By Gerald L. Maatman, Jr., Gregory Tsonis, and Ryan T. Garippo
Duane Morris Takeaways: On January 15, 2025, in Carrera v. EMD Sales, Inc., No. 23-217, 2025 WL 96207 (S. Ct. Jan. 15, 2025), the U.S. Supreme Court unanimously reversed the U.S. Court of Appeals for the Fourth Circuit, holding that the burden of proof required to prove the applicability of exemptions to the Fair Labor Standards Act (the “FLSA”) is not the “clear and convincing evidence” standard applied in the Fourth Circuit. In so doing, the Supreme Court harmonized the law across the country and confirmed that such exemptions need only be proven by a preponderance of the evidence.
Background
E.M.D Sales, Inc. (“EMD”) is a company that distributes food products in the Washington D.C. area. It employs sales representatives who work with partner grocery stores to help manage EMD products. The sales representatives “spend most of their time outside of EMD’s main office servicing stores on their routes,” however, there was disagreement as to “whether [the] sales representatives’ primary duty is to make sales of EMD products.” Carrera v. EMD Sales, Inc., No. 17-CV-3066, 2021 WL 1060258, at *2 (D. Md. Mar. 19, 2021).
In 2017, several of these sales representatives sued EMD in federal court in Maryland, arguing that they were entitled to overtime pay under the FLSA. In response, EMD argued that the sales representatives were exempt from the FLSA’s requirements pursuant to the “outside salesman” exemption. 29 U.S.C. § 213(a)(1).
Following a bench trial on the issue, the district court held that the outside salesman exemption did not apply. In so doing, the district court relied on Fourth Circuit precedent holding that the employer has the burden of proving the applicability of any FLSA exemption by “clear and convincing evidence.” Carrera, 2021 WL 1060258, at *5. In federal courts outside of the Fourth Circuit, an employer is only required to prove these exemptions under a lower standard of proof called the preponderance-of-the-evidence standard, which is the typical standard in civil cases. Id. The district court held that the employer failed to meet the heightened burden of proof regarding the applicability of the exemption, and thus held that the EMD sales representatives were entitled to overtime pay.
On appeal, EMD argued that the heightened “clear and convincing evidence” standard, which had long been the applicable standard for federal courts within the Fourth Circuit, should be overturned so it conformed with the standard applied across the rest of the country. The Fourth Circuit declined to do so and explained that “the district court properly applied the law of this circuit in requiring the defendants to prove their entitlement to the outside sales exemption by clear and convincing evidence.” Carrera v. EMD Sales, Inc., 75 F.4th 345, 353 (4th Cir. 2023). EMD, thereafter, sought review from the U.S. Supreme Court, which granted certiorari to resolve the issue.
The Supreme Court’s Opinion
In a unanimous 9-0 opinion written by Justice Kavanaugh, the Supreme Court explained that the “Fourth Circuit stands alone in requiring employers to prove the applicability of Fair Labor Standards Act exemptions by clear and convincing evidence. Every other Court of Appeals to address the issue has held that the preponderance standard applies.” Carrera, 2025 WL 96207, at *3. In noting that the “preponderance of the evidence” standard is “the established default standard of proof in American civil litigation,” the Supreme Court explained that the default standard can only be abrogated by statute, constitutional requirement, or other uncommon situations where unusual coercive relief is sought (e.g., revocation of citizenship, etc.).
In analyzing whether any such circumstances existed, the Supreme Court first observed that the FLSA is silent on the applicable burden of proof, noting there is no language that suggests that Congress intended a heightened burden to apply. Second, because the FLSA does not implicate constitutional rights, the U.S. Constitution did not compel a different result. Third, because FLSA lawsuits are akin to other employment statutes that entitle certain employees to monetary relief, they are not unusually coercive.
Turning next to policy arguments in favor of a heightened standard, the Supreme Court noted that other important statutes, such as Title VII of the Civil Rights Act, apply a preponderance standard while seeking to achieve laudable policy goals, such as ending discrimination in the workplace. Id. at *4-5. Finding nothing particularly distinct about the FLSA, the Supreme Court ultimately rejected the policy arguments advanced by the sales representatives, explaining that “rather than choose sides in a policy debate, this Court must apply the statute as written and as informed by the longstanding default rule regarding the standard of proof.” Id. at *5.
As a result, the Supreme Court reversed the decision of the Fourth Circuit and held that an employer must prove the applicability of FLSA exemptions only by a preponderance of the evidence. The Supreme Court also remanded the case back to the district court for a determination as to whether EMD met the lower evidentiary burden.
Implications For Employers
The Supreme Court’s decision in Carrera is a welcome reprieve for employers sued in Maryland, Virginia, West Virginia, North Carolina, and South Carolina federal courts. These employers will no longer have to satisfy a heightened burden of proof that they would otherwise not have to satisfy if sued for the same claims in any other state. Accordingly, employers based in those states can rest a little easier knowing that the standard for proving FLSA exemptions if sued will be the default standard applied in other jurisdictions, and not the heightened “clear and convincing evidence” standard that has long applied.
Duane Morris Takeaway: As the ultimate referee of law, the U.S. Supreme Court traditionally has defined the playing field for class action litigation and, through its rulings, has impacted the class action landscape. The past year was no exception. Although the U.S. Supreme Court did not directly address the procedural mechanisms that govern class actions during its most recent term, it issued multiple decisions that are sure to influence the class action space.
The most momentous decision came in Loper Bright Enterprises v. Raimondo, et al., 144 S. Ct. 2244 (2024), wherein the Supreme Court overruled Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), and undercut the authority of administrative agencies to engage in rulemaking. In doing so, the Supreme Court made clear that lower courts faced with class actions brought under the FLSA, ERISA, and TCPA, for example, must exercise their independent judgment in interpreting statutory provisions without deference to administrative agencies’ interpretations of those statutes.
The Supreme Court also issued a trio of mixed rulings regarding arbitration, including decisions that bear on the use of the Federal Arbitration Act to enforce arbitration agreements with class action waivers, and a number of miscellaneous rulings that likely will impact class actions in the areas of securities fraud, civil rights, preemption, and Title VII.
Watch partner Jerry Maatman discuss this trend in more detail in the video below:
Loper Bright Enterprises v. Raimondo, et al., 144 S. Ct. 2244 (2024)
The so-called Chevron doctrine, a fixture of administrative law for nearly four decades, emanates from the U.S. Supreme Court’s decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), and essentially required courts to defer to an agency’s reasonable interpretation of ambiguous laws. The Chevron doctrine involves two steps: (i) first, a court should determine whether the statute in question is unambiguous and, if so, apply its plain meaning; and (ii) second, if the court finds the statute ambiguous, the court should defer to the agency’s interpretation so long as the interpretation is reasonable or permissible.
On June 28, 2024, the U.S. Supreme Court in Loper Bright Enterprises v. Raimondo, et al., 144 S. Ct. 2244 (2024), overturned the 40-year-old Chevron doctrine and held that, when Congress passes an ambiguous law, there is no implied delegation of power to an administrative agency to define its own authority or to say that the law means. The plaintiffs, two sets of commercial fishermen, challenged the authority of councils established under the National Marine Fisheries Service (NMFS) to promulgate a rule requiring Atlantic herring fishermen to cover costs of federally-mandated observers aboard their vessels under the Magnuson-Stevens Fishery Conservation and Management Act (MSA).
Two district courts granted summary judgment, concluding that, where a statute governing its authority falls within the Chevron doctrine, the NMFS is authorized to promulgate rules, and courts are required to defer to its interpretations of ambiguous statutes. Both the D.C. and the First Circuit courts affirmed. Id. at 2256-57. The U.S. Supreme Court granted certiorari regarding the question of Chevron’s continued validity. Id. at 2257.
The Supreme Court vacated the judgments of the courts below and remanded. The Supreme Court held that requiring judicial deference to agency interpretations violates the Administrative Procedure Act (APA), which expressly grants courts authority to review and decide issues of law. Id. at 2263. The Supreme Court explained that, unlike courts, “agencies have no special competence in resolving statutory ambiguities,” particularly when it comes to statutes governing agencies’ own power or authority. The Supreme Court concluded that “Chevron gravely erred.” Id. at 2266.
Loper Bright is poised to impact class actions of all types. In class action litigation, plaintiffs routinely invoke the Chevron doctrine as a powerful tool to pursue broad claims against corporate defendants based on administrative regulations that often exceed statutory requirements. Invoking this doctrine, plaintiffs argue that a court must defer to agency rulemaking whenever the agency’s interpretation supports the litigant’s claims or undermines the defenses of their opponents. For decades, for example, the U.S. Department of Labor (DOL) has enforced the FLSA and other wage and hour laws through extensive regulations and administrative guidance. Whereas the regulations enjoyed considerable deference under Chevron, their future is uncertain under Loper Bright as the decision now requires courts to exercise their independent judgment. Litigants already are feeling the effect of Loper Bright on the FLSA, as demonstrated by a recent decision by the Fifth Circuit invalidating an FLSA regulation regarding the tip credit.
In Restaurant Law Center, et al. v. United States Department of Labor, 2024 WL 4609380 (5th Cir. Aug. 23, 2024), the Fifth Circuit invoked Loper Bright to vacate the DOL’s so-called “80/20” rule. The FLSA defines a “tipped employee” as any employee “engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips,” 29 U.S.C. §207(t), and allows an employer to pay such persons a cash wage less than minimum wage. The DOL adopted a regulation establishing limits on the amount of time tipped employees may perform non-tipped work at the cash wage, the thought being that, if the worker spends too much time performing non-tipped activities, the worker is no longer “engaged in [the tipped] occupation.” Under the rule, if an employee spends (i) more than 20% of a workweek performing non-tipped activities or (ii) more than 30 continuous minutes per shift performing non-tipped duties, the employee does not qualify as “tipped,” and the employer may not pay the cash wage. The Fifth Circuit found the 80/20 rule inconsistent with the statutory text of the FLSA because it impermissibly “disaggregates the component tasks of a single occupation” and thus “applies the tip credit in a manner inconsistent with the FLSA’s text.” Id. at *8-9. Citing Loper Bright and noting the existence of the 80/20 standard since 1988, the Fifth Circuit nonetheless was “not persuaded that the 80/20 standard, however longstanding, can defeat the FLSA’s plain text.” Id. at *9.
The Supreme Court foreshadowed another casualty of Loper-Bright in its decision in Helix Energy Solutions Group, Inc. v. Hewitt, 598 U.S. 39 (2023), wherein it held that highly-compensated employees paid on a daily, hourly, or shift basis do not satisfy the FLSA’s salary basis test. In his dissent, Justice Kavanaugh noted that the Supreme Court’s holding depended on the FLSA regulations, and those “regulations themselves may be inconsistent with the Fair Labor Standards Act.” Id. at 67 (Kavanaugh, J., dissenting). Because the relevant FLSA statutory language regarding exemptions “focuses on whether the employee performs executive duties, not how much an employee is paid or how an employee is paid,” Justice Kavanaugh concluded that it was “questionable whether the Department’s regulations — which look not only at an employee’s duties but also at how much an employee is paid and how an employee is paid — will survive if and when the regulations are challenged as inconsistent with the Act.” Id. Justice Kavanaugh’s implicit invitation to issue such a challenge, coupled with the demise of Chevron, very well may bring more changes to longstanding regulations that fuel hundreds of class action lawsuits each year.
Loper Bright also may fuel challenges related to fiduciary investment strategies. In a rule published in 2022, the U.S. Department of Labor explicitly allowed ERISA fiduciaries to consider environmental, social, and governance factors in selecting investments. In Utah v. Su, 109 F.4th 313 (5th Cir. 2024), 26 states brought suit to challenge the DOL’s rule, and the Fifth Circuit remanded the suit to the U.S. District Court for the Northern District of Texas with instructions to consider the rule in light of Loper Bright. Thus, courts may open the door to class claims for breach of fiduciary duty by investment managers that prioritize environmental, social, and governance factors above profitability.
Defendants also are apt to use Loper Bright to challenge the FCC’s interpretations of the TCPA. With its strict requirements and statutory damages, the TCPA is a frequent source of class claims. In a recent class certification decision involving claims for violation of the TCPA, in Mantha, et al. v. QuoteWizard.com, LLC, 347 F.R.D. 376 (D. Mass. 2024), the district court refused under Loper Bright to defer to the FCC’s interpretation of “person” to mean “residential telephone subscriber.” It instead found that the term “person” in the TCPA’s private-right-of-action provision includes anyone whose number is listed on the national do-not-call registry regardless of who listed it. Id. 394 & n.17.
In sum, this new doctrine of administrative law is already affecting FLSA, ERISA, and TCPA class actions, and has the potential to reshape other laws that provide the bases for class claims and defenses.
In 2024, the U.S. Supreme Court issued three decisions regarding arbitration under the Federal Arbitration Act, each of which has the potential to put more authority back in the hands of courts. The Supreme Court decided: (1) that district courts lack discretion to dismiss and, rather, must stay lawsuits pending the completion of arbitration, Smith v. Spizzirri, 601 U.S. 472 (2024); (2) that workers need not work for companies in the transportation industry to qualify for the FAA’s transportation worker exemption, Bissonnette v. LePage Bakeries Park St., LLC, 601 U.S. 246 (2024); and (3) where parties have agreed to two contracts – one sending arbitrability disputes to arbitration, and the other sending arbitrability disputes to the courts – a court must decide which contract governs, Coinbase, Inc. v. Suski, 144 S. Ct. 1186 (2024).
In Smith v. Spizzirri, 601 U.S. 472 (2024), the Supreme Court issued a unanimous decision holding that, when a district court determines that a plaintiff’s claims are arbitrable, the district court does not have discretion to dismiss the lawsuit. In this case, delivery drivers brought wage and hour claims against their former employer regarding their alleged misclassification as independent contractors. Although plaintiffs agreed that their claims were subject to arbitration, they opposed dismissal of their lawsuit and asked the district court to stay the case pending arbitration. Although the district court and the Ninth Circuit found dismissal consistent with the FAA, the U.S. Supreme Court disagreed. Interpreting § 3 of the FAA, which states that the court “shall on application of one of the parties stay the trial of the action until [the] arbitration” has concluded, the Supreme Court held that this statutory language “creates an obligation impervious to judicial discretion.” Id. at 476. It also found that the structure and purpose of the FAA supports interpreting § 3 as mandating a stay rather than dismissal. Based on § 16, which allows for an automatic interlocutory appeal of an order denying a motion to compel arbitration but not for an order granting a motion to compel arbitration, the Supreme Court reasoned that Congress sought to avoid dismissal, which triggers the right to an immediate appeal, and instead intended to move arbitrable disputes out of courts and into arbitration as quickly and easily as possible. Id. at 5-6. Finally, the Supreme Court explained that stays are preferable because they allow federal courts to maintain jurisdiction to resolve disputes between the parties. Id.
In Bissonnette, et al. v. LePage Bakeries Park St., LLC, 601 U.S. 246 (2024), the Supreme Court issued another decision regarding the FAA’s transportation worker exemption. The Court again cautioned that the exemption does not apply in “limitless terms” and, instead, applies only where workers play “a direct and necessary role in the free flow of goods across borders.” Id. Section 1 of the FAA exempts from arbitration “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The third category commonly is called the “transportation worker” exemption. Although the U.S. Supreme Court issued two decisions in 2022 – Southwest Airlines Co. v. Saxon, et al., 596 U.S. 450 (2022), and Domino’s Pizza, LLC v. Carmona, et al., 143 S. Ct. 361 (2022) – construing the FAA’s transportation worker exemption narrowly, many courts failed to heed that direction. As a result, in April 2024, the U.S. Supreme Court again weighed in on the issue in Bissonnette, et al. v. LePage Bakeries Park Street, LLC, 61 U.S. 246 (2024).
The defendant in Bissonnette produced baked goods in 19 states and distributed its products across the country. The plaintiff franchisees contracted with the defendant to distribute the products in local markets. The plaintiffs filed a putative class action, and the defendant moved to compel arbitration on an individual basis. The district court granted the motion, the Second Circuit affirmed, and the U.S. Supreme Court granted further review. As in Saxon, the U.S. Supreme Court emphasized in Bissonnette that the test for application of the transportation worker exemption focuses on the work performed by the plaintiff and not the employer’s industry. Addressing the employer’s argument that such a test would make virtually all workers who load or unload goods, such as pet shop employees and grocery store clerks, exempt transportation workers, the Supreme Court disagreed. It opined that the exemption has “never” been interpreted to apply in “such limitless terms.” Id. at 256. The Supreme Court emphasized that, for the exemption to apply, the worker “must at least play a direct and necessary role in the free flow of goods across borders.” Id. The Supreme Court thus vacated the order compelling arbitration and remanded for further proceedings.
Finally, on May 23, 2024, the U.S. Supreme Court issued its decision in Coinbase, Inc. v. Suski, et al., 144 S. Ct. 1186 (2024), holding that, where parties have agreed to two contracts – one sending disputes regarding arbitrability to arbitration, and the other sending disputes regarding arbitrability to the courts – a court (and not an arbitrator) must decide which contract governs. In connection with the sweepstakes offered by Coinbase, a cryptocurrency exchange platform, users filed a class action complaint alleging that the sweepstakes violated various California consumer protection statutes. Citing an arbitration clause in the User Agreement, Coinbase moved to compel arbitration on an individual basis. The arbitration clause in the User Agreement included a delegation clause that allocated decisions concerning whether disputes were arbitrable to the arbitrator. The users argued that the court, and not an arbitrator, should decide the arbitrability issue and, in support, cited a second contract – the Official Rules – they entered in connection with the sweepstakes. In contrast to the earlier executed User Agreement, the Official Rules contained a forum selection clause that required parties to decide all disputes related to the sweepstakes in California courts. The users argued that the Official Rules superseded the User Agreement and its arbitration and class action waiver provision. The district court denied Coinbase’s motion to compel arbitration, and the Ninth Circuit affirmed.
The U.S. Supreme Court granted review to answer the question of who – a judge or an arbitrator – should decide whether a subsequent contract supersedes an earlier arbitration agreement that contains a delegation clause. The Supreme Court held that, where parties have agreed to two contracts – one sending arbitrability disputes to arbitration, and the other sending arbitrability disputes to the courts – a court must decide which contract governs. By contrast, in cases where only one contract is at issue, and that contract contains an arbitration clause with a delegation provision, courts must send all arbitrability disputes to arbitration, absent a successful challenge to the delegation clause. Thus, it was correct for the district court and the Ninth Circuit to have determined which contract governed the claims concerning the sweepstakes. Although Coinbase sought to challenge the Ninth Circuit’s determination that the Official Rules superseded the User Agreement, the Supreme Court declined to consider that issue.
In 2024, the U.S. Supreme Court issued a number of additional rulings that have the potential to impact class actions, particularly in the areas of securities fraud, civil rights, and Title VII, and with respect to issues such as preemption and bankruptcy plan releases.
Securities fraud. The Supreme Court clarified the standard for claims brought under the Exchange Act alleging pure omissions of fact in Macquarie Infrastructure Corp., v. Moab Partners, L.P., 144 S. Ct. 885 (2024). Under the Securities Act, a pure omission of fact is expressly prohibited if it makes a statement in the offering documents misleading. The Supreme Court held that pure omissions do not impose liability under the Exchange Act. The decision also resolved a split among the courts of appeal concerning a private right of action arising from an Item 303 statement issued pursuant to SEC Regulation S-K. The Supreme Court ruled that, half-truths, in which a defendant discloses some but not all material facts that render the statement misleading, can create liability for an Item 303 statement. However, pure omissions in an Item 303 statement do not create a private right of action.
Civil rights. The U.S. Supreme Court issued an important civil rights ruling in City Of Grant Pass, Oregon v. Johnson, 144 S. Ct. 2202 (2024). The plaintiffs, two individuals experiencing homelessness, filed a class action alleging that a city’s enforcement of ordinances banning camping on public property was unconstitutional under the Eighth Amendment. The Supreme Court determined that enforcing general public-camping laws does not violate the Eighth Amendment’s cruel and unusual punishments clause, opining that this clause focuses on the nature of punishments, not the criminalization of certain behaviors. The Supreme Court also rejected arguments that the enforcement of these laws against individuals who are involuntarily homeless should be considered cruel and unusual and concluded that issues like homelessness and how to address them involve complex policy decisions best left to elected representatives, not federal courts.
Preemption. In Cantero, et al. v. Bank Of America, N.A., 144 S. Ct. 1290 (2024), an alleged class of home buyers argued that the defendant failed to comply with New York law requiring national banks to pay interest on escrow accounts. The defendant argued that federal law preempted the New York law. The district court ruled in favor of the plaintiffs, and the Second Circuit reversed. The Supreme Court then vacated and remanded the Second Circuit’s ruling. According to the Supreme Court, the Second Circuit applied “a categorical test that would preempt virtually all state laws that regulate national banks, at least other than generally applicable state laws such as contract or property laws.” Id. at 1301. The Supreme Court remanded and instructed the Second Circuit to “make a practical assessment of the nature and degree of the interference caused by a state law” by comparing the state law’s level of prevention or interference with national bank borrowers in this case with that found in other banking cases.
Title VII. In Muldrow v. City Of St. Louis, Missouri, 601 U.S. 346 (2024), the Supreme Court held that an employee challenging a job transfer under Title VII must show that the transfer brought about some harm with respect to an identifiable term or condition of employment, but the harm need not be significant. Numerous courts already have cited this opinion in denying motions to dismiss class claims under Title VII, illustrating its immediate impact. See, e.g., Wilder v. Honeywell Fed. Mfg. & Techs., LLC, 2024 WL 4567290, at *6 (W.D. Mo. Oct. 24, 2024) (denying motion to dismiss employment class action in light of Muldrow); Doe v. Bozzuto Mgmt. Co., 2024 WL 3104550, at *6 (D.D.C. June 24, 2024) (same); Tribue v. Maryland, 2024 WL 4202444, at *10 (D. Md. Sept. 13, 2024) (same).
Bankruptcy plan releases. The case of Harrington, United States Trustee, Region 2 v. Purdue Pharma L.P., 144 S. Ct. 2071 (2024), involved a challenge to Purdue’s Chapter 11 bankruptcy plan and the broad release of liability for various parties, including the Sackler family, which owned the company. In 2019, Purdue Pharma filed for Chapter 11 bankruptcy protection as part of an effort to address the thousands of lawsuits filed against it by state and local governments, municipalities, and individuals, related to the opioid epidemic. Plaintiffs claimed that Purdue’s aggressive marketing and distribution of OxyContin contributed to widespread opioid addiction and overdose deaths. As part of its bankruptcy proceedings, Purdue proposed a reorganization plan that involved restructuring the company and creating a public-benefit trust to handle its assets and liabilities. Purdue’s proposed bankruptcy plan, however, also provided a release of liability to the Sackler family, the owners of Purdue. The U.S. government challenged the release as unfair to a number of alleged victims who brought a class action lawsuit and wanted to preserve a chance to seek damages from the Sacklers. The Supreme Court ruled that the Bankruptcy Code does not authorize a release or injunction as part of a Chapter 11 reorganization plan that seeks to discharge claims against a non-debtor, such as the Sacklers, without the consent of the affected claimants.
These rulings generally make it easier for plaintiffs to bring and maintain class claims in court. As a result, corporations are apt to see their impact in the class action space in 2025 and beyond.
By Rebecca S. Bjork, Gerald L. Maatman, Jr., and Jennifer A. Riley
Duane Morris Takeaway: In a unanimous decision issued on January 15, 2025, the U.S. Supreme Court decided in Royal Canin U. S. A. v. Wullschleger, No. 23-677 (U.S. Jan. 15, 2025), that when a plaintiff files a civil suit under both state and federal law and subsequently amends the complaint to drop the federal law claims, the case must be remanded to state court due to lack of subject matter jurisdiction in the district court. This decision lends clarity to employers who have been navigating a circuit split on the question of whether federal district court subject matter jurisdiction is determined at the time of removal to federal court, or whether subsequent amendments abandoning federal claims destroys such jurisdiction. This issue arises over and over again in class action litigation.
Introduction
In a decision that will provoke readers’ memories (fondly or otherwise) of first year civil procedure class in law school, the U.S. Supreme Court ruled that a plaintiff’s deceptive marketing lawsuit originally stating both state and federal causes of action, that later dropped the federal claim in an amended complaint, must be remanded to state court. In a 9-0 decision, Justice Kagan explained that once the state law claims are stripped away, no federal subject matter jurisdiction exists and remand is required. Deciding a split amongst the circuit courts, the Supreme Court sided with the Eighth Circuit – and against the First, Third, Fourth, Sixth and Eleventh Circuits – in deciding that when a case is removed to federal court, an amended complaint dropping the federal claims destroys the district court’s jurisdiction.
This is obviously of interest for employers facing federal statutory class-wide claims involving issues such as wage and hour and discrimination, that also implicate overlapping state statutes.
The Ruling In Royal Canin U. S. A. v. Wullschleger
The U.S. Supreme Court issued its unanimous decision in Royal Canin U. S. A. v. Wullschleger, No. 23-677 (U.S. Jan. 15, 2025). In this case, the plaintiff purchased the defendant’s dog food that requires a prescription to obtain, believing that it contains medicine that off-the shelf dog food does not. Id. at 4. After learning that it does not, she filed suit in Missouri state court alleging violations of the state’s statute against deceptive marketing practices. Her complaint also included a claim under the federal Food, Drug and Cosmetic Act, 21 U.S.C. 301 (“FDCA”), that also forbids deceptive marketing practices.
Royal Canin, seeking perhaps to avoid being thrown to the dogs in a state court jury pool, decided to file a notice of removal of the plaintiff’s lawsuit to federal district court based on federal question jurisdiction (the plaintiff’s FDCA count). Id. at 4-5. In response, the plaintiff amended her complaint, dropping the FDCA claim, and only seeking relief under Missouri state law. Id. at 5. She then moved to remand to state court where she originally filed her complaint, but the district court denied her motion. Id. She ultimately appealed the dismissal of her amended complaint on the merits to the Eighth Circuit, and it reversed the district court’s decision to maintain jurisdiction of the matter and remanded it to state court. Id. Royal Canin sought certiorari to resolve the circuit split, and the Supreme Court obliged and affirmed the Eight Circuit’s ruling.
Basis Of The Supreme Court’s Opinion
In a very systematic and straightforward opinion of the Court, Justice Kagan explained why the limitations on federal court jurisdiction established by statute (e.g., 28 U.S.C. 1331 – cases “arising under” federal law) mandate SCOTUS’ unanimous conclusion. Long-established precedent holds that federal courts are courts of limited jurisdiction. Also, Congress has determined the scope of “supplemental jurisdiction,” where federal courts interpret and apply state law but only so long as they have concurrent federal jurisdiction to do so in the litigation. 28 U.S.C. 1367. And, the Supreme Court emphasized another statute that mandates that if at any time it appears that the federal court lacks subject matter jurisdiction, the case “must” be remanded to state court. 28 U.S.C. 1447(c). Id. at 3-4.
Applying these principles, the Supreme Court rejected Royal Canin’s argument that such limitations do not apply once a case has been removed to federal court and so-called “removal jurisdiction” exists. The Supreme Court explained, “Royal Canin argues that our precedent makes an exception for when an amendment [to a complaint] follows a lawsuit’s removal, but that is to read two bits of gratuitous language for a good deal more than they are worth.” Id. at 6. The Supreme Court continued that “Nothing in § 1367’s text . . . distinguishes between cases removed to federal court and cases originally filed there.” Id. at 8. And, unfortunately for Royal Canin, the Supreme Court has already held that in such a circumstance relating to original jurisdiction, the amended complaint is what determines jurisdiction, not the one at the time of removal. Id. As a result, the Supreme Court concluded that when the plaintiff “reconfigured her case to make it only about state law” her suit “became one for a state court.” Id. at 20.
Implications For Employers
As employers know, many class and collective action lawsuits are filed by plaintiffs that allege both state law and federal law claims. The classic example is a hybrid class and collective action under the Fair Labor Standards Act and a similar but often more onerous state statute governing how employees are paid. In our experience, many plaintiffs add their state law claims in order to extend the relevant statute of limitations period, for example, or sweep in certain state law substantive claims that are not available under a governing federal law.
Royal Canin U. S. A. v. Wullschleger will simplify litigation strategy decisions for employers with nationwide workforces. However, it remains to be seen how the plaintiffs’ bar will respond in terms of crafting both original and amended complaint strategies in the employment law space. We will be following developments closely and will provide our analysis and insights here.
Duane Morris Takeaway: The U.S. Supreme Court’s 2023 decision in Students for Fair Admissions, Inc. (SFFA), et al. v. President & Fellows of Harvard College, 600 U.S. 181 (2023), stimulated a flood of claims targeting diversity, equity, and inclusion (DEI) programs over the past year. Headlines were replete with cases of employees and applicants accusing employers of prioritizing diversity over merit and improperly using protected characteristics to guide decision-making, setting the stage for more class action activity in this area.
In SFFA, the U.S. Supreme Court held that two colleges and universities that considered race as a factor in their admissions processes violated the Equal Protection Clause of the U.S. Constitution and Title VI of the Civil Rights Act of 1964. Although the decision did not arise in the employment context, or involve Title VII, the Supreme Court’s decision striking down the use of racial preferences has caused an increase in class action lawsuits and other claims challenging (i) employers’ DEI programs, (ii) alleged misrepresentations about their DEI programs, and (iii) other environmental, social, and governance (ESG) initiatives.
Watch the video below with partner Jerry Maatman to hear more about this trend:
Since the U.S. Supreme Court struck down affirmative action in college admissions, plaintiffs have filed a flood of challenges to corporate DEI programs, claiming that they constitute impermissible “reverse discrimination” under Title VII. Headlines this past year were replete with cases of employees and applicants accusing employers of prioritizing diversity over merit and improperly using protected characteristics to guide decision-making. In 2024, courts issued a number of rulings in these cases, with mixed results, typically dependent on the nature of the allegations at issue in the lawsuit. In general, companies found more success in overcoming these challenges where their challenged DEI programs were focused more on colorblind issues like eliminating implicit bias and fostering inclusivity, and less success when focused on achieving numerical diversity quotas and other actions perceived as demonizing white males. See, e.g., De Piero v. Pennsylvania State University, 711 F. Supp. 3d 410 (E.D. Pa. 2024) (granting in part and denying in part employee’s reverse discrimination claims); Young v. Colorado Department Of Corrections, 94 F.4th 1242 (10th Cir. 2024) (affirming dismissal of employee’s reverse discrimination claim); Herrera v. New York City Department Of Education, 2024 WL 245960 (S.D.N.Y. Jan. 23, 2024) (denying defendants’ motion for summary judgment on employees’ reverse discrimination claims); Duvall v. Novant Health, Inc., 95 F.4th 778 (4th Cir. 2024) (affirming verdict for employee alleging reverse discrimination).
In October 2024, a rare class action trial in California in Palmer, et al. v. Cognizant Technology Solutions Corp., Case No. 17-CV-6848 (C.D. Cal.), led a jury to find a technology firm liable for engaging in a pattern or practice of discrimination against Caucasian and non-Indian employees in its termination and deployment decisions. The plaintiffs alleged the technology firm favored Indian and South Asian employees for whom it sponsored H-1B visas. The jury concluded, based on statistical evidence presented at trial, that the technology firm engaged in a pattern or practice of discrimination by terminating non-Indian and non-South Asian employees at a much higher rate than its other employees (8.4 times more likely).
In 2024, the U.S. Supreme Court granted certiorari in a reverse discrimination lawsuit, with a decision likely to be rendered in 2025 that will have implications for reverse discrimination lawsuits of all types, including class actions, moving forward. At issue in Ames, et al. v. Ohio Department of Youth Services, No. 23-1039 (U.S. cert granted Oct. 4, 2024), is whether, in addition to pleading the other elements of an employment discrimination claim under Title VII of the Civil Rights Act of 1964, a majority-group plaintiff must show “background circumstances to support the suspicion that the defendant is that unusual employer who discriminates against the majority.” The Supreme Court is poised to resolve a federal circuit split over this issue, potentially opening the courthouse to more such claims.
Although many companies’ DEI programs remain strong post-SFFA with an increased emphasis on inclusivity and ensuring compliance with anti-discrimination laws, other companies have begun stepping down their DEI commitments for a variety of reasons, including the fear of a backlash of reverse discrimination claims. Companies that step down their DEI commitments, however, should take care to ensure that their public-facing statements regarding those commitments remain true.
More generally, all companies should take care to ensure that they are not overstating or misrepresenting their policies and practices regarding DEI and other social issues. Such overstatements are known as “diversity washing” or “woke washing,” and are increasingly forming the basis of class action lawsuits alleging securities fraud or other misrepresentations.
In 2024, federal courts denied motions to dismiss in two diversity-washing class actions, for example, finding that plaintiffs plausibly stated claims for intentional misrepresentations. See Craig, et al. v. Target Corp., 2024 WL 4979234 (M.D. Fla. Dec. 4, 2024) (denying motion to dismiss securities fraud class action alleging misrepresentations regarding the risk of customer boycotts from ESG, DEI, and LGBT initiatives); SEB Inv. Management AB v. Wells Fargo & Co., 2024 WL 3579322 (N.D. Cal. July 29, 2024) (denying motion to dismiss securities fraud class action alleging false or misleading statements regarding corporation’s requirement that 50% of job interview candidates be diverse).
Companies’ statements regarding their DEI commitments have been voluntary to date. As a result, diversity-washing claims have applied only to statements companies have elected to make. However, many more public company statements about diversity may be forthcoming and subject to complaints filed by the plaintiffs’ class action bar, pending a challenge in the Fifth Circuit to SEC-approved Nasdaq rules requiring any of the over 3,000 companies listed with the Nasdaq with at least five board members to either have two board members from an underrepresented group or explain why not. The Fifth Circuit previously upheld these Nasdaq board diversity rules over a challenge under the First and Fourteenth Amendments to the U.S. Constitution, the Securities Exchange Act, and the Administrative Procedure Act. See Alliance For Fair Board Recruitment v. SEC, 85 F.4th 226 (5th Cir. 2023). In 2024, the Fifth Circuit vacated that opinion and reheard the case en banc, on May 14, 2024. If the Nasdaq board diversity rule is upheld, it will take full effect in December 2026.
The label “ESG” has become mainstream in the past few years. ESG refers broadly to “environmental, social, and governance,” which many companies have embraced as part of their business plans and corporate missions. Whereas diversity-washing class actions focus on the “S” in ESG, class actions also recently have proliferated relative to overstatements regarding environmental issues, thus highlighting the “E” in “ESG.”
These “greenwashing” class actions continued to proliferate in 2024. See Dorris, et al. v. Danone Waters of America, 2024 WL 4792048 (S.D.N.Y. Nov. 14, 2024) (dismissing greenwashing class action); Fanucchi v. Enviva Inc., 2024 WL 3302564 (D. Md. July 3, 2024) (dismissing greenwashing class action); Boyd, et al. v. Target Corp., 2024 WL 4287669 (D. Minn. Sept. 25, 2024) (denying motion to dismiss greenwashing class action).
As companies continue to add statements regarding their environmental impact or social responsibility to enhance their marketing efforts, communicate their company values, and/or attempt to appeal to consumers and shareholders attuned to ESG considerations, we expect to see ESG class actions continue their growth trajectory.
Duane Morris Takeaways:Register today and join us Thursday, January 30, 2025, at a Duane Morris Exclusive Event – our Book Launch for the Duane Morris Class Action Review – 2025! This event will be offered as an in-person panel discussion and a Zoom webinar.
The DMCAR e-book is an essential desk reference that can be viewed on any device and is fully searchable with selectable text. The 2025 Review analyzes 1,441 class action rulings from state and federal courts in 23 areas of law, providing a comprehensive review of the class action landscape. Details on the 10 key trends identified this year and a copy of the Executive Summary are featured on the DMCAR website here.
You are invited to join Duane Morris Partners Gerald L. Maatman, Jr. and Jennifer Riley for a panel discussion marking the release of the Duane Morris Class Action Review – 2025. Please register here to reserve your spot today! The event will be offered as an in-person discussion or join us live via Zoom webinar.
Featuring authors Gerald L. Maatman, Jr., Jennifer A. Riley and American Lawyer Media staff reporter Amanda Bronstad in a discussion of the key class action developments and decisions in 2024 and what companies can expect in 2025. We hope to see you there!
In-Person Event Location: Convene CityView Duane Morris Plaza | 13th Floor 30 South 17th Street, Philadelphia, PA 1910
Registration: 3:30 p.m. to 4:00 p.m. Eastern Book Launch and Discussion: 4:00 p.m. to 5:00 p.m. Eastern Cocktail Reception: 5:00 p.m. to 6:00 p.m. Eastern
Duane Morris Takeaway: Despite another tumultuous year of rulings, the arbitration defense remained one of the most powerful weapons in the class action defense toolkit. A defendant’s ability to enforce an arbitration agreement containing a class or collective action waiver continues to reign as one of the most impactful defenses in terms of shifting the pendulum of class action litigation. The U.S. Supreme Court cleared the last hurdle to widespread adoption of such agreements with its decision in Epic Systems Corp. v. Lewis, et al., 138 S. Ct. 1612 (2018). In response, more companies of all types and sizes updated their onboarding systems, terms of use, and other types of agreements to require that employees and consumers resolve any disputes in arbitration on an individual basis.
Watch Review Editor Jerry Maatman explain this trend below:
To date, companies have enjoyed a high rate of success enforcing those agreements and using them to thwart class actions out of the gate. In 2024, although defendants continued to win most motions to compel arbitration filed, their margin of victory dwindled. Across substantive areas of class action litigation, courts issued rulings on approximately 167 motions to compel arbitration over the past year. Defendants prevailed in 91 of those rulings, a success rate of approximately 54%. These numbers are lower than the numbers we saw in 2023, where courts issued rulings on 187 motions to compel arbitration, and defendants prevailed on 123 motions, which translated into a success rate of 66%.
Given the potency of the arbitration defense, the plaintiffs’ class action bar has continued to press potential exceptions to its coverage, including the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (the Ending Forced Arbitration Act or EFAA) and the transportation worker exemption to the FAA. Over the past year, plaintiffs made significant strides on both fronts as courts issued a mixed bag of rulings. Plaintiffs continued to assert the EFAA to avoid arbitration of cases containing claims for alleged sexual harassment. And, despite the U.S. Supreme Court’s guidance, many lower federal courts continued to apply the transportation worker exemption in a broad manner to workers who handled goods that moved in interstate commerce, irrespective of whether they played a direct role in transporting the goods across borders, such as last-mile delivery drivers, warehouse workers, and local distributors.
The EFAA amended the FAA and provided plaintiffs the discretion to avoid pre-dispute arbitration provisions in cases where they allege conduct constituting “a sexual harassment dispute or a sexual assault dispute” or are the named representatives in “a class or in a collective action alleging such conduct.” In other words, the Act does not render arbitration agreements invalid but allows plaintiffs bringing sexual assault or sexual harassment claims to elect to avoid the agreements and to bring their cases in court instead of arbitration.
In 2024, plaintiffs asserted the EFAA as a defense to approximately 47 motions to compel arbitration. Plaintiffs succeeded in enforcing the EFAA and keeping claims in court, in whole or in part, in approximately 27 of those rulings, or 57.4%. More than two years after the law’s effective date, courts are continuing to define its parameters, and rules regarding the law’s application are taking shape in multiple areas, the majority of which are coming out in favor of a broad application of the EFAA, making it easier for plaintiffs to avoid arbitration.
When Do Claims Arise?
Although by its terms the EFAA applies to any “dispute or claim that arises or accrues” on or after its enactment on March 3, 2022, courts have adopted varying interpretations of this language. Multiple decisions in 2024 showed that courts are receptive to arguments that the EFAA applies to conduct that occurred prior to the effective date of the Act so long as the plaintiffs file their charges or lawsuits after March 3, 2022.
In Famuyide, et al. v. Chipotle Mexican Grill Inc., 2024 U.S. App. LEXIS 19449 (8th Cir. Aug. 5, 2024), for example, the Eighth Circuit took a broad view as to when a dispute “arises” for purposes of the Act. A former employee claimed that a co-worker raped her at work in 2021, months before the EFAA took effect. The Eighth Circuit, however, held that the dispute arose when the plaintiff filed her lawsuit in court in July 2022 and not when the sexual assault occurred in 2021 or even when her attorneys sent a demand letter to the defendant in February 2022 because the demand letter was not a “conflict or controversy between the parties.” Id. at *6.
Similarly, in Kader, et al. v. Southern California Medical Center Inc., 2024 Cal. App. LEXIS 50 (Cal. App. 2d Dist. Jan. 29, 2024), the Second Appellate District for the California Court of Appeal found that a dispute arose when the plaintiff filed charges with the Department of Fair Employment and Housing. An executive brought claims for sexual misconduct, as well as discrimination, retaliation, and defamation against a medical center alleging that it employed a doctor who sexually assaulted him. The defendant moved to compel arbitration based on an agreement that the plaintiff signed in 2019. The Court of Appeal concluded that the date a dispute arises “depends on the unique facts of each case” but that “a dispute does not arise merely from the fact of injury.” Rather, “[f]or a dispute to arise, a party must first assert a right, claim, or demand.” Id. at *5.
What About Allegedly Continuing Violations?
In 2024, the Second Circuit weighed in on the impact of plaintiffs’ alleging “continuing violations,” again in a way consistent with a broad interpretation of the EFAA. In Olivieri, et al. v. Stifel, Nicolaus & Company, 112 F.4th 74 (2d Cir. 2024), the Second Circuit held that the EFAA shields claims from arbitration where the plaintiff alleges that the misconduct continued past the effective date of the law. Although the plaintiff alleged that she began experiencing a retaliatory hostile work environment before the effective date of the Act, and filed suit in January 2021, she claimed that the continuing course of conduct persisted after enactment of the EFAA, and, therefore, her claims were covered under the EFAA through the continuing violation doctrine. The Second Circuit agreed. The Second Circuit held that, while the plaintiff’s claim did accrue before the EFAA went into effect given that she filed suit in January 2021, her claims continued to accrue again with each act she alleged added to the hostile work environment. The Second Circuit reasoned that, “[i]f Congress wanted the EFAA to apply only to claims that ‘first’ accrue after its enactment, it could have said so.” Id. at 89.
Does The EFAA Shield Tag-Along Claims?
The scope of the EFAA has been a hotly contested issue in terms of the breadth of its arbitration shield and whether it applies to all claims asserted by a plaintiff or only the sexual assault or sexual harassment claims. In October 2024, California’s Second Appellate District held in Yongtong Liu, et al. v. Miniso Depot CA Inc., 105 Cal. App. 5th 791 (Cal. App. 2d Dist. 2024), that the EFAA extends to a plaintiff’s entire employment case, including a plaintiff’s wage claims, shielding them from arbitration. A human resources employee brought suit against an employer alleging that the CEO made inappropriate comments regarding her appearance and sexual orientation. The employee also asserted wage & hour claims for alleged misclassification, unpaid overtime, and minimum wage violations. The EFAA states, in relevant part, that “no predispute arbitration agreement . . . shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the . . . sexual harassment dispute.” 9 U.S.C. § 402(a) (emphasis added). Focusing on the statute’s use of the word “case,” the appellate court ruled that the EFAA “makes the parties’ arbitration agreement unenforceable as to [plaintiff’s] entire case.” Such ruling runs counter to others, including the June 2023 decision in Mera v. SA Hospitality Group LLC, 675 F. Supp. 3d 442, 448 (S.D.N.Y. 2023), wherein a federal magistrate judge ruled that, although a restaurant chain could not force a plaintiff to arbitrate his sexual harassment claims, it could force him to arbitrate his wage & hour overtime claims because they “do not relate in any way to the sexual harassment dispute.”
Companies should anticipate continued development of these and other novel issues as we continue further past the enactment date and plaintiffs continue to shift their interest toward the EFAA’s arbitration shield.
In one of the largest door-openers to the courthouse for the plaintiffs’ class action bar, courts have issued a runaway train of rulings that position the transportation worker exemption to swallow up the FAA for workers who move or contribute to the movement of goods. Section 1 of the FAA exempts from arbitration “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The third category commonly is called the “transportation worker” exemption. Although the U.S. Supreme Court has instructed lower courts to interpret the transportation worker exemption “narrowly,” its parameters have carved a slippery slope for lower courts.
In Southwest Airlines Co. v. Saxon, et al., 142 S.Ct. 1783 (2022), the U.S. Supreme Court applied the transportation worker exemption to an airport ramp supervisor. Although it held that the exemption requires direct involvement in the transportation of goods across state or international borders, it had no problem finding the plaintiff part of such a class: “We have said that it is ‘too plain to require discussion that the loading or unloading of an interstate shipment by the employees of a carrier is so closely related to interstate transportation as to be practically a part of it.’ . . . We think it equally plain that airline employees who physically load and unload cargo on and off planes traveling in interstate commerce are, as a practical matter, part of the interstate transportation of goods.” Id. at 1789.
This ruling set off a barrage of decisions finding individuals who touch goods that move in interstate commerce, or the means of transport for such goods, subject to the exemption. As a result, in April 2024, the U.S. Supreme Court took up Bissonnette, et al. v. LePage Bakeries Park Street, LLC, 61 U.S. 246 (2024). As in Saxon, the U.S. Supreme Court emphasized that the test for application of the transportation worker exemption focuses on the work performed by the plaintiff and not the employer’s industry. Addressing the employer’s argument that its test would fold virtually all workers who load or unload goods, such as pet shop employees and grocery store clerks, into the exemption, the Supreme Court stated that the exemption has “never” been interpreted to apply in “such limitless terms.” Id. at 256. For the exemption to apply, the worker “must at least play a direct and necessary role in the free flow of goods across borders.” Id.
The Bissonnette decision appears to have had a smaller impact on the lower courts, which issued opinions before and after Bissonette that broadly construe the transportation worker exemption.
In May, for example, the California Court of Appeal in Peters, et al. v. SDLA Courier Services, 2024 Cal. App. Unpub. LEXIS 2954 (Cal. App. 2d Dist. May 14, 2024), found the plaintiff, a delivery driver who made only local deliveries of Amazon products, an exempt transportation worker. The plaintiff filed a class action alleging that the defendant violated various provisions of the California Labor Code, and the defendant moved to compel arbitration of the plaintiff’s individual claims and to dismiss the class claims. The trial court denied the motion, finding the FAA inapplicable because the plaintiff was a “last-leg delivery driver” and “engaged in interstate commerce.” Id. at *2. The Court of Appeal affirmed, reasoning that, but for the plaintiff and those like her, the packages would not get delivered to customers.
The Ninth Circuit also applied the transportation worker exemption broadly in three of its decisions this past year, both before and after Bissonette.
On March 12, 2024, in perhaps the most aggressive application to date, the Ninth Circuit ruled in Ortiz, et al. v. Randstad Inhouse Services, LLC, 95 F.4th 1152 (9th Cir. 2024), that the plaintiff, a warehouse equipment operator responsible for moving packages to and from warehouse racks, qualified as a transportation worker. After plaintiff filed a class action for alleged wage & hour violations, the defendant moved to compel arbitration, and the district court denied the motion. The Ninth Circuit affirmed. It found that the plaintiff “actively engaged” in transportation because he “ensured that goods would reach their final destination by processing and storing them while they awaited further interstate transport.” Id. at 1162. Further, it found that the plaintiff “actively engaged” with transportation because he handled goods “as they went through the process of entering, temporarily occupying, and subsequently leaving the warehouse.” Id.
On July 19, 2024, the Ninth Circuit affirmed the district court’s ruling in Lopez, et al. v. Aircraft Service International, Inc., 107 F.4th 1096 (9th Cir. 2024). The plaintiff, a fueling technician at Los Angeles International Airport, initiated a wage and hour class action against his employer, who moved to compel arbitration. The district court denied the motion. It reasoned that, although the plaintiff did not handle goods in commerce, he was directly involved in the maintenance of the means by which the goods were transported. The Ninth Circuit affirmed. Although the plaintiff did not have any hands-on contact with goods or any direct participation in their movement, the Ninth Circuit reasoned that the plaintiff’s work fueling airplanes was a “vital component” of the plane’s ability to fly. Id. at 1101.
On September 11, 2024, the Ninth Circuit issued another broad ruling in Nair, et al. v. Medline Industries, LP, 2024 WL 4144070 (9th Cir. Sept. 11, 2024). There, the plaintiff was a California warehouse operator who worked on a shipping dock stacking pallets and wrapping them in saran wrap. The plaintiff alleged that a driver told her that he made out-of-state deliveries and that a training video showed her employer shipping medical supplies throughout the country. The Ninth Circuit affirmed the district court’s order denying a motion to compel arbitration, noting that the employer had done nothing to rebut the plaintiff’s evidentiary showing that she packaged and loaded goods that traveled in interstate commerce. Justice Ryan Nelson’s concurrence cautioned that the Ninth Circuit needed to ground its decisions in the statutory text of the transportation worker exemption rather than through “judicially created tests [that] risk taking on a life of their own.” Id. at *2.
The U.S. District Court for the District of Colorado followed this line of reasoning and issued a similar ruling in Rietheimer, et al. v. United Parcel Service Inc., No. 23-CV-477 (D. Colo. Nov. 13, 2024). The plaintiff, a last-mile delivery driver, filed a class action, and the defendant moved to dismiss the class claims and compel individual arbitration. The court ruled that the plaintiff and other last-mile delivery drivers like him were engaged in interstate commerce within the meaning of the transportation worker exemption. The court explained that, although the plaintiff did not directly transport goods across state lines, a significant portion of the packages he handled came from out of state, and his role was integral to the final step in the interstate delivery process. It reasoned that the packages the plaintiff delivered were part of an ongoing interstate transaction and thus concluded that he was directly involved in the free flow of goods across state borders. Given the enduring impact that the arbitration defense has in class action litigation, companies are apt to face additional hurdles from creative workarounds from the plaintiffs’ class action bar as courts continue to push the boundaries of the transportation worker exemption.
Duane Morris Takeaway: The plaintiffs’ class action bar has continued to invest in the privacy class action space and, over the past year, has generated a multitude of filings, making privacy one of the hottest areas of growth in terms of activity by the plaintiffs’ class action bar. As technology continues to infiltrate our everyday lives, it provides ongoing inspiration for novel claims. Two of the most active areas of privacy litigation over the past year include: (1) litigation regarding “biometric” technologies under the Illinois Biometric Privacy Act (BIPA); and (2) claims regarding website advertising technologies (adtech) asserted under a variety of federal and state statutory and common laws.
Watch DMCAR co-editor Jennifer Riley explain this trend in the following video:
Additionally, in the absence of a federal comprehensive privacy law, states have been enacting their own patchwork of laws. There are currently 19 states that have passed comprehensive privacy laws. The following chart shows new laws that will become effective in 2025:
On August 2, 2024, the Illinois Governor signed a long-awaited amendment to the BIPA, the most popular and heavily litigated privacy law in the U.S. The amendments eliminated per-scan damages, granting defendants a reprieve from potentially crushing penalties allowed under pre-amendment version of the law that inspired thousands of class action lawsuits over the past seven years.
Enacted in 2008, the BIPA regulates the collection, use, and handling of biometric information and biometric identifiers by private entities. Subject to certain exceptions, the BIPA prohibits collection or use of an individual’s biometric information and biometric identifiers without notice, written consent, and a publicly available retention and destruction schedule.
In terms of lawsuit filings, for nearly a decade following enactment of the BIPA, activity under the statute remained largely dormant. The plaintiffs’ bar filed approximately two total lawsuits per year from 2008 through 2016 before filings increased in 2017 and then skyrocketed in 2019. In 2020, plaintiffs filed more than six times as many class action lawsuits for alleged violations of the BIPA than they filed in 2017 and more than the number of class action lawsuits they filed from 2008 through 2016 combined.
Filings continued to accelerate in 2023, prompted by two rulings from the Illinois Supreme Court that increased the opportunity for recovery of damages under the BIPA. On February 2, 2023, the Illinois Supreme Court held that a five-year statute of limitations applies to claims under the BIPA, and, on February 17, 2023, the Illinois Supreme Court held that a claim accrues under the BIPA each time a company collects or discloses biometric information. See Tims v. Black Horse Carriers, 2023 IL 127801 (Feb. 2, 2023); Cothron, et al. v. White Castle System, Inc., 2023 IL 1280004 (Feb. 17, 2023).
In 2024, the Illinois General Assembly dealt a significant blow to plaintiffs’ pursuit of these claims. On August 2, 2024, the Illinois Governor signed SB 2979 into law, amending the BIPA and limiting plaintiffs to one recovery per person under §§ 15(b) and 15(d). In other words, a private entity that, in more than one instance, collects, captures, or otherwise obtains the same biometric identifier or biometric information from the same person using the same method of collection “has committed a single violation” for which an aggrieved person is entitled, at most, to one recovery. See 740 ILCS 14/20 (b), (c). Courts to date have disagreed as to whether the amendment and its new “per person” damages regime applies retroactively, seeEdwards v. Central Transport LLC, No. 24-CV-1925 (N.D. Ill. Nov. 13, 2024), or whether it applies only on a go-forward basis. We anticipate that parties will continue to litigate this question in 2025.
While a welcome relief to defendants, the BIPA’s new “per person” damages regime remains sizable and on a par with other privacy statutes that remain popular with the plaintiffs’ class action bar, such as the Electronic Communications Privacy Act (ECPA), which provides for damages up to $10,000 per claimant, or the Video Privacy Protection Act (VPPA), which provides for damages up to $2,500 per claimant.
Thus, whereas their rate of growth slowed in 2024, BIPA filings remained robust in comparison with prior years. Indeed, plaintiffs filed 427 lawsuits invoking the BIPA in 2024, compared with 417 in 2023, and 362 in 2022. The graphic shows the year over year growth in BIPA filings over the past eight years:
In terms of substance, 2024 saw the emergence of two significant trends in BIPA litigation that illustrate plaintiffs’ continued creativity when it comes to applying the BIPA to new technologies.
First, plaintiffs filed a significant number of BIPA cases targeting technologies that perform functions other than biometric identification. These include virtual try-on technologies, efforts to measure affects or emotions, attempts to verify conformance with pornography restrictions or passport photo requirements, and other functions. Basically, if a company’s technology performs any function at all involving a face, the company was a potential target of BIPA litigation in 2024. Although no courts have ruled definitively as to whether such technologies obtain “biometric identifiers” or “biometric information” within the meaning of the BIPA, some courts have found allegations regarding their use sufficiently plausible to survive motions to dismiss.
In Davis v. e.l.f. Cosmetics, Inc., 2024 U.S. Dist. LEXIS 94318 (N.D. Ill. May 28, 2024), for example, plaintiffs filed a class action alleging that the defendant’s virtual try-on technology used facial recognition technology without proper consent in violation of § 15(b). The defendant moved to dismiss on the ground that virtual try-on involves only facial detection (i.e., whether there is a face), not facial recognition or identification. The court rejected the argument, concluding that the plaintiffs’ allegations that the virtual try-on tool obtained biometric identifiers was “enough” at the pleading stage to overcome a motion to dismiss. Id. at *2.
In Martell, et al. v. X Corp., 2024 U.S. Dist. LEXIS 105610 (N.D. Ill. June 13, 2024), by contrast, plaintiff alleged that he uploaded a photograph containing his face to the social media platform X and that X then analyzed the photograph for nudity and other inappropriate content using a product called PhotoDNA. Id. at *1. According to the plaintiff, PhotoDNA created a unique digital signature of his face-containing photograph known as a “hash” and, therefore, necessarily obtained a “scan of . . . face geometry” in violation of the BIPA. Id. at *1-2. X Corp. moved to dismiss arguing, among other things, that plaintiff failed to allege that PhotoDNA obtained a scan of face geometry because PhotoDNA does not perform facial recognition. The court granted the motion finding no plausible allegations of a scan of face geometry because “PhotoDNA is not facial recognition software.” Id. at *5. As the court explained, the “plaintiff does not allege that the hash process takes a scan of face geometry, rather he summarily concludes that it must. The court cannot accept such conclusions as facts adequate to state a plausible claim.” Id. at *9.
Second, plaintiffs have filed a significant number of BIPA cases over the use of AI‑based facial recognition systems that transform photographs into numerical expressions that can be compared to determine their similarity. These modern systems are different than older, non-AI facial recognition systems in place at the time of the BIPA’s enactment in 2008 that attempt to identify individuals by using measurements of face geometry. The older systems construct a facial graph from many key landmarks such as the corners of the eyes, tip of the nose, and corners of the mouth. Courts have disagreed as to whether the BIPA, which defines biometric identifiers to include a “scan of face geometry,” applies to AI machine-learning systems for facial analysis or recognition that do not construct such geometric graphs.
One court previously found that this question is one for a jury, see In Re Facebook Biometric Information Privacy Litigation, 2018 WL 2197546, at *2-3 (N.D. Cal. May 14, 2018), but at least one other court, Zellmer, et al. v. Meta Platforms, Inc., 104 F.4th 1117 (9th Cir. 2024), held to the contrary.
In Zellmer, a plaintiff who never used Facebook sued Meta for alleged violations of the BIPA after his friends uploaded photographs of him to Facebook. He alleged that Facebook collected or captured his biometric identifiers when its tag suggestion feature created what Facebook calls a “face signature” from those uploaded photos. Id. at 1120. The district court granted summary judgment to Facebook, and the Ninth Circuit affirmed. As the Ninth Circuit explained, “[n]o one – not even [defendant, the creator of the face signature] – can reverse-engineer the numbers comprising a given face signature to derive information about a person.” Id. at 1121. For this reason, the face signature “cannot identify an individual” and, therefore, is not subject to the BIPA. Id. at 1123.
We expect continued litigation in 2025 over whether the BIPA regulates only those technologies capable of identification and whether AI-based facial recognition systems implicate the BIPA will remain a hotly litigated topic in 2025.
Although website activity tracking tools are nothing new, and appear on most websites, this past year they continued to fuel a wave of lawsuits alleging that such tools caused companies in various industries to share users’ private information. While some of these cases and claims met an early dismissal, others inspired sizable settlements, signaling that corporations should expect continued investment in this area by the plaintiffs’ bar in 2025.
In 2024, for the second time in as many years, plaintiffs filed more than two hundred class action complaints alleging that Meta Pixel, Google Analytics, and other similar software code embedded in websites secretly captured plaintiffs’ web browsing data and sent it to Meta, Google, and other online advertising agencies. This software, often called “adtech,” is a popular feature on many websites today. More than ten million companies and governmental organizations use it. Adtech works by collecting information about a person’s web-browsing behavior, using AI to analyze the collected data, and then serving targeted advertisements based on the analysis.
Plaintiffs have asserted claims attacking adtech based on one or more of a wide variety of legal theories, including federal and state wiretapping statutes, eavesdropping statutes, the VPPA, unfair and deceptive practices statutes, various common laws, and other legal theories. Plaintiffs typically seek to invoke a statute that provides for statutory damages, asserting that hundreds of thousands of website visitors, times $10,000 per claimant in statutory damages under the Federal Wiretap Act, for example, equals billions of dollars. Several of these cases have led to multi-million-dollar settlements, but the vast majority remain undecided.
The courts reviewing these claims have been tasked with applying statutes, many of which were passed decades ago, in novel ways to new technologies that the drafters of those laws could not have envisioned. As a result, courts issued an assortment of rulings on motions to dismiss adtech class actions in 2024, resulting in a mixed bag of outcomes. Court rulings on these inventive theories varied widely in 2024, presaging continued battles in 2025 as these issues bubble up to appellate courts.
One of this year’s largest adtech class action led to a victory for defendants in T.D. v. Piedmont Healthcare, Inc., Case No. 23-CV-5416 (N.D. Ga. Aug. 24, 2024). The plaintiffs sued Piedmont alleging that it installed the Meta Pixel on its public-facing website and its secure patient portal and transmitted the plaintiffs’ “personally identifiable information (PII) and protected health information (PHI) [to Meta] without their consent.” Id. at 1-2.
The plaintiffs asserted claims for invasion of privacy, breach of fiduciary duty, negligence, breach of contract, unjust enrichment, and violation of the ECPA. The court granted Piedmont’s motion to dismiss.
First, the court found no invasion of privacy because “[t]here is no intrusion upon privacy when a patient voluntarily provides personally identifiable information and protected health information to his or her healthcare provider.” Id. at 5-6. Second, the court rejected all seven of plaintiffs’ alleged damages theories and, accordingly, dismissed plaintiffs’ breach of fiduciary duty, negligence, breach of contract, and unjust enrichment, all of which required the plaintiffs to plausibly allege damages or, relatedly, enrichment, as an element of these claims. Id. at 7-10. Finally, the court dismissed the plaintiffs’ ECPA claim, which required plaintiffs to plausibly allege an intentional interception of the contents of an electronic communication. Id. at 11.
By contrast, in Kane, et al. v. University Of Rochester, 2024 WL 1178340 (W.D.N.Y. Mar. 19, 2024), a New York federal court denied a motion to dismiss finding that adtech plaintiffs sufficiently alleged that defendant disclosed information they entered on defendant’s website in the form of appointment scheduling information that identified the user who scheduled the appointment, the provider, and the provider’s specialty. Id. at *5-7.
The court declined to dismiss plaintiffs’ claims for breach of express contract, unjust enrichment, bailment, and violation of New York’s deceptive trade practices statute, and found that plaintiffs sufficiently invoked the crime-tort exception under ECPA. Id. at *7-8. The court acknowledged that it joined the “[a]t least one [other] . . . court” by finding an adtech plaintiff sufficiently invoked the crime-tort exception under ECPA with allegations that the website owner’s purpose was to “enhance its marketing efforts.” Id. at *7.
In cases where websites containing video and adtech allegedly transmit video viewing information, plaintiffs often assert claims for alleged violations of the federal VPPA. It prohibits a “video tape service provider” from knowingly disclosing “personally identifiable information concerning any consumer of such provider.” 18 U.S.C. § 2710(b)(1).
The statute defines a “video tape service provider” to include any person “engaged in business, or affecting interstate or foreign commerce, of rental, sale, or delivery of prerecorded video cassette tapes or similar audio-visual materials.” 18 U.S.C. § 2710(a)(4).
The VPPA provides for damages up to $2,500 per violation in addition to costs and attorneys’ fees for successful litigants, making it an attractive source of filings for the plaintiffs’ class action bar.
Indeed, plaintiffs initiated more than 250 VPPA class actions in 2024, compared to 137 in 2023, reflecting continued growth of VPPA class actions fueled in large part by adtech claims.
In 2024, courts issued a mixed bag of rulings on motions to dismiss claims for alleged violation of the VPPA. Compare, e.g., Brown, et al. v. Learfield Communications, LLC, 2024 U.S. Dist. LEXIS 15587 (W.D. Tex. Jan. 29, 2024) (dismissing VPPA claim because the plaintiff failed to allege a nexus between plaintiff’s newsletter subscription and access to video content), with Salazar, et al. v. National Basketball Association, 2024 U.S. App. LEXIS 25902 (2d Cir. Oct. 15, 2024) (rejecting defendant’s argument that the VPPA applies only to subscribers of audiovisual services and finding that it also applies to subscribers of an email newsletter).
These rulings illustrate the vast and growing patchwork quilt of differing approaches to adtech claims asserted under a variety of legal theories. A more expansive discussion of these rulings appears in Chapter 14 regarding Privacy Class Actions. The initial decisions concerning class certification of adtech claims issued in 2024, however, came out in favor of defendants as both courts denied class certification. SeeGriffith, et al. v. TikTok, Inc., 2024 U.S. Dist. LEXIS 176403 (C.D. Cal. Sept. 9, 2024); Martinez, et al. v. D2C, LLC, 2024 U.S. Dist. LEXIS 178570 (S.D. Fla. Oct. 1, 2024).
In 2025, we anticipate that the patchwork quilt will expand as more courts confront these novel claims and decisions start making their way toward resolution at the appellate level.
Duane Morris Takeaway: Although courts issued fewer decisions on motions for class certification in 2024 as compared to 2023, the plaintiffs’ class action bar obtained certification at a more consistent rate across all substantive areas, suggesting that plaintiffs are being more selective in their investments and the cases they pursue through class certification.
Watch Duane Morris partner Jennifer Riley discuss the consistent certification rates in 2024 and what it means for 2025 in the video below:
In 2024, courts issued rulings on 432 motions for class certification, a decrease from 2023, when courts issued rulings on 451 motions for class certification. Of those, courts granted motions for class certification at a lower rate. Courts granted 272 of those motions, for a certification rate of approximately 63%. In 2023, by contrast, courts granted 324 motions for class certification, for a certification rate of approximately 72%.
Although the certification rate overall was lower, plaintiffs obtained certification at a more consistent rate across substantive areas, from a low of 33% in the RICO area, to a high of approximately 86% in the WARN areas. By contrast, in 2023, the numbers varied more substantially across substantive areas, from a low of 14% in the data breach area, to a high of 97% for securities fraud.
Plaintiffs Continued To Certify Cases At High Rates
In 2024, plaintiffs succeeded in certifying class actions at a high rate. Across all major types of class actions, courts issued rulings on 432 motions to grant or to deny class certification in 2024. Of these, plaintiffs succeeded in obtaining or maintaining certification in 272 rulings, an overall success rate of approximately 63%.
The numbers show that, when compared to 2023, plaintiffs filed fewer motions for class certification in 2024, and succeeded in certifying fewer classes in 2024.
By comparison, in 2023, courts issued rulings on 451 motions to grant or deny class certification, and plaintiffs succeeded in obtaining or maintaining certification in 324 rulings, with an overall success rate of 72%. In 2022, courts issued rulings on 335 motions to grant or to deny class certification, and plaintiffs succeeded in obtaining or maintaining certification in 247 rulings, an overall success rate of nearly 74%.
In 2024, the number of motions that courts considered varied significantly by subject matter area, and the number of rulings varied across substantive areas. The below chart summarizes these results in each of the key areas of class action litigation (sorted by plaintiffs’ success rate).
The plaintiffs’ bar obtained the highest rates of success in WARN Act, wage & hour, securities fraud, and antitrust class actions. In cases alleging claims for violation of the WARN Act, plaintiffs succeeded in obtaining orders certifying classes in six of seven rulings issued during 2024, a success rate of 85.7%. In wage & hour class and collective actions, plaintiffs succeeded in obtaining first-stage certification orders in 124 of 156 rulings issued during 2024, a success rate of 79.5%. In cases alleging antitrust violations, plaintiffs succeeded in obtaining orders certifying classes in 15 of 21 rulings issued during 2024, a success rate of 71.4%.
Although the certification rate overall was lower, as discussed above, moving down to 63% in 2024 from 72% in 2023, plaintiffs obtained certification at a more consistent rate across substantive areas. In 2024, plaintiffs succeeded in certifying cases alleging WARN Act violations at a rate of 85.7%, their highest rate of success among substantive areas. Plaintiffs succeeded in certifying cases alleging RICO violations at a rate of 33.3%, their lowest rate of success across substantive areas. Compared to 2023, these numbers reflect less variance across substantive areas.
In 2023, plaintiffs succeeded in certifying cases alleging securities fraud at a rate of 97.2%, their highest rate of success among substantive areas. Plaintiffs succeeded in certifying cases alleging data breach claims at a rate of 14.3%, their lowest rate of success across substantive areas.
The year over year compression suggests that plaintiffs were more selective during 2024 relative to the cases in which they sought class certification, particularly at the low end.
In 2024, for example, the number of rulings on motions for class certification in the data breach area dropped to four, a decrease of 42.9%, but plaintiffs fared better on those four, going two for four, for a success rate of 50.0%.
Courts Issues More Rulings In FLSA Collective Actions Than In Any Other Area Of Law
In 2024, courts issued more certification rulings in FLSA collective actions than in any other type of case. Many courts historically have applied a more lenient standard to such motions, allowing plaintiffs to increase the size of their cases with comparatively low investment, contributing to the number of filings in this area.
Overall, courts issued 171 rulings. Of these, 156 addressed motions for conditional certification of collective actions under 29 U.S.C. § 216(b), and 18 addressed second-stage motions for decertification of collective actions. Of the 167 rulings that courts issued on motions for conditional certification, 125 rulings favored plaintiffs, for a success rate of nearly 75%.
Plaintiffs’ success rate at the conditional certification stage outpaced their performance from 2023. In 2023, courts issued 183 rulings. Of these, 165 addressed motions for conditional certification of collective actions under 29 U.S.C. § 216(b), and 18 addressed second-stage motions for decertification of collective actions. Of the 167 rulings that courts issued on motions for conditional certification, 125 rulings favored plaintiffs, for a success rate of nearly 75%.
The results plaintiffs achieved in 2024 are more similar to the results they obtained in 2022, during which courts issued rulings on 236 motions. Of these, 219 addressed motions for conditional certification of collective actions, and 18 addressed motions for decertification of collective actions. Of the 219 rulings that courts issued on motions for conditional certification, 180 rulings favored plaintiffs, for a success rate of 82%.
Although success rates stayed high, and climbed closer to the rate observed in 2022, the overall number of rulings declined. This phenomenon likely reflects the impact of the so-called Swales-Clark movement. Until 2021, courts almost universally applied a two-step process to certification of FLSA collective actions. At the first stage, courts required a plaintiff only to make a “modest factual showing” that he or she was similarly-situated to others, and plaintiffs often met such burden at the outset of litigation by submitting declarations from a limited number of potential collective action members.
At the second stage, courts conducted a more thorough examination of the evidence to determine whether in fact the plaintiff was similarly-situated to others and the court manageably could try the case on a collective basis.
Over the past few years, however, courts have started taking a fresh look at the two-step process and whether it comports with the FLSA. Federal appellate courts in two circuits – the Fifth Circuit and Sixth Circuit – along with various district courts answered that question in the negative.
In 2021, the Fifth Circuit in Swales, et al. v. KLLM Transport Services, LLC, 985 F.3d 430, 436 (5th Cir. 2021), rejected the two-step approach to evaluating collective action certification, holding instead that district courts should “rigorously scrutinize the realm of ‘similarly-situated’ workers … at the outset of the case.”
In 2023, the Sixth Circuit in Clark v. A&L Homecare & Training Center, LLC, 68 F.4th 1003 (6th Cir. 2023), likewise jettisoned the two-step approach but expressly declined to adopt the standard approved by the Fifth Circuit. Instead, the Sixth Circuit introduced a new standard that requires the plaintiff to demonstrate a “strong likelihood” that other employees are “similarly-situated” to the plaintiff.
Although different, both Swales and Clark require plaintiffs to make a more substantial showing than the first-step approach requires, thereby requiring more factual development and, as a result, more investment on the part of the plaintiffs’ bar. As a result, we have seen fewer motions filed in these two circuits over the past two years, as plaintiffs progress further into discovery before filing their motions for conditional certification and as plaintiffs shift their efforts away from pursuing collective actions in the Fifth and Sixth Circuits.
Indeed, once a hotbed of filings, the number of rulings in the Fifth and Sixth Circuits were muted in 2024. In the Fifth Circuit, courts issued rulings on six motions for conditional certification, and plaintiffs prevailed on five, for a success rate of 83%, and, in the Sixth Circuit, courts issued rulings on ten motions for conditional certification, and plaintiffs prevailed on eight, for a success rate of 80%. While the results are solid for plaintiff’s side lawyers, the investment of time and effort to secure certification and thereafter monetize their cases shows a far longer track than in other federal circuits
These numbers illustrate the impact of Clark. Whereas courts in the Sixth Circuit issued rulings on ten motions for conditional certification this year, in 2023, as Clark began to take hold, courts in the Sixth Circuit issued 22 decisions on motions for conditional certification.
In 2022, the last full year before Clark, courts in the Sixth Circuits issued 36 decisions on motions for conditional certification. These numbers show a decrease of 14 rulings in each of the past two years. These numbers may continue to decline as plaintiffs shift their case filings to other circuits that have retained the lenient two-step approach or to other areas.
The distribution of conditional certification rulings over the past years shows that a disproportionate number emanated from traditionally pro-plaintiff jurisdictions, including the judicial districts within the Second Circuit (33 decisions) and Ninth Circuit (21 decisions), which include New York and California, respectively. The following map illustrates these variations:
At the decertification stage, courts generally have conducted a closer examination of the evidence and, as a result, defendants historically have enjoyed an equal if not higher rate of success on these second-stage motions as compared to plaintiffs. The results in 2024, however, were less favorable for defendants. Courts issued 15 rulings on motions for decertification. Of these, five rulings favored defendants, for a success rate of only 33.3%, and 10 rulings favored plaintiffs, for a success rate of 66.6%.
By comparison, in 2023, courts issued 18 rulings on motions for decertification of collective actions. Of these, eight favored defendants, for a success rate of 44.4%, and ten rulings favored plaintiffs, for a success rate of 55.6%. Such a rate aligns with the success rate defendants enjoyed in 2022. In 2022, courts similarly issued 18 rulings on motions for decertification of collective actions. Of these, defendants prevailed in nine, for a success rate of 50%, and plaintiffs prevailed in nine, for a success rate of 50%.
The variation in numbers across federal circuits no doubt flows from the different standards and approaches that different courts take in evaluating motions for conditional certification and decertification and, in turn, the likelihood of plaintiffs’ success on such motions. If more courts join the Fifth and Sixth Circuits in abandoning the traditional two-step certification process, and thereby increase the time and expense of gaining a conditional certification order, it may lead to a reshuffling of the deck in terms of the types of cases plaintiffs pursue and where plaintiffs choose to file them.
Duane Morris Takeaway: As authors and editors of our firm’s our Class Action Review, we identified ten (10) key trends in class action litigation over the past year. Trend # 1 focuses on the unprecedented number of massive class action settlements reached in the last 12 months. Aside from the Big Tobacco settlements nearly two decades ago, 2022, 2023, and 2024 have marked the most extensive set of billion-dollar class action settlements in the history of the American court system.
In today’s video blog, Duane Morris partner Jerry Maatman discusses how the aggregate monetary value of class action settlements continued to reach incredible highs in 2024, as plaintiffs’ lawyers and government enforcement agencies monetarized their claims into enormous settlement values. In 2024, the plaintiffs’ bar was successful in converting case filings into significant settlement numbers again. Tune in below to hear all about this or read the blog post blow for more information.
In 2024, settlements reached the $40 billion mark for the third year in a row. The cumulative value of the highest ten settlements across all substantive areas of class action litigation totaled $42 billion. That number is the third highest value we have tallied in the last two decades, trailing only the settlement numbers from 2023 and 2022. In 2023 settlements totaled $51.4 billion, and in 2022, settlements totaled $66.0 billion. Combined, the past three years of $159.4 billion reflect use of the class action mechanism to redistribute wealth at an unprecedented level.
These gargantuan settlements yielded extraordinary and record-setting attorneys’ fee awards. On April 23, 2024, U.S. District Judge Richard Gergel of the U.S. District Court for the District of South Carolina awarded more than $956 million in attorneys’ fees to plaintiffs’ lawyers who secured two settlements worth more than $11 billion with four manufacturers of “forever chemicals” that allegedly polluted drinking water in the United States with per- and polyfluoroalkyl substances, or PFAS. Numbers like this explain at least in part why we are continuing to see the plaintiffs’ class action bar grow in numbers and expand its reach as lawyers clamor to identify the next “tort of the day.”
On an aggregate basis, across all areas of litigation, class actions and government enforcement lawsuits garnered more than $42 billion in settlements in 2024. The largest 20 settlements during 2024 are in the chart below. The total for the top 20 settlements in 2024 was $34.6 billion.
Such numbers fall slightly short only of the numbers we tallied in 2022 and 2023. The value of class actions and government enforcement settlements in 2022 topped $66 billion, and the value in 2023 topped $51 billion. Combined, the three-year settlement total eclipses any other three-year period in the history of American jurisprudence.
As to settlements of one billion dollars or more, in 2024, parties agreed to resolve ten class actions for $1 billion or more. These settlements include the following:
The number of billion dollar settlements in 2024 surpassed the number in 2023, falling short only of the number of billion-dollar settlements in 2022. In 2023, parties resolved nine class actions for $1 billion or more. In 2022, parties resolved 15 class actions for $1 billion or more in settlement dollars. Together, corporations have seen 34 settlements of one billion dollars or more in three years. This string of settlements marks the most extensive set of billion-dollar class action settlements in the history of the American court system.
In 2024, rich settlement numbers spanned nearly every area of class action litigation. The following shows the cumulative value of the ten highest settlements in each key area of class action litigation:
The value of the ten highest settlements in the privacy, data breach, and labor areas increased in 2024, reflecting the growth of class action litigation in these areas, as they account for a higher percentage of the overall total. By contrast, the value of the ten highest settlements in antitrust, discrimination, civil rights, and FCRA class actions decreased to less than 50% of their 2023 totals.
Particularly when viewed in conjunction with the settlement values observed in 2022 and 2023, the settlement numbers in 2024 confirm that we have entered and are operating in a new era of enhanced class action risks. Corporations should expect these numbers to continue to incentivize the plaintiffs’ class action bar to be equally if not more aggressive with their case filings and settlement positions in 2025.
While settlements have been particularly robust over the past three years, the number of class action filings have been relatively stable and are down slightly overall in 2024.
There has been a steady increase in areas such as data privacy, with heightened concerns about cybersecurity and consumer data protection driving lawsuits. Additionally, the COVID-19 pandemic sparked a rise in class actions related to health and safety protocols, insurance claims, and employee rights. Overall, the legal landscape has grown more complex, with plaintiffs and defendants navigating a more dynamic and often contentious environment, and often leading to massive settlement opportunities for plaintiffs.
Duane Morris Takeaway: Corporations should expect such numbers to incentivize the plaintiffs’ class action bar to be equally if not more aggressive with their case filings and settlement positions in 2025.
Duane Morris Takeaways:Register today and join us Thursday, January 30, 2025, at a Duane Morris Exclusive Event – our Book Launch for the Duane Morris Class Action Review – 2025! This event will be offered as an in-person panel discussion and a Zoom webinar.
The DMCAR e-book is an essential desk reference that can be viewed on any device and is fully searchable with selectable text. The 2025 Review analyzes 1,441 class action rulings from state and federal courts in 23 areas of law, providing a comprehensive review of the class action landscape. Details on the 10 key trends identified this year and a copy of the Executive Summary are featured on the DMCAR website here.
You are invited to join Duane Morris Partners Gerald L. Maatman, Jr. and Jennifer Riley for a panel discussion marking the release of the Duane Morris Class Action Review – 2025. Please register here to reserve your spot today! The event will be offered as an in-person discussion or join us live via Zoom webinar.
Featuring authors Gerald L. Maatman, Jr., Jennifer A. Riley and American Lawyer Media staff reporter Amanda Bronstad in a discussion of the key class action developments and decisions in 2024 and what companies can expect in 2025. We hope to see you there!
In-Person Event Location: Convene CityView Duane Morris Plaza | 13th Floor 30 South 17th Street, Philadelphia, PA 1910
Registration: 3:30 p.m. to 4:00 p.m. Eastern Book Launch and Discussion: 4:00 p.m. to 5:00 p.m. Eastern Cocktail Reception: 5:00 p.m. to 6:00 p.m. Eastern
