partnership (“Meijer Defendants”). The newly-added Meijer Defendants argued that the District Court violated the Rule 16(b) of the Federal Rules of Civil Procedure by allowing Plaintiffs to improperly join them in the ongoing 3-year old case without first seeking leave of court and without demonstrating good cause. The Sixth Circuit held that the District Court acted within its broad discretion and did not violate the Federal Rules of Civil Procedure because it provided a cut-off date that allowed for the specific amendments. The Sixth Circuit explained “[t]hough unconventional, the District Court’s actions are not so extraordinary as to warrant mandamus.” Id. at *1. The decision illuminates the broad discretion that district courts enjoy in managing class action litigation and the important role that scheduling orders play throughout the entire litigation.

Case Background

In July 2018, Plaintiffs filed the underlying lawsuit against a group of pharmacies. The case was removed to federal court and ultimately became part of the opioid multidistrict class action proceeding entitled In Re National Prescription Opiate Litigation, 1:17-MD-2804 (N.D. Ohio 2017) (“MDL”).

Significantly, in the underlying case, the district court entered an order on May 3, 2018, which amended its Case Management Order and provided that “‘[i]f a case is later designated as a bellwether for motion practice or trial, a separate CMO will be entered that will provide further opportunity to amend.’” (“2021 Bellwether Order”). See Petition at 4-5.

In 2021, the District Court selected the underlying case to proceed as a bellwether case against the pharmacies. See Sixth Circuit Order at 1. Subsequently, on May 19, 2021, Plaintiff filed a supplemental pleading, adding the Meijer Defendants to the underlying case. See id.; Petition at 5. The amendments were made nearly three years after Plaintiff filed suit and more than 26 months after the deadline to add new defendants.

After unsuccessfully moving to strike the Meijer Amendments and certify the Court’s 2021 Bellwether Order for interlocutory appeal, on November 9, 2021, Defendants filed a petition for a writ of mandamus with the Sixth Circuit. See Petition at 7. In the Petition, the Meijer Defendants argued that the District Court allowed Plaintiff to add the Meijer Defendants years after the deadline for amending pleadings passed and without requiring Plaintiff to demonstrate good cause, as required by Rule 16(b) of the Federal Rules of Civil Procedure. See Petition at 1. The Meijer Defendants requested that the Sixth Circuit issue a writ ordering the District Court to strike the untimely amendments and dismiss the Meijer Defendants from the case. See id. at 2.

The Sixth Circuit’s Ruling Denying The Writ Of Mandamus

The Sixth Circuit denied the writ of mandamus. It held that the District Court’s order, while “unconventional,” fell within the parameters of Rule 16(b). See Sixth Circuit Order at 1. The Court of Appeals explained that Rule 16(b) requires that “scheduling orders limit the time to join other parties” and the District Court’s 2021 Bellwether Order “explicitly provided permission for plaintiffs to amend their complaint if their case was selected as a bellwether.” Id. The Sixth Circuit reasoned that because Plaintiffs exercised their right to amend after the underlying case was chosen as a bellwether, Plaintiffs did not need to seek permission from the District Court. Id. at 2.

The Sixth Circuit noted that the 2021 Bellwether Order allowed plaintiffs to amend whenever their case was selected as a bellwether, and there was no cut-off for amendments. Id. The Sixth Circuit acknowledged that, under the 2021 Bellwether Order and without any cut-off date, the amendments could have gone differently (i.e., made on the eve of trial or adding a defendant that was completely new to the litigation). Id. at 2. Instead, the Sixth Circuit determined that the Meijer Defendants suffered little, if any, prejudice. Id. at 2-3. Thus, the Court of Appeals explained, “[t]hat unusual aspect of the scheduling order did not clearly violate Rule 16 because it provided some limit (when the case was selected as a bellwether), although the order went right to the edge of the district court’s discretion under Rule 16.” Id. at 2.

In denying the writ, the Sixth Circuit held that the Meijer Defendants “ha[ve] shown that the district court’s scheduling order was unconventional but not a judicial usurpation of power nor a clear abuse of discretion.” Id. at 3.

Implications For Companies

The Sixth Circuit’s order recognizes the broad discretion that district courts have in managing their dockets and illustrates the importance that scheduling orders play in all types of cases, and specifically in MDLs and class actions. Companies should pay close attention to all of the proposed deadlines included in any scheduling orders, and try to prevent these types of amendments from being entered at the outset.

November 28, 2022December 1, 2023 by Gerald L. Maatman, Jr.

Ohio State Wins More Than Just Games, As The Ohio Court of Appeals Reverses Class Certification In Favor Of The University

By Gerald L. Maatman, Jr., Jennifer A. Riley, Shaina Wolfe

Duane Morris Synopsis – In Smith v. Ohio State University, 2022-Ohio-4101 (Ohio App. Nov. 17, 2022), The Ohio State University successfully appealed an Ohio Court of Claim’s (“trial court”) Order granting class certification in a lawsuit brought by a former undergraduate student. The former student alleged that when the university only offered online classes due to COVID-19, it breached its contract by keeping all the tuition payments from her and other students without giving them the robust in-person experience promised when they initially paid their tuition bills. The Ohio Court of Appeals held that while the trial court has broad discretion in granting class certification, it failed to determine proof of injury and economic damages relative to the former student and potential class members. In crafting a class certification defense strategy, especially in a breach of contract case where the injury and damages typically are in play, employers should focus on the lawsuit basics when opposing class certification, i.e., demanding that plaintiffs show causation and injury in fact.

Case Background

Plaintiff, a former college student, filed a lawsuit alleging that Defendant, The Ohio State University (“OSU”), breached its contract and received unjust enrichment in Spring 2020 by failing to partially refund students their tuition and fees after transitioning from their robust, in-person education to “subpar” online education during COVID-19. Id. at 4-5.

In June 2021, Plaintiff moved for class certification. Id. at 5. After briefing and oral argument, the trial court granted Plaintiff’s motion and certified a class consisting of all undergraduate students enrolled in classes at Defendant’s Columbus campus during the Spring 2020 semester. Notably, the trial court found that the class suffered the same injury, i.e., losing the benefit of in-person classes and access to the campus. Id. at 9-10.

In appealing the trial court’s decision, Defendant raised several arguments for why the trial court’s decision was incorrect. Significantly, Defendant’s main, and ultimately successful, arguments focused on the trial court’s failure to conduct the “rigorous analysis” required by Ohio Civil Rule 23 (like Federal Rule of Civil Procedure 23) in determining whether Plaintiff had satisfied the prerequisites for class certification. Id. at 10-11.

The Court Of Appeals’ Ruling Reversing Class Action Certification

The Ohio Court of Appeals agreed with Defendant and reversed the trial court’s order granting class certification for three reasons.

First, the Court of Appeals found that the Plaintiff failed to present sufficient evidence of an economic injury. Id. at 17-18. Instead, the trial court simply assumed that a “benefit” was lost based only on the fact Defendant closed its campus and switched to remote classes and services in response to the pandemic. Id. at 18.

Second, the Court of Appeals found that the trial court failed to consider Defendant’s arguments and evidence contesting proof of injury. Id. at 18-19. Defendant submitted an expert report that included evidence that students paid the same for in-person and online learning and that the in-person teaching modality carried the possibility of substantial remote instruction even in a normal semester. Id. at 19. Meanwhile, Plaintiff submitted no expert testimony regarding how and or whether other students were injured in this case. Id. Indeed, Plaintiff’s expert’s report excluded any survey questions or consideration of market preferences during an emergency such as the pandemic that forced the closure. Id.

Third, the Court of Appeals found that the trial court’s analysis of Plaintiff’s unjust enrichment claim was merely folded into the same generalized injury analysis without any individualized consideration. Id. at 19-20.

In holding that the trial abused its discretion, the Court of Appeals reasoned that, “[t]he trial court, in assuming an injury from the fact of closure and termination of in-person classes, did not assess these complicated and difficult considerations, particularly as they relate to whether [Plaintiff] presented any common evidence — or even a method to possibly determine — that class members suffered an economic injury considering the effect of the pandemic.” Id. at 20. Further, the Court of Appeals opined that “having accepted the closure of campus and temporary termination of in-person classes and services as an injury per se, and having failed to consider how the pandemic affects class certification in this case at all, the trial court did not undertake a rigorous analysis with respect to the number and nature of individualized inquires that might be necessary to establish liability with respect to both tuition and fees.” Id.

Implications

In class actions asserting breach of contract claims, it is not uncommon for plaintiffs to seek class certification before developing their case through affidavits from other individuals and expert testimony. Employers can use this to their advantage by attacking causation and damages. This strategy may not only hinder a plaintiff from notifying potentially thousands of other putative class members of the claims, but also potentially saving money through limited discovery.

November 23, 2022December 1, 2023 by Gerald L. Maatman, Jr.

Illinois Court Finds That Collective Action Certification In A Wage & Hour Case Demands More Than Barebones Affidavits When Balanced Against Facially Lawful Policies

By Gerald L. Maatman, Jr., Gregory Tsonis, Shaina Wolfe

Duane Morris Synopsis- In Roberts, et al. v. One Off Hospitality Group, Ltd., Case No. 21-CV-05868 (N.D. Ill. Nov. 10, 2022), a group of restaurants successfully defended against the proposed conditional certification of a collective action under the Fair Labor Standards Act (“FLSA”) in a lawsuit brought by a bartender. In a win for the defense at a stage where plaintiffs generally have a low evidentiary burden, the Court determined that barebones affidavits fall short of what a Plaintiff must show in terms of proof to anchor a conditional certification order. While Plaintiff alleged that the restaurants’ policy off-the-clock work and overtime policies violated the FLSA, Judge Virginia M. Kendall of the U.S. District Court for the Northern District of Illinois determined that Plaintiff did not make the “modest factual showing” that other similarly situated employees experienced the allegedly common, unlawful policy. The decision demonstrates the importance and value in maintaining up-to-date lawful employee handbooks, and specifically, policies on wages and overtime.

Case Background

Plaintiff, an hourly non-exempt bartender, filed lawsuit alleging that One Off Hospitality Group — the owner and operator of several popular restaurants including Publican and Big Star — and several executives (“Defendants”) violated the FLSA and other Illinois wage and hour laws. She alleged that Defendants failed to properly pay her by requiring her to clock-in and clock-out at the times of her scheduled shift, regardless of the time she actually worked, to avoid paying overtime compensation. She further alleged that Defendants did not pay their employees for performing off-the-clock work and/or offered gift cards as compensation instead of cash. When she recorded her overtime work, Plaintiff claimed that management reprimanded her for violating internal company policy.

On July 14, 2022, Plaintiff moved, pursuant to § 216(b) of the FLSA, for conditional certification of a collective action of all current and former hourly non-exempt employees who worked within Defendants’ restaurants. In support of her motion, Plaintiff attached only two sworn declarations. Plaintiff’s declaration focused on her unique experience, and detailed the compensation structure and missed overtime hours she experienced. Plaintiff also included a declaration from a former Floor Supervisor and Assistant General Manager that worked in Defendants’ restaurants, which focused on the company’s policy of requiring employees to work off the clock. In opposition, Defendants put forth their Employee Handbook and emphasized that their written, uniform policy at every location prohibited off-the-clock work. Defendants also included sworn declarations from employees and managers stating the company policy and the repercussions for engaging in off the clock work.

The Court’s Ruling Denying Conditional Certification

The Court denied Plaintiff’s motion for conditional certification. It found that Plaintiff had not made a “modest factual showing” that she and other employees were victims of a common policy or plan that violated the law. Id. at 3.

After analyzing the evidence, the Court held that Plaintiffs’ sworn declarations were insufficient and that she needed other corroborative evidence. Notably, Court emphasized that, “[c]ritically absent are affidavits from any other similarly situated employees who worked at the defendants’ restaurants.” Id. at 4. Significantly, the Court explained that “[t]he need for additional support is particularly pronounced where, as here, the defendants maintained a facially lawful policy.” Id. The Court held that “‘modest factual support’ demands more than the barebones affidavits provided.” Id.

Implications for Employers

The Court’s decision in denying conditional certification is not an outlier, but over the past several years, nearly 80 percent of such motions have been granted in federal court due to the low burden applicable to § 216(b) of the FLSA.

Judge Kendall’s decision underscores the value of generally maintaining Employee Handbooks and, specifically, policies regarding wages and overtime. In addition to providing clear guidelines to employees on what is allowed, these policies provide the first line of defense in FLSA lawsuits seeking to groups of allegedly similarly situated employees, particularly where plaintiffs marshal minimal evidence that certification of a collective action is appropriate.

November 23, 2022 by Gerald L. Maatman, Jr.

California Callout: New 2023 Privacy Regulations Coming Soon

By Gerald L. Maatman, Jr., Jennifer Riley, Brandon Spurlock, and Alex W. Karasik

Duane Morris Synopsis: On the heels of California’s enactment of the California Consumer Privacy Act (“CCPA”) in 2020, and after two legislative bills that proposed to continue the employer exemption failed, employers will now need to comply with all requirements of the CPRA (“California Privacy Rights Act”) effective January 1, 2023. California-based employers now face these strict privacy requirements in the existing minefield of nuanced employment laws.

Legislative Background

The CCPA is often considered the most stringent data privacy law in the United States. This landmark law established privacy rights for California consumers, including: (1) the right to know about the personal information a business collects about them and how it is used and shared; (2) the right to delete personal information collected from them (with some exceptions); (3) the right to opt-out of the sale of their personal information; and (4) the right to non-discrimination for exercising their CCPA rights. (See https://oag.ca.gov/privacy/ccpa.).

Currently, data collected from workers is exempt from all but two provisions of the CCPA: (i) employers must provide an initial disclosure to all employees at or prior to the point of collection, and (ii) employees still have a right to statutory damages in the event of a data breach. “Employees” is a term that casts a wide net. It includes job applicants, business owners, officers, directors, medical staff members, independent contractors, emergency contacts and beneficiaries.

Two separate California state bills sought to continue the employer exemption: (1) AB 2891, for an additional three years; and (2) AB 2871, for an indefinite time period. Neither bill was passed by the Legislature in its final 2022 session. Accordingly, with the exemption expiring, employers must now fully comply with the former CCPA’s requirements, as the new CPRA comes into effect.

Employer Obligations

First, employees are now afforded various rights, including: (1) a right to request access to their personal information and information about how automated decision technologies work; (2) a right to correct inaccurate personnel information; (3) the right to request that an employer delete their personal information, including the obligation that employers must also notify third parties to whom they have sold or shared such personal information of the consumer’s request to delete; (4) the right to limit the use and disclosure of sensitive personal information to that which is necessary to perform the services or provide the goods reasonably expected by an average consumer who requests such goods and services.

Notice Obligations

Employers should be mindful of particular notice obligations under the CPRA. These include the: (1) requirement of notice at collection; and (2) requirement of a privacy policy. Regarding the notice at collection, employers are required to give employees, applicants, and contractors notice at the time they collect the information if they plan to collect, use, or disclose that personal information, while also disclosing the categories of personal information. The privacy policy is comprehensive and must disclose categories of personal information collected over the 12 months before the policy’s effective date. The policy also must disclose sources from which personal information is collected, the business purpose for the collection, categories of third-parties to whom personal information is disclosed; and categories of personal information sold or shared. And employers are obligated to post the privacy policy online where it is accessible to employees, applicants, and contractors.

Data Governance

To ensure compliance with the CPRA, it is crucial that employers understand where personal information is located within their businesses. It behooves them to undertake a data inventory or data mapping exercise to assess how and where relevant information is stored and/or transferred. Employers should also take stock of their records retention policies to ensure compliance, and also develop an internal framework to handle requests from employees for access and/or deletion.

Implications For Employers

Employers who have operations in California should immediately take heed of these new obligations. It is inevitable that the Plaintiff’s bar will be scrutinizing these practices come January 2023. Accordingly, employers should determine whether they are covered by the CPRA, and prepare privacy policies that are fully compliant.

November 16, 2022 by Class Action Defense

When Consistency Creates Commonality

By Jonathan A. Segal

Duane Morris Takeaways: Guest blogger Jonathan A. Segal – one of the deans of the employment bar in the United States – offers his ruminations on the challenges that employers face in class action litigation.

I recently attended an employment law webinar. It got me thinking about employers and the challenge of dealing with workplace class action litigation.

At one point, when discussing how to minimize exposure to discrimination claims, a seminar speaker opined there are three words to keep in mind at all times: “Consistency, Consistency and Consistency.”

When it comes to performance management, if employers treat employees consistently when the circumstances are the same or substantially similar, they can mitigate exposure to individual discrimination claims. The consistency ensures that helpful comparators exist, which employers can use to defend an alleged employment discrimination claim. Of course, and as important, the consistency here is critical to a strong workplace culture.

However, consistency is not always desirable. Huh? Stay with me.

Rule 23 of the Federal Rules of Civil Procedure 23 provides:

Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if:
- the class is so numerous that joinder of all members is impracticable;
- there are questions of law or fact common to the class;
- the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
- the representative parties will fairly and adequately protect the interests of the class.

As is evident, consistency may help satisfy the second requirement relative to common issues of fact or law. The U.S. Supreme Court decided that a decade ago in its seminal ruling in Wal-Mart Stores, In. v. Dukes, 564 U.S. 338 (2011).

Arguably – and we certainly see it in the courtroom in the manner of arguments by Plaintiff’s counsel – per se rules that are created to minimize any exposure to discrimination claims may increase the employer’s exposure to class claims because of the commonality they create. But one example suffices — automatic termination of employees after they have been on leave for a specified period of time.

Ralph Waldo Emerson once said that “Foolish consistency is the hobgoblin of little minds.” Let me say this with a bit more civility. While consistency often is desirable, there are times when consistency hurts rather than helps. The key is to know when consistency is desirable and when it is, well, anything but optimal.

Over the next year, I will blog about examples of employment practices/rules that create commonality that have been the basis for class action attacks. In these blogs, I also will talk about alternative approaches that help mitigate exposure to both individual and class action claims.

Stay tuned!

November 14, 2022 by Gerald L. Maatman, Jr.

New Trial Sought Following $228 Million Judgment In Landmark BIPA Class Action

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Alex W. Karasik

Duane Morris Synopsis: In Rogers v. BNSF Railway Co., Case No. 19-CV-03083 (N.D. Ill.), the first federal court jury trial in a case brought under the novel Illinois Biometric Information Privacy Act (“BIPA”), the plaintiffs secured a verdict in favor of the class of 45,000 workers against Defendant BNSF. After a week-long trial in the U.S. District Court for the Northern District of Illinois in Chicago, the jury found that BNSF recklessly or intentionally violated the law 45,600 times. The Court thereafter entered against BNSF for $228 million. Post-trial motions are now before the Court, which raise significant issues for all companies that use biometric equipment.

On November 9, 2022, Defendant BNSF Railway Co. filed a motion for a new trial under Rule 59(a) or to reduce the damages award under Rule 59(e). It argues that none of the 45,000 class members suffered any actual harm. It also raised constitutional concerns about the BIPA.

This latest development suggests that BNSF is pulling out all the stops to challenge the precedent-setting $228 million judgment. The outcome of this motion and future appeals will profoundly shape the privacy class action landscape.

Case Background

As we blogged about here, Plaintiff filed a class action lawsuit alleging that BNSF unlawfully required truck drivers entering the Company’s facilities to provide their biometric information through a fingerprint scanner. He claimed that BNSF collected the drivers’ fingerprints without first obtaining informed written consent or providing a written policy that complied with the BIPA and therefore violated sections 15(a) and (b) of the BIPA. BNSF argued that it did not operate the biometric equipment and instead sought to shift blame to a third-party vendor who operated the biometric equipment that collected drivers’ fingerprints.

The case proceeded before a jury in federal court in Chicago. The proceeding was closely watched, as it represented the very first time any class action had gone to a full trial with claims under the BIPA. The trial lasted five days. However, the jurors deliberated for just over an hour. Following the jury’s finding of liability, the Court entered a judgment against BNSF in the amount of $5,000 per violation, for a total amount of $228 million.

BNSF’s Motion For A New Trial Or Amended Judgment

BNSF renewed its motion for judgement as a matter of law pursuant to Federal Rule of Civil Procedure Rule 50(b), following the Court’s denial of BNSF’s Rule 50(a) motion at trial. In the alternative, BNSF moved for a new trial under Rule 59(a), or to reduce the damages award under Rule 59(e).

First, BNSF argues that there was insufficient evidence for the jury to find that BNSF violated the BIPA. Id. at *3. In support of that argument, BNSF cited testimony from its former Director of Technology Services that BNSF did not collect or obtain biometrics from truck drivers in Illinois, that the biometric data was stored on another entity’s server, and that BNSF did not maintain a copy of any of that data. Id. at *4.

Second, BNSF argues that it is entitled to judgment as a matter of law or a new trial, or at least a significant reduction in damages, because there was insufficient evidence for a rational jury to conclude that BNSF violated the BIPA recklessly or intentionally 45,600 times — which is the basis for the $228 million damages award. Id. at *5-6. BNSF claims that there was no evidence that BNSF even learned about the BIPA until April 2019. Therefore, BNSF argued, no rational jury could have inferred from this evidence that BNSF consciously disregarded or intentionally violated the rights of Plaintiff and the class members at any point, much less for the full class period starting in April 2014.

Third, BNSF argued that the Court’s award of $228 million in damages where Plaintiff admits he and the members of the class have suffered no actual harm violates the Due Process Clause and Excessive Fines Clause of the U.S. Constitution. BNSF points out that, “It is undisputed that neither Plaintiff nor any member of the class has suffered any actual harm from any alleged violation of BIPA. Given that the agreed value of the class’s injury is zero dollars, any award would be disproportional to such nonexistent harm.” Id. at *8-9.

Accordingly, BNSF seeks relief that the Court should enter judgment as a matter of law against Plaintiff and in favor of BNSF; or in the alternative, the Court should grant BNSF a new trial, or substantially reduce the damages award against BNSF.

The ball is now in Plaintiff’s court to respond to the motion. Further proceedings will then await the parties after full briefing of the post-trial motion.

Implications For Employers

BNSF’s filing of this motion indicates that the Company will not be going down (to the tune of $228 million) without a fight. The ultimate outcome of this motion, and any potential Seventh Circuit appeals, will be carefully scrutinized by both the plaintiff class action bar and businesses throughout Illinois and beyond.

Employers not only should continue to monitor this groundbreaking privacy class action lawsuit, but also ensure their strategic compliance plans are sufficient in regards to biometric privacy laws.

November 11, 2022November 14, 2022 by Gerald L. Maatman, Jr.

Illinois Federal Court Rejects Efforts To Dismiss BIPA Claims Involving Virtual Try-On Technology

By Gerald L. Maatman, Jr., Gregory Tsonis, and Kelly Bonner

Duane Morris Takeaways – In a significant decision for retailers, Judge Manish Shah of the U.S. District Court for the Northern District of Illinois recently denied in part Defendant Estée Lauder’s motion to dismiss proposed class action claims that its consumer “try-on” technology violated the Illinois Biometric Information Privacy Act (“BIPA”). The Court rejected Defendant’s personal jurisdiction argument, as well as claims that its website terms and conditions required Plaintiff to arbitrate her dispute, and that Plaintiff lacked standing to sue on behalf individuals that used websites Plaintiff herself did not visit. In a decision entitled Kukovec v. The Estée Lauder Companies, Inc., Case No. 22-CV-1988 (N.D. Ill.), the Court determined, however, that Plaintiff did not sufficiently plead that the cosmetics giant intentionally or recklessly violated consumers’ biometric privacy rights, and thereby dismissed those claims. The ruling in Kukovec illustrates the ongoing legal risks for retailers in using “try-on” tech to enhance customer service.

Case Background

Too Faced Cosmetics, a cosmetics brand owned by Defendant Estée Lauder, operates a website featuring a try-on function to allows shoppers to virtually test its products. When a shopper clicks a “Try It On” button, a pop-up box appears containing a disclaimer informing the shopper that their “image will be used to provide you with the virtual try-on experience” and a link to a privacy policy. Id. at 4. If the shopper selects the “Live Camera” option, the user’s computer camera is activated and the product is overlaid on part or all of the user’s face. Id.

Plaintiff, an Illinois resident, alleged that Defendant’s try-on tool violated Section 15(b) of the BIPA by capturing users’ facial geometry without informing them how that data is collected, used, or retained. Id. at 6. Plaintiff also alleged that Defendant lacked a publicly-available written policy establishing how long such data is retained and when it is destroyed, in violation of Section 15(a) of the BIPA. Id. Plaintiff filed a putative class action lawsuit against Defendant, seeking to represent a class of individuals that used the virtual try-on tool not just on the Too Faced website, but also four other websites for Defendant’s other brands. Id. Defendant removed the case to federal court based on diversity jurisdiction and the Class Action Fairness Act, then moved to dismiss the complaint.

The Court’s Ruling On Defendant’s Motion To Dismiss

Defendant sought to dismiss Plaintiffs’ claims on four grounds, three of which the Court fully rejected.

First, Defendant argued that the Court lacked personal jurisdiction over it since its “Try On” tool was “geography neutral,” did not target Illinois consumers, and the mere accessibility of the tool to Illinois consumers lacked the substantial connection to Defendant’s sale of cosmetics and employees in Illinois. Id. at 8. The Court rejected this “overly narrow” interpretation of personal jurisdiction. It held that “[t]he try-on tool is part of [Defendant’s] cosmetics marketing and sales strategy,” since those that use the tool are also presented with buttons to add the products to their cart or send as a gift. Id. at 9.

Second, Defendant argued that venue was improper because Plaintiff’s claims were subject to arbitration pursuant to a provision in its website’s terms and conditions. Id. at 11. Central to the issue of whether Plaintiff had constructive knowledge of the arbitration agreement was whether the terms and conditions were presented in “clickwrap” form, where a customer has to affirmatively check a box to assent (as courts generally uphold such assent), or “browsewrap” form, where a customer’s continued use of a website is taken as passive assent (and which require more detailed analysis). Defendant’s website contained both clickwrap and browsewrap forms, but the Plaintiff only visited pages with browsewrap forms. Id. at 12. Users of the virtual try-on tool received a pop-up notification that had Too Faced’s privacy policy, not its terms and conditions, though the privacy policy contained a link to the terms and conditions. Id. On other pages, the terms and conditions were presented at the bottom of webpages “in the middle of fifteen links to other pages on the site and six links to social media platforms. . .” Id. The Court held such a website design insufficient to provide constructive notice, since a customer “could easily try the tool without once confronting the terms-and-conditions link.” Id. at 14. Further, the Court rejected Defendant’s argument that the Plaintiff had constructive notice because she recently filed two other BIPA-related lawsuits against TikTok and L’Oréal, noting that a website user “is not automatically on notice that any website she visits likely has terms and conditions just because she’s visited other websites that have them.” Id. at 15. Accordingly, the Court held that Plaintiff lacked constructive knowledge and that the arbitration clause could not be enforced against her.

Third, Defendant also sought to dismiss the complaint on the basis that it provided only “conclusory legal statements” and lacked sufficient facts establishing that Defendant captured users’ facial geometry, collected biometric data, or acted negligently, recklessly, or intentionally under the BIPA. Id. at 16. The Court disagreed. It found that the complaint “alleged enough to infer” that Defendant captured Plaintiff’s biometric information and “no intermediary separated the defendant from the collection of plaintiff’s facial geometry.” Id. at 17. However, since recklessness and intentionality require a specific state of mind that Plaintiff did not allege, the Court dismissed Plaintiff’s claims for reckless or intentional conduct, but allowed Plaintiff an opportunity to amend her complaint. Id. at 18.

Finally, Defendant contended that since Plaintiff did not use the websites of its four other brands that utilize the virtual try-on tool, she lacked standing to sue on their behalf. The Court noted that because no class had been certified, yet Defendant’s argument was premature. The Court reasoned that plaintiff “alleges an injury from a technology deployed across multiple websites” and that standing exists because Plaintiff’s injury “can be redressed by a decision in her favor.” Id. at 20.

Implications For Companies Using Biometric Equipment

By allowing consumers to “try-on” products in a virtual environment, retailers increasingly rely on biometric data to provide hyper-personalized services and recreate the real-world shopping experience for the virtual world. But as the popularity of try-on technology grows, so too does the legal risk from biometric data privacy lawsuits. Since 2019, numerous retailers have been sued for violating the BIPA and other state biometric privacy laws for their use of try-on tech and other digital tools to personalize consumer recommendations. The Kukovec decision highlights how new technologies expose companies to costly litigation, even when they take steps to notify consumers or mandate arbitration. Companies should consider how they notify customers regarding try-on technology, ensure that their privacy policies stay current with evolving legislation and competing definitions of “biometric data,” and implement proper safeguards and consent processes.