Class Action Defense

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

Federal Court In Kansas Blows Up ADEA Collective Action Against Learjet, Inc. And Bombardier, Inc., Granting Defendants’ Motion To Decertify

By Gerald L. Maatman, Jr. and Gregory Tsonis

Duane Morris Takeaways: In a decisive ruling on February 29, 2024, Judge Eric F. Melgren of the U.S. District Court for the District of Kansas granted the motion by defendants Bombardier, Inc. (“Bombadier”) and its subsidiary Learjet, Inc., (“Learjet”) in Wood, et al. v. Learjet Inc. et al., Case No. 18-CV-02681 (D. Kan. Feb. 29, 2024), to decertify a collective action brought under the Age Discrimination in Employment Act (“ADEA”). This landmark decision underscores the increased scrutiny applied during the decertification stage of collective actions, especially concerning allegations under the ADEA, and how defendants can successfully achieve decertification by attacking proffered evidence and establishing the individualized inquiries which preclude proceeding as a collective action.

Case Background

The lawsuit originated from claims by two named plaintiffs, both over the age of 40 and former employees at the Bombardier Flight Test Center (“BFTC”) in Wichita, Kansas, operated by Learjet. The named plaintiffs alleged a pattern or practice of age discrimination in violation of the ADEA, i.e., specifically that defendants targeted non-union employees over the age of 40 for termination. Following the lawsuit’s initiation, and applying the “similarly situated” collective action standard incorporated by the ADEA from the Fair Labor Standards Act, plaintiffs sought conditional certification of a collective action under the traditionally “lenient” standard applied by the courts within the Tenth Circuit and others in evaluating certification of collective actions. Specifically, the plaintiffs sought and obtained conditional certification for a collective action consisting of non-union personnel employed since April 2, 2016 at the BFTC whose employment was terminated when they were over 40 years of age. After the dissemination of notice, additional plaintiffs opted in, with four remaining by the time the defendants moved for decertification.

Procedurally, the defendants moved to decertify the collective action after the conclusion of fact discovery.

The two named plaintiffs and four opt-ins all worked in the BFTC, were over the age of 40 at the time their employment ended, and were terminated for various reasons. One named plaintiff was terminated as a result of performance issues and a safety violation. The other named plaintiff was placed on a performance improvement plan for time management issues that resulted in his termination. While Learjet terminated one opt-in plaintiff for insubordination in connection with his failure to repay a tax payment reimbursement to the company, the three other opt-in plaintiffs were laid off as part of corporate reorganizations, with performance playing a role in some, but not all, layoff-related terminations.

The Court’s Decision

Applying the Tenth Circuit’s two-step approach for collective action certification, the Court moved from the “lenient standard” at the conditional certification stage to the “stricter” standard post-discovery to assess whether the plaintiffs were “similarly situated.” Id. at 9. The analysis to determine whether the members of the collective action were “similarly situated” to the named plaintiffs involved examining disparities in employment circumstances and available individual defenses, as well as procedural fairness and efficiency considerations.

The Court found the evidence of a discriminatory policy, predicated on an alleged statement about the company’s age composition, insufficient to establish a pattern or practice of discrimination. To establish an unlawful policy, plaintiffs relied on a single statement made by a director at a meeting in which he “drew an inverted triangle to represent a large number of older workers (at the top) and a small number of younger workers (at the bottom)” and allegedly stated that “the age balance was upside down” and that they “needed to reduce the age of the Company.” Id. at 3. The Court, however, determined that “no evidence” of a discriminatory policy existed other than the alleged statement. Notably, the Court highlighted the lack of documentation, meetings, or direct involvement by management in any discriminatory policy’s alleged development or implementation. Id. at 13. Furthermore, terminations affecting the named plaintiffs and opt-ins spanned three years and involved various decision-makers, and evidence demonstrated that the average age of BFTC employees and percentage of workers over the age of forty increased between 2015 and 2019. Id. at 8, 13.

The Court also considered the individual circumstances of the named plaintiffs’ and opt-ins’ terminations, noting significant differences in the reasons for termination and the involvement of different managers in these decisions. The Court credited defendants’ argument that individualized defenses required decertification, as some opt-in plaintiffs executed releases barring their ADEA claims, the named plaintiffs’ claims were limited by the scope of their charges of discrimination, and one opt-in failed to disclose claims against defendants in bankruptcy proceedings. Id. at 16. Though noting that the individualized evidence was “not onerous,” the Court opined that the diversity in employment circumstances and the presence of individualized defenses underscored the plaintiffs’ disparate situations, which counseled against the maintenance of a collective action. Id. at 16. Finally, the Court also found that the “lack of common representative evidence” and the “highly individualized” circumstances of each plaintiff threatened to confuse a jury by requiring separate mini trials, which was wholly inefficient. Id. at 17. Accordingly, the Court granted defendants’ motion to decertify.

Implications for Employers

This decision sends a strong message about the potential hurdles faced by plaintiffs in sustaining collective actions after fact discovery, particularly in pattern-or-practice ADEA cases. For employers, the ruling highlights the importance of meticulous record-keeping, clear performance management, and consistent application of termination policies to defend against collective action claims effectively.

Moreover, this decision showcases the strategic value of aggressively challenging collective action certification on the basis of individualized claims and defenses, thereby preventing the broad-brush grouping of distinct employment cases. Employers should also note the critical role of early, proactive legal strategies in managing and mitigating the risks associated with collective action litigation.

March 5, 2024March 5, 2024 by Class Action Defense

Investment Advisory Business And Executive Ordered By New York Federal Court To Pay Agreed-Upon Settlement Amount, Plus Interest After Ignoring Court Deadlines

By Gerald L. Maatman, Jr., Maria Caceres-Boneau, and Gregory S. Slotnick

Duane Morris Takeaways: On February 29, 2024, Judge Andrew Carter of the U.S. District Court for the Southern District of New York in Lee v. Grove Group Advisors LLC, et al., Case No. 1:20 Civ. 05937 S.D.N.Y. (Feb. 29, 2024), issued an order granting a motion to enforce a settlement agreement reached between the parties nearly three years after it was initially submitted for approval, and more than two years after the Court ultimately approved the agreement as fair and reasonable. The decision underscores the importance of a Court’s retention of jurisdiction over a case in order to enforce or otherwise apply the settlement of a case, and also serves as a reminder that employers and individual business executives who sign settlement agreements to end litigation should always be prepared to make all agreed-upon payments, or else risk the ire of a Judge, the Court’s enforcement of the agreement, and additional interest on the original settlement amount.

Case Background

According to the Complaint filed by the Plaintiff on July 30, 2020, Plaintiff began working on August 9, 2019 for the defendants – including an investment advisory company and its Chief Executive Officer/Co-Founder (together, “Defendants”) – as a “Manufacturing and Engineering Director” for which Defendants agreed to pay Plaintiff an annual salary of $160,000. Complaint (“Compl.”) at ¶¶ 12, 21-22. Plaintiff claims that Defendants also agreed to provide him with fifteen (15) days of PTO per year. Id. at ¶ 23. According to Plaintiff, in January 2020, Defendants ceased paying him his wages, told him that they’d pay him “soon,” and after he continued to work for Defendants, in February 2020, Defendants sent him a letter stating that his last day of employment was February 13, 2020. Id. at ¶¶ 26-33. The letter also informed Plaintiff that Defendants owed him approximately $24,000 for the period from December 22, 2019 to February 13, 2020, that Defendants did not have the means to pay him at that time, but that they were making “every effort to raise money for the company in order to pay our liabilities, yours included.” Id. at ¶ 32.

Plaintiff alleges that on May 15, 2020, Defendants paid him only $3,846.15, and that Defendants did not pay him the balance of what they owed him despite Plaintiff trying to reach out to Defendants on numerous occasions in an attempt to get paid, the only reply from Defendants being “we will let you know when we get the funds to pay you.” Id. at ¶¶ 34-35. Plaintiff claimed entitlement to $20,153.87 in unpaid earned wages for work performed for Defendants, as well as sixty-four (64) hours of accrued, unused PTO valued at $4,923.07 – totaling $25,076.94. Id. at ¶¶ 36-38.

According to the Court Order, the parties reached agreement at mediation and submitted an initial proposed settlement agreement for Court approval on May 27, 2021, as required by Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015). Order at 1. On December 28, 2021, after the parties filed a revised agreement, the Court approved the agreement as fair and reasonable, and it provided for payment by Defendants of a settlement sum of $14,990 by January 11, 2022. Id. at 1-2. Critically, the Court retained jurisdiction over the case to hear any motion to enforce or otherwise apply the settlement. Id. The Order stated that Plaintiff now sought to enforce the agreement, and that the Court provided Defendants with multiple opportunities to respond to the motion to enforce, including a December 4, 2023 order to show cause as to why Plaintiff’s motion to enforce should not be deemed unopposed. Id.

The Court’s Decision

The Court determined that because the parties reached a binding and enforceable agreement, Plaintiff’s motion to enforce the agreement should be granted. Id. The order confirmed that to date, Defendants had not paid any of the settlement sum, and that after counsel for Defendants’ request to withdraw was granted by the Court, Plaintiff filed a motion to enforce the settlement on April 12, 2023. Id. at 2. Defendants also ignored the Court’s repeated warnings to obtain new counsel. Id. On June 5, 2023, the Court issued an order to show cause as to why the Plaintiff’s motion should not be treated as unopposed, and provided another follow-up to Defendants by way of a December 1, 2023 filing. Id. Defendants did not respond, and the Court noted that they have not made any filing on the docket since February 9, 2023. Id. at 2-3.

The Court set out the standard of review for settlement agreements, which it stated are interpreted according to general principles of contract law. Id. at 3. The Court found that when a judge determines a settlement agreement was in fact reached, the agreement is binding on the parties, and that the parties must be in agreement on all essential terms. Id. The order confirmed that once a settlement agreement is reached, it constitutes a binding and conclusive contract, and that the parties are bound to its terms even if they have a later change of heart. Id. at 4.

The Court stated that it may only vacate a stipulation of settlement upon a showing of good cause, such as fraud, collusion, mistake, duress, lack of capacity, or where the agreement is unconscionable, contrary to public policy, or so ambiguous that it indicates by its terms that the parties did not reach agreement. Id. at 5.

In this case, the Court found no such showing of good cause to vacate the agreement, since it was written and signed by the parties and approved by the judge. Id. In considering the totality of the circumstances, the Court ruled that Plaintiff established that the signed settlement agreement is enforceable. Id. at 6. As a result, the Court granted Plaintiff’s motion to enforce the agreement, as well as Plaintiff’s request for 9% interest per year from the date the funds became due (January 11, 2021) to the date the funds became owed (April 12, 2023 – the filing date of the motion to enforce settlement). Id. The Court calculated such interest to be $3,034.55, and ultimately held Plaintiff is entitled to recover from Defendants, individually, jointly and severally, the total amount of $18,024.55. Id.

Implications For Businesses

The Lee decision illustrates that under appropriate circumstances, such as the settlement of an unpaid wage claim providing for a judge to retain jurisdiction, a court is apt to grant motions to enforce a settlement agreement without hesitation (and also award interest on same). In this case, the Court provided Defendants with numerous opportunities to defend themselves and appear on the docket. However, Defendants’ silence spoke volumes, and the Court ultimately approved Plaintiff’s motion to enforce the valid agreement previously reached and submitted on the docket by the parties.

Businesses and their executives should always ensure their intent and unquestioned ability to make agreed-upon payments as part of any litigation settlement agreement (and to their employees), whether an unpaid wage claim filed on the docket for Court approval in the Second Circuit, or a private, confidential breach of contract claim. This is especially so when a Court retains jurisdiction over a filed matter to enforce any settlement agreement reached. Of course, employers should also make sure that they follow Court Orders and meet Court deadlines to a tee!

February 29, 2024 by Class Action Defense

Illinois Federal Court Trims Homebuyers’ Antitrust Class Claims In Dispute With NAR

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

Duane Morris Takeaways: On February 20, 2024, Judge Andrea R. Wood of the U.S. District Court for the Northern District of Illinois granted Defendants’ motion to dismiss with respect to a federal antitrust claim seeking injunctive relief for violations of Section 1 of the Sherman Act, among other claims, in Batton, et al. v. The National Association of Realtors, et al., No. 21-CV-00430 (N.D. Ill. Feb. 20, 2024). The Court accepted defense arguments that the members of the putative class were only indirect purchasers of buyer-broker services; therefore the Court opined that they were barred from seeking damages under federal antitrust law by Illinois Brick Co. v. Illinois, 431 U.S. 720, 729 (1977), and dismissed the claim for injunctive relief under Section 1 because the more directly injured home sellers are challenging the same rules and seeking the same injunction in separate, related cases.

Batton is required reading for any corporate counsel handling antitrust class action litigation involving indirect purchasers.

Case Background

Plaintiffs are homebuyers. Defendants, National Association of Realtors (“NAR”), Realogy Holdings Corp., HomeServices of America, Inc., HSF Affiliates, LLC, Long & Foster Companies, Inc., BHH Affiliates, LLC, RE/MAX LLC, and Keller Williams Realty, Inc. utilized a Multiple Listing Service (“MLS”) in the sale of homes. Plaintiffs alleged that MLS access was restricted only to home sellers who make a set commission offer to the successful buyer-broker, resulting in supracompetitive commission rates that get baked into the purchase price for homes. Plaintiffs brought a claim for injunctive relief under Sherman Act Section 1 as well as various state antitrust and consumer protection claims.

The Court’s Ruling

Although Illinois Brick does not preclude indirect purchasers like the putative class of homebuyers from pursing claims for injunctive relief under the Sherman Act, the Court dismissed the claim. It reasoned that because the more directly injured home sellers were challenging the same rules and seeking the same injunction in separate litigation before the same Court, the claim could not stand.

Implications For Defendants

Batton could be an important test of indirect purchasers’ ability to use antitrust law when there are other purchasers better suited to bring federal antitrust claims. Hence, it is an important decision in this space.

February 29, 2024 by Gerald L. Maatman, Jr.

It’s Here! The Duane Morris Privacy Class Action Review – 2024

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

Duane Morris Takeaways: The last year saw a virtual explosion in privacy class action litigation. As a result, compliance with privacy laws in the myriad of ways that companies interact with employees, customers, and third parties is a corporate imperative. To that end, the class action team at Duane Morris is pleased to present the Privacy Class Action Review – 2024. This publication analyzes the key privacy-related rulings and developments in 2023 and the significant legal decisions and trends impacting privacy class action litigation for 2024. We hope that companies and employers will benefit from this resource in their compliance with these evolving laws and standards.

Click here to download a copy of the Privacy Class Action Review – 2023 eBook. Look forward to an episode on the Review coming soon on the Class Action Weekly Wire!

February 28, 2024 by Class Action Defense

The Class Action Weekly Wire – Episode 45: 2024 Preview: Data Breach Class Action Litigation

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jennifer Riley and Alex Karasik and associate Emilee Crowther with their discussion of 2023 developments and trends in data breach action litigation as detailed in the recently published Duane Morris Data Breach Class Action Review – 2024.

Check out today’s episode and subscribe to our show from your preferred podcast platform: Spotify, Amazon Music, Apple Podcasts, Google Podcasts, the Samsung Podcasts app, Podcast Index, Tune In, Listen Notes, iHeartRadio, Deezer, YouTube or our RSS feed.

Episode Transcript

Jennifer Riley: Welcome to our listeners. Thank you for being here for our weekly podcast the Class Action Weekly Wire. I’m Jennifer Riley, partner at Duane Morris, and joining me today is my partner, Alex Karasik, and our colleague, Emilee Crowther. Thank you guys for being on the podcast.

Alex Karasik: Thank you, Jen. Happy to be part of the podcast.

Emilee Crowther: Thanks, Jen. I’m glad to be here

Jennifer: Today on the podcast we are discussing the recent publication of this year’s edition of the Duane Morris Data Breach Class Action Review. Listeners can find the eBook publication on our blog, the Duane Morris Class Action Defense Blog. Alex, can you tell our listeners a little bit about our new publication?

Alex: Absolutely, Jen. We’re very excited about this new publication. The purpose of the Duane Morris Data Breach Class Action Review is really multi-faceted. The volume of data breach class actions exploded in 2023. And these types of cases come with unique challenges, including those involving issues of standing and uninjured class members. And these issues continue to vex the courts leading to inconsistent outcomes. Data breach has emerged as one of the fastest growing areas in class action litigation. After every major (and even some of the not-so-major) report of data breach – companies can now expect resulting negative publicity, which in turn often leads to class action litigation. This saddles companies with significant costs to both respond to the data breach as well as deal with these mega lawsuits. In this respect, we hope this book will provide our clients and corporate counsel with an analysis of trends and significant rulings in the data breach space which will enable them to make informed decisions when dealing with litigation risks in this area. And hopefully, this can be a key desktop reference for all those whoever might encounter a data breach class action.

Jennifer: Defense of data breach class actions is continuing to grow into a high-stakes arena. The playbook of the plaintiffs’ class action bar and data breach cases continues to press the legal envelope on how courts are willing to interpret injuries stemming from data breaches and methods for calculating damages. The Review has dozens of contributors, thus manifesting the collective experience and expertise of our Class Action Defense Group. Emilee, what benefits can this offer our clients?

Emilee: Well, there are a lot of different benefits that could be offered. But while a data breach can be perpetrated in any number of ways, the legal issues that arise from the theft or loss of data largely fall within the same set of legal paradigms. The Review provides examination of the recent developments and settlements in the law and the area of data breach class action litigation. This publication assist our clients by identifying developing trends in the case law and offering practical approaches in dealing with data breach class action litigation.

Jennifer: What were some of the key takeaways from the publication with regard to litigation in this area in 2023?

Emilee: It remains somewhat difficult to obtain class certification for plaintiffs in data breach class actions this year, with only 14% of motions for class certification being granted. However, while data breach class actions pursued a decade ago faced little prospect of success, recent developments in the law and subsequent jurisprudence are providing momentum for the plaintiffs’ class action bar. Plaintiffs can more readily show standing and successfully plead duty, causation, and damages. A fundamental question in most data breach class actions is whether the plaintiff can show that he or she has standing to assert claims.

Alex: We also discuss in the Review the impact that the MOVEit Customer Data Security Breach Litigation will have on the data breach class action landscape in general. Although this class action is in its infant stages, the Judicial Panel on Multidistrict Litigation has consolidated more than 100 class action lawsuits resulting from an alleged cyber gang in Russia’s exploitation of a vulnerability in the file transfer software MOVEit. The group threatens to publish files to its website, which leaks private data. The impacts of this data breach are still unfolding, but it certainly has significant stakes. The long-term fallout might include personally identifiable information (“PII”) being leaked potentially of up to 55 million people. Some of the affected entities include Shell, TIAA, American Airlines, the U.S. Departments of Energy and Agriculture, the government of Nova Scotia, and the Louisiana and Oregon Departments of Motor Vehicles. So there’s lots of folks impacted in this one.

Jennifer: Thanks, Alex. This data breach litigation is at the top of the watch list as we move into 2024, we will be sure to keep our listeners updated with all of the important developments. The Review also talks about the top data breach settlements in 2023. How do plaintiffs do in securing settlement funds this past year?

Emilee: Well, Jen, plaintiffs did very well in securing high dollar settlements in 2023. The top 10 settlements totaled $515.75 million dollars. The top settlement alone in 2023 was $350 million dollars in a case called In Re T-Mobile Customer Data Security Breach Litigation, which resolved claims that cybercriminals exploited T-Mobile’s data security protocols and gained access to internal servers containing the personally identifiable information of millions of customers.

Jennifer: We will continue to track those settlement numbers in 2024, as record-breaking settlement amounts have been a huge trend that we have followed for the past two years. Thanks Alex and Emilee for being here today, and thank you to our loyal listeners for tuning in. Listeners, please stop by the blog for a free copy of the Data Breach Class Action Review eBook.

Emilee: Thank you for having me, Jen, and thank you listeners.

Alex: Thank you, listeners, we appreciate you!

February 22, 2024 by Class Action Defense

Hot Off The Presses! The Duane Morris Data Breach Class Action Review – 2024

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

Duane Morris Takeaways: Data breaches are becoming increasingly common and detrimental to companies. The scale of data breach class actions “exploded” in 2023, as companies faced copycat and follow-on lawsuits across multiple jurisdictions. The combined value of the top 10 settlements across all areas of class-action litigation hit near-record highs. To that end, the class action team at Duane Morris is pleased to present the inaugural edition of the Data Breach Class Action Review – 2024. This new publication analyzes the key data breach related rulings and developments in 2023 and the significant legal decisions and trends impacting data breach litigation for 2024. We hope that companies and employers will benefit from this resource and assist them with their compliance with these evolving laws and standards.

Click here to download a copy of the Duane Morris Data Breach Class Action Review – 2024 eBook.

Stay tuned for more data breach action analysis coming soon on our weekly podcast, the Class Action Weekly Wire.

February 21, 2024 by Gerald L. Maatman, Jr.

Seventh Circuit Affirms Minors Are Not Parties Bound To Arbitrate Claims In GIPA Class Action

By Gerald L. Maatman, Jr., Derek S. Franklin, and George J. Schaller

Duane Morris Takeaways: In Coatney, et al. v. Ancestry.com DNA, LLC, No. 22-2813, 2024 U.S. App. LEXIS 3584 (7th Cir. Feb. 15, 2024), the Seventh Circuit affirmed the district court’s denial of Ancestry’s motion to compel arbitration on the grounds that minors were not parties to arbitration agreements entered by their guardians and the Defendant. Circuit Judge Michael B. Brennan wrote the opinion of the Seventh Circuit panel.

For companies facing class actions under the Illinois Genetic Information Privacy Act (“GIPA”) involving alleged disclosure of confidential genetic information, this ruling is instructive on dispute resolution provisions and how drafting those provisions can dictate who is bound to arbitrate claims.

Case Background

Defendant, Ancestry.com DNA, LLC (“Ancestry”) is a genealogy and consumer genomics company that allows users to create accounts to purchase DNA test kits, which Ancestry collects consumer saliva samples. Id. at 2. Ancestry takes these samples, analyzes the genetic information, and then returns genealogical and health information to the purchaser through its website. Id. In 2020, Blackstone, Inc. acquired Ancestry.

Only adults may purchase or activate a DNA test kit, and purchasers must agree to Ancestry’s terms and conditions before purchasing and activating a test kit. Id. However, minors thirteen to eighteen years old may still use Ancestry’s DNA service as long as a parent or legal guardian purchases and activates the test kit, and sends in the minor’s saliva sample using an account managed by the child’s parent or guardian. Id.

Between 2016 and 2019, guardians purchased and activated test kits on behalf of the Plaintiffs, who were all minors at the time. Id. at 2-3. Each guardian agreed to consent terms (“Terms”) concerning the use of each minor’s DNA test kit. Id. at 3. The terms contained a dispute resolution provision binding the parties to arbitration and waiving any class actions. Id. However, the Terms did not require Plaintiffs to read them. Plaintiffs alleged that they did not, and that they also did not create the Ancestry accounts. Id. at 4.

Plaintiffs, on behalf of themselves and a putative class of similar members, filed suit against Ancestry in Illinois federal court alleging violations of the Illinois GIPA. Id. Plaintiffs alleged that, as part of Blackstone’s 2020 acquisition of Ancestry, Ancestry disclosed genetic test results and personal identifying information to Blackstone without obtaining written authorization. Id.

Ancestry responded by moving to compel arbitration under the Terms dispute resolution provisions. Id. at 5. The district court denied Ancestry’s motion. First, the district court found that Plaintiffs did not assent to Ancestry’s Terms through their guardians’ accounts or their guardians’ execution of consent forms on Plaintiffs’ behalf. Id. Second, the district court determined equitable principles such as the theory of direct benefits estoppel did not bind Plaintiffs, as there were no allegations that Plaintiffs accessed their guardians’ Ancestry accounts or their DNA test results. Id.

As a result, Ancestry filed an interlocutory appeal with the Seventh Circuit for review of the district court’s decision. Id.

The Seventh Circuit’s Decision

The Seventh Circuit affirmed the district court’s decision. On appeal, Ancestry urged the Seventh Circuit to reverse the district court’s denial of its motion to compel on three grounds, including: (1) Plaintiffs’ guardians assented to the Terms on their behalf; (2) Plaintiffs were “closely related” parties to their guardians (or even third-party beneficiaries), foreseeably bound by the Terms; or (3) as direct beneficiaries of the Terms, Plaintiffs were estopped from avoiding them. Id. at 6.

At the outset, the Seventh Circuit reasoned that it is a “bedrock principle” that “an arbitration agreement generally cannot bind a non-signatory.” Id. at 6-7. The Seventh Circuit also explained that “whether an arbitration agreement is enforceable against a non-party is a question governed by ‘traditional principles of state law.’” Id. at 7.

First, on Ancestry’s argument that Plaintiffs’ guardians assented to the Terms on Plaintiffs’ behalf, the Seventh Circuit determined that the Terms’ plain and ordinary meaning was unambiguous and found that the only parties to the agreement are the signatory and Ancestry. Id. Further, the Seventh Circuit noted that Terms stated they “are personal” to the signatory, who “may not … assign or transfer any … rights and obligations,” established by them. Id. The Seventh Circuit also found that the Terms contained no language that the guardians “agreed to them ‘on behalf of their children.” Id. at 9.

Second, the Seventh Circuit rejected Ancestry’s argument that Plaintiffs may be contractually bound to the Terms “either as closely related parties or third-party beneficiaries.” Id. at 11. The Seventh Circuit opined that “[t]he company mounts these arguments from shaky legal ground, as Illinois ‘recognize[s] a strong presumption against conferring contractual benefits on non-contracting third parties.’” Id. With respect to Ancestry’s argument that Plaintiffs were bound by the Terms as “closely related” parties to their guardians who signed them, the Seventh Circuit determined that a special relationship in fact and in law between the Plaintiffs and their guardians as that relationship “does not join their identities, as can be the case with parent and subsidiary corporations.” Id. at 12-14. The Seventh Circuit similarly concluded that the Terms did not cover Plaintiffs as third-party beneficiaries since the express provisions of Ancestry’s Terms excluded third-party beneficiaries. Id. at 12. While the Seventh Circuit found that the Terms that contemplated consent to Ancestry’s processing and analysis of a child’s DNA, no aspect of that consent established that the Terms were for “plaintiffs direct benefit.” Id. at 16. In addition, the Terms’ arbitration provision did “not contain language capturing the plaintiffs.” Id. at 17. Instead, the provisions’ language indicated that the “signatories intended to bind themselves, but not others to arbitration.” Id.

Finally, the Seventh Circuit rejected Ancestry’s argument that “[a]s direct beneficiaries of their guardians’ agreement to the Terms, Plaintiffs are estopped from avoid its arbitration provision.” Id. at 18. Noting the absence of legal authority supporting Ancestry’s argument, the Seventh Circuit concluded “that Illinois would not embrace direct benefits estoppel to bind plaintiffs here.” Id. at 19. The Seventh Circuit also based its conclusion on the absence of any record allegation that “plaintiffs have accessed or used the analyses completed by Ancestry as contemplated by the Terms” coupled with Illinois’ law “disfavoring the binding of non-signatories to arbitration.” Id. at 25.

Implications For Companies

Companies that are confronted with GIPA class action litigation involving dispute resolution provisions should note the Seventh Circuit’s emphasis in Coatney on the lack of allegations that Plaintiffs read the contractual terms at issue, along with the absence of contractual language capturing or identifying Plaintiffs.

Further, from a practical standpoint, companies should carefully evaluate the language expressed in terms and conditions agreements, including those drafted in dispute resolution provisions, as courts are not inclined to assume non-signatories are bound to agreements when not expressly included.

February 21, 2024February 23, 2024 by Class Action Defense

The Class Action Weekly Wire – Episode 44: 2024 Preview: Wage & Hour Class Action Litigation

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jerry Maatman and Jennifer Riley and associate Greg Tsonis with their discussion of wage & hour class and collective action litigation over the past 12 months as detailed in the recently published Duane Morris Wage & Hour Class And Collective Action Review – 2024.

Episode Transcript

Jerry Maatman: Welcome back, loyal podcast listeners. Thank you for being here for our kickoff 2024 podcast for our weekly series entitled The Class Action Weekly Wire. I’m Jerry Maatman of Duane Morris, joining me today is my partner Jennifer Riley and our colleague Greg Tsonis. Thank you Jen and Greg for being on our kickoff podcast!

Jennifer Riley: Thank you, Jerry. Happy to be part of the first Weekly Wire podcast of 2024.

Greg Tsonis: Thanks, Jerry. I’m glad to be here.

Jerry: Today on our podcast we’re discussing the recent publication of this year’s edition of the Duane Morris Wage & Hour Class And Collective Action Review. Listeners can find this eBook publication on our blog, the Duane Morris Class Action Defense Blog. Jen, can you tell our listeners a little bit about this publication?

Jennifer: Absolutely, Jerry. The purpose of the Duane Morris Wage & Hour Class And Collective Action Review is really multi-faceted. We hope it will demystify some of the complexities of class and collective action litigation and keep corporate counsel updated on the ever evolving nuances of Rule 23 as well as FLSA collective action issues in this respect. We really hope that this book will provide our clients with an analysis of trends and significant rulings in the wage & hour space, and enable them to make informed decisions in dealing with complex litigation risks.

Jerry: Defense of wage & hour class and collective actions is really the hallmark of our defense group at Duane Morris, and on this call and the podcast today is over 65 years’ worth of collective experience in handling these types of cases. Greg, what are some of the collective experiences and sort of desk reference attributes of this publication in terms of what’s going on in the wage in our world for 2023 and 2024?

Greg: Well, Jerry, as you know, wage & hour litigation has long been a focus of the plaintiffs’ class action bar. The relatively low standard by which plaintiffs can achieve conditional certification under the FLSA, often paired with state law wage & hour class claims, offers a pretty potent combination by which plaintiffs can pursue alleged misclassification or unpaid overtime claims, for example. So this publication will definitely assist our clients by identifying developing trends in the case law and offering practical approaches for dealing with class and collective action litigation.

Jerry: Well, I know Greg and Jen – you’re the main contributors and authors of the book. Along with about 30 of our colleagues in our Class Action Defense Group. What are some of the takeaways from 2023, and what corporate counsel and employers can expect in 2024?

Greg: Great question. So in in 2023 courts once again issued more certification rulings and FLSA collective actions than in other types of cases. Plaintiffs historically have been able to obtain conditional certification of FLSA collective actions at a pretty high rate which definitely is contributed to the number of filings in this area.

Jennifer: Right, Greg – agreed. Despite the high number of certification motions decided, of the 167 rulings that were issued on motions for conditional certification – 125 rulings favored plaintiffs for a success rate of nearly 75%. Those numbers are actually lower than the numbers we observed in 2022, when plaintiffs had a success rate of nearly 82%. The decline in success rates in 2023 likely reflects the impact of rulings in the Fifth Circuit and the Sixth Circuit, which took a closer look at that so called two-step process of certification. The Review goes into this analysis, and what employers can expect moving into 2024.

Jerry: I’ve always thought in the wage & hour space that change is inevitable, and employers are struggling with keeping up with the changes. And what our clients tell me in particular, is that this book is an essential desk reference that they cite and look to at least once a week. And I think one of the key issues going on right now is the propensity of the plaintiffs’ bar to file lawsuits involving very highly compensated employees, those that bank over six figures a year. And intuitively, one would think those sorts of folks are not entitled to overtime. But one of the central focuses in this year’s book is the Supreme Court’s decision this past year in Helix v. Hewitt on the salary basis test and the exemption for highly compensated individuals that brings into focus another area that’s in the book, and that’s about settlements. How do plaintiffs do in terms of securing high level settlements over the past 12 months?

Greg: Well, plaintiffs did a very good job in securing high dollar settlements in 2023, particularly in the state of California. The top 10 wage & hour settlements in 2023 totaled $742.5 million dollars, and nine of those 10 settlements emanated from litigation in California. This total was a pretty significant increase over 2022, when the top 10 wage & hour settlements totaled almost $575 million dollars.

Jerry: Those numbers are rather stunning. My prognostication is for 2024 – I think for the first time ever – we’re going to see the top 10 wage & hour class and collective action settlements exceed $1 billion dollars.

Well, thanks, Jen and thanks, Greg for being here today on our kicked off podcast for 2024. Listeners, please stop by our Duane Morris Class Action Defense Blog to obtain a free copy of the Duane Morris Wage & Hour Class And Collective Action Review eBook.

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

Jennifer: Thanks so much, everyone.

February 20, 2024February 21, 2024 by Class Action Defense

Eleventh Circuit Holds Nissan Is Not Joint Employer Of Florida Dealership Technicians In Wage & Hour Class And Collective Action

By Gerald L. Maatman, Jr., Alex W. Karasik, and Nicolette J. Zulli

Duane Morris Takeaways: In Ayala v. Nissan N. Am., Inc., No. 23-11027, 2024 U.S. App. LEXIS 2965 (11th Cir. Feb. 8, 2024), the Eleventh Circuit unanimously upheld a District Court’s decision granting Nissan’s motion for summary judgment in a wage & hour class and collective action. It held that none of the eight factors for determining joint employment weighed in favor of the company. The Eleventh Circuit further affirmed the District Court’s denial of both Rule 23 class action certification and conditional certification of the collective action under the FLSA.

The Eleventh Circuit’s opinion offers a treasure trove of insights regarding the crucial joint employer issue — particularly for employers who operate in a business-partnership dynamic where one entity (e.g., a manufacturer or staffing company) maintains oversight and/or indirect influence over the employees of the other entity (e.g., a car dealership or contractor) that handles payroll and/or hiring and firing processes.

Case Background

Two automotive service employees (“Technicians”) working at Florida Nissan dealerships filed suit against Nissan, alleging violations of the FLSA and the Florida Minimum Wage Act (“FMWA”), for failure to pay wages as required by law. Id. at *3. They also sought conditional certification as a collective action pursuant to the FLSA, 29 U.S.C. § 216(b), as well as certification of a class action under Rule 23.

The Technicians alleged they performed vehicle repair and maintenance on behalf of Nissan at the dealerships but were not compensated as required by law. Id. Specifically, they pointed to Nissan’s Assurance Products Resource Manual (“APRM”) and Dealership Agreements, which determined how much Nissan paid dealerships for warranty work conducted by technicians, regardless of how long the work took. Pursuant to the APRM and the Dealership Agreements, Nissan agreed with each dealership to reimburse the dealership according to the “flat-rate” system. Id. at *3.

The Technicians argued that — when the warranty work took longer than the “flat-rate time” determined by Nissan, thus limiting Nissan’s reimbursement to the dealership — the result is that they were underpaid by the dealership. Id. at *4. As a result, the Technicians asserted that Nissan was a joint employer, which Nissan opposed. The District Court agreed with Nissan and granted its motion for summary judgment. The Technicians appealed. Id. at *2.

The Eleventh’s Circuit’s Decision

The Eleventh Circuit affirmed the District Court’s order granting summary judgment and denying class certification under Rule 23 and conditional certification of a collective action under 29 U.S.C. § 216(b). Id. at *20.

On appeal, the Technicians argued that the District Court erred in granting summary judgment, because it failed to consider all admissible record evidence that they presented. Id. at *2. They further argued that the District Court erred in denying their motions for certification. First, the Eleventh Circuit rejected the Technicians’ argument that summary judgment was improper, after applying the eight-factor test under Layton v. DHL Express (USA), Inc., 686 F.3d 1172 (11th Cir. 2012), which is guided by five principles that are focused on indicators of “economic dependence,” for evaluating whether an employment relationship exists under the FLSA. These factors include: (1) The nature and degree of control of the workers; (2) The degree of supervision, direct or indirect, of the work; (3) The power to determine the pay rates or the methods of payment of the workers; (4) The right, directly or indirectly, to hire, fire, or modify the employment conditions of the workers; (5) Preparation of the payroll and payment of wages; (6) Ownership of the facilities where work occurred; (7) Performance of a specialty job integral to the asserted joint employer’s business; (8) The relative investments of the asserted joint employer in equipment and facilities used by the workers. Id. at *6-7.

The Eleventh Circuit held that none of these factors weighed in favor of a finding that Nissan was a joint employer of the Technicians. Id. at *22. Its analysis greatly emphasized the Technicians’ (i) failure to identify any specific, substantive content in Nissan’s 233-page APRM or its Anomalous Repair Control Program, and (ii) their reliance on conclusory and uncorroborated allegations in declarations and affidavits. The Eleventh Circuit opined that this was insufficient to show the District Court failed to consider relevant evidence. Id. at *8, *16. The Eleventh Circuit relied primarily upon a comparison to its prior decisions in Layton, Aimable v. Long & Scott Farms, 20 F.3d 434 (11th Cir. 1994), and Martinez-Mendoza v. Champion Int’l Corp., 340 F.3d 1200 (11th Cir. 2003), ultimately concluding that the relevant factors in this case weigh more heavily against joint employment. Id. at *18.

The Eleventh Circuit also rejected the Technicians’ argument that the District Court erred in denying both certification of a class action under Rule 23 and conditional certification of a collective action under § 216(b). The Eleventh Circuit opined that the putative class members would be employed by different dealers, making the inquiries about their pay “highly individualized and unwieldy.” Id. at *23. This, in turn, meant that the employees would not be similarly situated (as required for a collective action under the FLSA) and that there would not be sufficient common facts (as required for a class action under Rule 23). Id.

Implications For Employers

The Ayala decision is notable in that it offers a novel glimpse into the Eleventh Circuit’s approach to construing the language of employer policies to determine joint-employer status. To that end, the decision not only calls for employers to assess their business relationships to those it considers employees versus contractors, but also highlights the importance of constructing written policies and procedures with an eye toward the eight factors used to determine joint employer status.

February 19, 2024 by Eden Anderson

Illinois Federal Court Orders Samsung To Defend 806 Individual BIPA Claims In Arbitration And Pay $311,000 In Arbitration Filing Fees

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

Duane Morris Takeaways: On February 15, 2024, the Judge Harry Leinenweber of the U.S. District Court for the Northern District of Illinois granted a motion to compel arbitration in Hoeg et al. v. Samsung Electronics of America, Inc., Case No. 23-CV-1951 (N.D. Ill. Feb. 15, 2024), and sent 806 individual privacy claims to arbitration and ordered Samsung to pay $311,000 to cover its share of arbitration filing fees in those matters. The decision highlights the potential downsides of class action waivers in arbitration agreements, as well as the importance of coupling a class action waiver with a well-crafted mass arbitration provision designed to streamline arbitration proceedings and, hopefully, limit exposure and litigation costs.

Case Background

Samsung required customers to execute agreements to binding arbitration and those agreements waive the right to pursue class claims. The arbitration agreements provided that electronic acceptance, opening product packaging, product usage, or product retention amounted to acceptance of the arbitration agreement.

In 2022, 806 customers, all of whom alleged they had purchased and used Samsung products, filed individual arbitration actions against Samsung alleging violations of the Illinois Biometric Privacy Act (“BIPA”). After Samsung failed to pay $311,000 in arbitration filing fees due in the matters, AAA administratively closed the cases in January 2023. The plaintiffs then moved to compel arbitration.

The Court’s Decision

The Court granted the motion to compel arbitration and, in doing so, was highly critical of Samsung’s tactics in seeking to stall the prosecution of the claims. The Court found that the plaintiffs alleged they purchased and used Samsung products, and thereby assented to arbitration. While Samsung argued those allegations were conclusory and did not show the existence of agreements to arbitrate, the Court noted that Samsung’s approach “flips the evidentiary burden on its head” because, as the party opposing arbitration, it was Samsung’s burden to dispute the existence of an agreement to arbitrate. Id. at 9.

As to its failure to pay the arbitration filing fees, the Court expressed great displeasure with Samsung, noting that its “repeated failure to pay after multiple deadlines, without any showing of hardship, is a classic refusal to pay scheme in violation of Section 4” of the Federal Arbitration Act. Id. at 15. The Court also highlighted that Samsung’s tactics had delayed plaintiffs’ prosecution of their claims for two years. The Court further denied Samsung’s request that the matters be stayed so that it could pursue an appeal and ordered Samsung to pay the outstanding arbitration fees.

Implications Of The Decision

The Hoeg decision highlights the potential downsides of class action waivers, which have spurred the plaintiffs’ bar to pursue hundreds or even thousands of individual arbitrations all at once. The decision also underscores the importance of adding a mass arbitration provision to an arbitration agreement. Such a provision, if well-crafted, may serve to streamline those proceedings, facilitate resolution, and limit exposure. Some jurisdictions have enacted laws aimed at punishing a retailer’s or employer’s failure to pay arbitration fees. For example, in California, if arbitration fees are not timely paid, it results in a material breach of the arbitration agreement and could lead to the imposition of sanctions including “the reasonable expenses, including attorney’s fees and costs, incurred by the employee or consumer as a result of the material breach.” (Cal. Civil Code § 1281.99.)