Duane Morris Takeaways: On February 2, 2024, Judge Yvonne Gonzalez Rogers of the U.S. District Court for the District of Northern California granted Plaintiffs’ motion to certify a class of purchasers of one or more iOS applications or application licenses from Defendant Apple, Inc. (“Apple”) or who paid for one or more in-app purchases since July 10, 2008 in In Re Apple iPhone Antitrust Litigation, No. 4:11-CV-06714 (N.D. Cal. Feb. 2, 2024). The Court rejected defense arguments that class certification should be denied on the grounds that the model of Plaintiffs’ expert revealed millions of uninjured class members and that individual issues would predominate. Instead, the Court found that the model showed an estimated 7.9% of the class is uninjured and that with more complete data the model will be capable of showing antitrust impact on a class-wide basis.
In Re Apple iPhone Antitrust Litigation is required reading for any corporate counsel handling antitrust class action litigation involving claims by end consumers.
Case Background
Plaintiffs are purchasers of iPhone applications (apps), app subscriptions, and/or in-app content via the iPhone App Store. Defendant sells iPhones and requires app purchases to be made via the App Store. Plaintiffs claim that Apple charges App Store developers supracompetitive commissions that are passed on to consumers in the form of higher prices for app downloads, subscriptions, and in-app purchases. Plaintiffs assert claims under § 2 of the Sherman Act for unlawful monopolization and attempted monopolization of the iPhone applications aftermarket.
In a prior ruling, the Court denied class certification. It had concluded that Plaintiffs could not establish the predominance requirement under Rule 23(b)(3) because they had not demonstrated that damages from Apple’s alleged anticompetitive conduct could be proven on a class-wide basis. According to the Court, the methodology of Plaintiffs’ expert failed to reasonably ascertain how many class members were unharmed by the alleged conduct and individual questions would predominate.
The Court’s Class Certification Ruling
In response to the Court’s ruling, Plaintiffs narrowed their class definition to only include Apple account holders who have spent $10 or more on app or in-app content.
Using that new definition, Plaintiffs submitted revised and new expert reports estimating that the proposed class includes only 7.9% unharmed members and again moved for class certification under Rule 23(b)(3). Since the Court’s prior ruling, the Ninth Circuit also rejected the argument that “Rule 23 does not permit the certification of a class that potentially includes more than a de minimis number of uninjured class members.” Olean Wholesale Grocery Cooperative, Inc. v. Bumble Bee Foods LLC, 31 F. 4th 651, 669 (9th Cir. 2022). According to the Court, the revised model can show the impact of Apple’s allegedly anticompetitive conduct across all class members, and once Apple produces the rest of its app transactional data, the model will be able to calculate the exact extent of injury suffered by each class member. Under Olean, the Court opined that Plaintiffs meet the predominance requirement.
Implications For Defendants
In Re iPhone Antitrust Litigation is another example of a federal court class certification decision turning on the existence of common, injury-producing conduct. The Court credited evidence that may be over inclusive at class certification stage of the proceedings, but is nonetheless capable of showing the impact of the allegedly anticompetitive conduct across all class members at trial.
By Gerald L. Maatman, Jr., Nathan K. Norimoto, Nick Baltaxe
Duane Morris Takeaways: On January 28, 2024, in Chavez, et al. v. San Francisco Bay Area Rapid Transit District, No. 22-CV-06119, 2024 U.S. Dist. LEXIS 14785 (N.D. Cal. Jan. 28, 2024), Judge William Alsup of the U.S. District Court for the Northern District of California denied class certification for a failure to accommodate religious beliefs claim premised on a workplace COVID-19 vaccine mandate. Specifically, the Court held that the putative class was not certifiable as the class failed to meet Rule 23(b)(3)’s predominance and superiority requirements. The decision is a good roadmap for employers dealing with the continuing fall-out of the COVID-19 pandemic.
Background Of The Case
Defendant San Francisco Bay Area Rapid Transit (“BART”) implemented a workplace policy mandating that all employees needed a COVID-19 vaccination by December 21, 2021. Id. at 2. In response, BART received 188 requests for religious exemption and accommodation. Id. While some employees did not complete the exemption application process, 148 employees submitted applications to BART, noting varying belief systems such as “Christianity,” “Catholic,” “Islamism,” or even personal belief systems such as being “anti tyranny [sic].” Id. at 3. A panel of BART employees then reviewed each application individually and conducted further interviews with the applicants before deciding to grant or deny the request. Id. at 5.
Of the 148 completed applications, BART granted 70 religious exemptions and denied 78. Id. Those who were denied were given the option to either comply with the mandate, retire, voluntarily resign, or be terminated. Id. In total, 36 employees either retired, resigned, or were terminated. Id. BART considered accommodation for the 70 employees who were granted exemptions, but ultimately did not provide any accommodations as they could not “identify a reasonable accommodation that did not place an undue hardship on the District.” Id. at 6. Of the 70 applicants who were denied accommodation, 37 resigned, retired, or were terminated. Id. BART additionally received 25 requests for medical exemptions, and eight medical exemptions were granted, with those employees being placed on unpaid leave that only ended upon vaccination. Id.
Plaintiff Gabriel Chavez and 16 other named plaintiffs filed a class action complaint alleging that BART’s policy violated Title VII, the First Amendment right to free exercise of religion under 42 U.S.C. § 1983, and California’s Fair Employment and Housing Act (“FEHA”). Id. at 7. Plaintiff sought to certify a class pursuant to Rule 23(b)(3) composed of “all employees employed by BART who (1) have been ordered to submit to a COVID-19 vaccination, (2) have sincerely held religious beliefs which prevent them from taking the vaccine, (3) have submitted a request for a religious exemption, and (4) were denied a religious accommodation.” Id. Plaintiff also proposed a second, alternative class consisting of all employees employed by BART who “(1) have been ordered to submit to a COVID-19 vaccination, (2) have sincerely held religious beliefs which prevent them from taking the vaccine, (3) have submitted a request for religious exemption and religious accommodation, and (4) whose request for a religious exemption were denied.” Id.
The Court’s Ruling
The Court examined the class certification requirements under Rule 23(b)(3), which provide that a plaintiff must establish “that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Id. at *8.The Court held that Plaintiffs’ proposed class, as well as the proposed alternative class, did not satisfy the predominance and superiority requirements, and denied Plaintiffs’ certification motion. Id. at 23.
First, the Court examined the requirement of common issues predominating over any questions affecting only individual members. Id. at 11-20. With respect to Plaintiffs’ Title VII and FEHA claims, the Court noted that whether or not an individual had a bona fide religious belief – a requirement for both claims – there were too many individual systems of belief to examine. Id. at 12. The Court held that nearly every named plaintiffs’ application contained a distinct system of belief, and any examination of whether or not a request rested on a “bona fide religious belief” would necessarily require an individual inquiry into each plaintiffs’ belief system. Id. The Court expressed doubt that the various written or interview responses of one plaintiff will have any evidentiary impact on the bona fide religious belief of the class as a whole. Id.
Next, the Court held that BART’s undue hardship showing required an individualized inquiry of factual issues. Id. The Court noted that the potential class members are drawn from a large diversity of jobs – over a dozen unique jobs – and that accommodations reasonably considered for a “train conductor’s request bear no relation to the job functions and reasonable accommodations BART must consider when evaluating the exemption request of a manager of technology programs, a fire protection worker, or a police officer, or a senior operations supervisor liaison.” Id. 13-14.Further, the Court found that the inclusion of some union employees in the putative class also required individualized inquiries as the union’s contracted-for-rights “grant impacted workers certain rights, such as seniority, that BART is not required to transgress upon.” Id. at 14. Moreover, the Court indicated that a significant portion of the class would not be impacted by an “undue hardship” analysis, as 78 of the proposed members were not even considered for accommodation. Id. at 15.The Court did acknowledge that some aspects of the undue hardship consideration may be more amenable to common proof, but in light of the putative class’s “job diversity,” it reasoned that any undue hardship analysis “cannot be understood without an interrogation of individual employees’ job duties.” Id. at 16.
As to the Free Exercise of Religion Claims, the Court determined that those claims could not satisfy the predominance requirement. In doing so, it noted that “the sincerity and religious nature of plaintiffs’ belief is . . . an individualized issue.” Id. at 20. The Court found that each of the plaintiffs cited a “myriad” of religious and of personal experiences, along with refusal due to “CDC VARS data and concerns regarding health consequences, the Organization of American States Declaration of Rights of Indigenous Peoples, Senate Bill 1383 and Senate Bill 1159, among others.” Id. The Court concluded that the need to determine whether plaintiffs have met the bona fide religious belief threshold required individualized inquiries, which ultimately foreclosed class certification. Id.
Finally, the Court found that the putative class did not satisfy Rule 23(b)(3)’s superiority requirement. The Court reasoned that class members have “significant interest in the individual control of their claims.” Id. at 21-22. As an example, it noted that two potential class members have already brought individual actions against BART, and that seventeen other employees had filed suit in a third case. Id. at 22. The Court held that “[p]utative class members’ demonstrated interest in bringing and controlling these various litigations further reflects the significant monetary and emotional stakes at issue, and counsels against certification.” Id. In closing, the Court noted that given “the wide range of individual issues and proof” there will also likely be difficulties in managing the class action. Id.
Implications For Employers
The ruling in Chavez, et al. v. San Francisco Bay Area Rapid Transit District confirms that the need for individualized inquiries is a strong impediment to certifying a class action premised on COVID-19 vaccine accommodation theories of liability. This ruling stresses the specific importance of these individualized inquiries in the context of religious accommodations, which have recently been the subject of significant litigation after many employers implemented COVID-19 vaccine mandates in the workplace
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Derek S. Franklin
Duane Morris Takeaways: On January 29, 2024, in Hossfeld v. Allstate Insurance Co., No. 1:20-CV-07091 (N.D. Ill. Jan. 29, 2024), Judge Joan B. Gottschall of the U.S. District Court for the Northern District of Illinois denied a renewed motion for class certification brought by plaintiffs accusing Allstate of violating telemarketing laws by allowing an outside party to solicit ‘do-not-call’ listees on its behalf. After denying the plaintiff’s initial motion of class certification a year earlier, Judge Gottschall denied the plaintiff’s second motion for class certification because the plaintiff failed to show a material change of circumstances in the time since the first certification motion that warranted a different ruling. The decision is required reading for corporate defendants seeking to quell efforts by plaintiffs to take a second shot at obtaining class certification after a failed earlier attempt.
Case Background
Plaintiff Robert Hossfeld filed a lawsuit against Allstate Insurance Co. alleging that Allstate violated the Telephone Consumer Protection Act (“TCPA”) by providing a telemarketer that Allstate contracted with a list of consumer leads identifying individuals such as Plaintiff who requested to be placed on Allstate’s internal ‘do-not-call’ list. Id. at 2.
In May 2022, Plaintiff filed a motion for class certification pursuant to Rule 23 of the Federal Rules of Civil Procedure. In March 2023, the Court denied Plaintiff’s motion on the grounds that Plaintiff failed to show a large enough class to make joinder impractical. Id. at 2-3. In the order denying the motion, the Court did not include language stating that its denial of Plaintiff’s certification bid was “with prejudice.” Id. at 8.
Given the absence of that language, Plaintiff filed a renewed motion for class certification in May 2023 asking the Court to reconsider its earlier class certification ruling. Plaintiff asserted that he “reviewed the infirmities relied upon by the Court in its original opinion denying his first motion for class certification, and modified the class definitions and arguments to address them.” Id. at 5. Allstate moved to strike Plaintiff’s second motion for class certification, arguing that Plaintiff should not be given a “second bite at the apple.” Id. at 1.
The Court’s Rejection Of Second Motion For Class Certification
On January 29, 2024, the Court issued a 9-page decision granting Allstate’s motion to strike Plaintiff’s second class certification motion. Id. The Court’s decision analyzed Plaintiff’s second class certification motion under two applicable standards, including: (1) principles governing a pre-judgment motion for reconsideration under Rules 54(b) and 59(c); and (2) the Rule 23(c)(1) standard for revising an order granting or denying class certification. Id. at 4. The Court rejected Plaintiff’s arguments under both standards.
First, the Court determined that Plaintiff did not satisfy the reconsideration standards under Rules 54(b) and 59(e) because he failed to “present either newly discovered evidence or establish a manifest error of law or fact.” Id. at 5. The Court noted as part of this conclusion that, “although [Plaintiff] has submitted evidence not previously presented to the court, he [did] not contend that this evidence was unavailable to him when he filed his first class certification motion or that the court made a manifest error of fact or law when it denied his first class certification motion. Id. at 5-6.
Second, the Court found that Plaintiff’s did not make a necessary showing to reverse the Court’s earlier denial of class certification under Rule 23. Citing Seventh Circuit precedent in Chapman v. First Index, Inc., 796 F.3d 783, 785 (7th Cir. 2015), which affirmed the denial of a second class certification motion where there was no showing of “a material change of circumstances to justify revisiting the first class certification ruling,” the Court in Hossfeld rejected Plaintiff’s argument for the same reason. Id. at 7. As the Court explained, Plaintiff did not dispute that the newly-included arguments and supporting evidence in his second class certification motion were available at the time of his first motion. Id. at 9. Thus, the Court concluded that Plaintiff did not show “a material change in circumstances needed to obtain a second bite at the proverbial apple.” Id.
Based on rejecting Plaintiff’s arguments under both applicable legal standards, the Court granted Allstate’s motion to strike Plaintiff’s second motion for class certification. Id.
Implications For Companies
This opinion represents a helpful roadmap for employers to fend off attempts by plaintiffs to revive a failed class certification bid. The decision is a strong source of persuasive authority supporting that a plaintiff cannot successfully move a second time for class certification absent either “a manifest error of law or fact” in the court’s first class certification ruling, or newly-discovered evidence unavailable at the time of the first class certification bid representing a “material change in circumstances.” Id. at 5, 9. For these reasons as well, the ruling underscores the importance of not saving potentially supportive arguments and evidence during an initial class certification battle in case of a “second bite at the apple” that may not come.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther
Duane Morris Takeaways: In Brown v. Learfield Communications, LLC, et al., No. 1:23-CV-00374, 2024 U.S. Dist. LEXIS 15587 (W.D. Tex. Jan. 29, 2024), Judge David A. Ezra of the U.S. District Court for the Western District of Texas granted Defendants Learfield Communications, LLC and Sidearm Sports, LLC’s Rule 12(b)(6) motion to dismiss Plaintiff’s Video Privacy Protection Act (VPPA) class claim. The Court held that Plaintiff failed to plead facts to support his claim under the VPPA because he did not allege that he was a subscriber to audio-visual goods or services themselves, just a newsletter that contained links to publicly-available content on The University of Texas’s website. Defendants in VPPA class actions can utilize this decision as a roadmap when preparing motions to dismiss.
Case Background
Defendants Learfield Communications, LLC and Sidearm Sports, LLC (collectively, “Defendants”) operated the University of Texas at Austin’s (“UT”) website (the “UT Website”). Id. at 2. The UT Website contains software that enables Facebook to track the activity of UT Website users on other websites. Id. Defendants invite UT Website visitors to subscribe to emailed newsletters. Id. at 3. The newsletters provide links to various videos, clips, and other content on the UT Website related to UT Athletics. Id. Plaintiff Adam Brown subscribes to UT’s emailed newsletter. Id.
In April 2023, Plaintiff filed a class action against Defendants UT, UT Athletics, Learfield, and Sidearm alleging that they violated the VPPA by purportedly exposing the subscribers’ personal identification information and gathering marketing data without consent. Id. at 4. In June 2023, UT and UT Athletics filed a motion to dismiss based on sovereign immunity. Id. at 2. The motion was granted in July. Id. In September, Defendants Learfield and Sidearm filed a motion to dismiss under 12(b)(1), 12(b)(6), and 12(b)(7). Id.
The Court’s Decision
The Court denied Defendants’ Rule 12(b)(1) and 12(b)(7) motions to dismiss. It held that neither Learfield or Sidearm was entitled to immunity as an “arm of the state,” and that neither UT or UT Athletics were indispensable parties to the lawsuit. Id. at 7-10.
The Court, however, granted Defendants’ Rule 12(b)(6) motion to dismiss on the basis that Plaintiff was not a “consumer” under the VPPA because he failed to allege a factual nexus between the subscription and Defendants’ allegedly actionable video content. Id. at 2, 19, 26.
To state a claim under the VPPA, the Court noted that a plaintiff must allege that a defendant “(1) is a video tape service provider; (2) who knowingly disclosed to any person; (3) personally identifiable information; (4) concerning any consumer.” Id. at 10-11; 18 U.S.C. 2710(b)(1). Under the VPPA, a “consumer” is “any renter, purchaser, or subscriber of goods or services from a video tape service provider.” 18 U.S.C. § 2710(a)(1).
The Court reasoned that the VPPA “only applies to consumers (including subscribers) of audio video services” because, when reading the term “consumer” in the full context of the VPPA, “a reasonable reader would understand the definition of ‘consumer’ to apply to a renter, purchaser or subscriber of audio-visual goods or services, and not goods or services writ large.” Id. at * 19 (emphasis original) (quoting Carter v. Scripps Networks, LLC, 2023 WL 3061858, at *6 (S.D.N.Y. Apr. 24, 2023)).
The Court concluded that Plaintiff was not a “consumer” under the VPPA because (i) the newsletter did not contain videos, just links to videos on the UT Website; and (ii) the linked videos were available for any member of the public to see on the UT Website, not just those who subscribed to the newsletter. Id. at 26-28. Accordingly, the Court ruled that Plaintiff was not a subscriber to audio-visual goods or services, just a newsletter. Id. at 28-29. Ultimately, because Plaintiff failed to allege facts to support a claim under the VPPA, the Court granted Defendants 12(b)(6) motion to dismiss. Id. at 29.
Implications For Companies
The decision in Brown v. Learfield serves as a roadmap for defendants in VPPA class actions to utilize when preparing motions to dismiss. This case is also important as it adds the Western District of Texas to a growing number of federal courts that strictly construe the VPPA to audio-visual materials, not links to publically-available videos in newsletters. See, e.g., Carter v. Scripps Networks, LLC, No. 22-CV-2031, 2023 WL 3061858, at *6 (S.D.N.Y. Apr. 24, 2023); Jefferson v. Healthline Media, Inc., No. 3:22-CV-05059, 2023 WL 3668522, at *3 (N.D. Cal. May 24, 2023); Gardener v. MeTV, No. 22-CV-5963, 2023 WL 4365901, at *4 (N.D. Ill. July 6, 2023).
By Gerald L. Maatman, Jr., Katelynn Gray, and Gregory S. Slotnick
Duane Morris Takeaways: On January 23, 2024, in Chen et al. v. Reardon, Index No. 908146-23, in the Supreme Court of the State of New York (Albany County), a judge denied a motion to dismissfiled by the New York Department of Labor (NYDOL) seeking dismissal of a lawsuit claiming the agency improperly closed wage theft investigations for home care aides by way of inappropriate rulemaking under New York’s State Administrative Procedures Act (NYSAPA). Specifically, in evaluating the NYDOL’s motion and giving the workers the benefit of every possible inference, the court held the NYDOL may have improperly engaged in formal rulemaking without abiding by all required prerequisites (such as public notice) in shutting down its investigations of the workers’ unpaid wage claims due to collective bargaining agreements that included mandatory arbitration. The judge concluded that a “reasonable view of the facts stated” describes the NYDOL’s application of a “fixed, general principle” of dismissing every complaint that was subject to mandatory arbitration (i.e., a NYDOL rule), rather than “ad hoc decisions” evaluating the individual facts and circumstances of each claim. Id. at 9.
The decision highlights a state court’s willingness to scrutinize a state agency’s “informal” broad interpretations of its own investigation procedures under state law, and ultimately provides allegedly aggrieved employees with reasonable means to challenge the agency’s actions.
Case Background
Five home care aides who provided live-in services to elderly and disabled patients claim they typically worked 24-hour shifts without ever receiving five hours of uninterrupted sleep or three hours of meal breaks. Id. at 2. The workers alleged that they were never paid for more than 13 hours of work for any such 24-hour shifts despite not receiving the required sleeping and meal break periods in alleged violation of the New York Labor Law (NYLL) and its “13-hour rule.” Id. After working these shifts for some time, the workers each filed their own complaint with the NYDOL, claiming their compensation structure violated the NYLL.
The NYDOL initially accepted the complaints and began investigating. However, when the NYDOL determined that the workers were all subject to mandatory arbitration through a collective bargaining agreement with their respective unions, who had filed grievances on their behalf, the NYDOL terminated each investigation. The NYDOL sent each worker a complaint closing letter stating “we understand other means are available for a resolution of your claims.” One NYDOL investigator explained to a worker that the DOL closed the case “following the advice of our counsel’s office. The [CBA] supersedes our authority in this case. There is no getting around it. The same is true in each case we have closed on this basis.” The NYDOL also issued a press release around the same time stating that it “may accept…cases [involving alleged violations of the 13-hour rule] if an employee is not covered by an arbitration clause.” Id.
In August 2023, the workers filed an Article 78 petition against the NYDOL, seeking that the NYDOL reopen the closed investigations of their claims. Id. at 2-3. The workers argued the NYDOL’s policy of closing the investigations was pursuant to a “rule” within the meaning of the NYSAPA and that the NYDOL failed to submit a notice of proposed rulemaking as required before adopting such a rule. They also claimed the NYDOL’s reliance on that rule before closing their cases was an error of law, that the NYDOL’s jurisdiction is not limited by private arbitration agreements such that termination of their investigations was an abuse of the NYDOL’s discretion. Id.
The NYDOL moved to dismiss the petition and claimed it must be dismissed because it fails to establish a right of mandamus relief and fails to state a claim under the NYSAPA. Id.
The Court’s Decision
The Court determined that in considering a motion to dismiss, the petition must be given a liberal construction, the petitioners must be afforded every possible favorable inference, and the motion should only be granted if there is no “reasonable view of the facts” that could entitle petitioners to relief. Id. at 4.
The NYDOL argued that it has discretionary authority to investigate employer-employee controversies, and that the Article 78 petition could not be used to compel it to engage in a discretionary act. Id. In addressing these positions, the Court found that if a petitioner prevails under either a mandamus to compel or a mandamus to review under New York law, the Court “may grant the petitioner the relief to which he is entitled.” Id. at 5. The Court further found that under appropriate circumstances, such relief could include an order that directs specified action by the respondent. Id. It then held that because the workers asserted various causes of action under state law and alleged that the NYDOL’s decisions to close their complaints were arbitrary and capricious, affected by errors of law, and abuses of discretion, a judgment in favor of the workers could appropriately require the NYDOL to revisit their complaints. Id. at 6-7.
As for the workers’ claims under the NYSAPA and the NYDOL’s potentially improper rulemaking, the NYDOL argued that its determination to decline to investigate the individual petitioners’ claims was specific to the facts and circumstances of the complaints and subsequent investigations, and not of “general applicability that implements or applies law.” Id. The Court opined that the NYSAPA requires the NYDOL to comply with certain procedural requirements before adopting any “rule” and that if the NYDOL engaged in formal rulemaking but did not comply with the procedural requirements of the NYSAPA, that regulatory action must be annulled. Id. at 6-7.
The NYDOL conceded that it did not follow the rulemaking procedures laid out in the NYSAPA, and the only question the Court needed to decide was whether the workers adequately pled that NYDOL’s decision to terminate its investigations was pursuant to a rule within the meaning of the NYSAPA. Id. at 7. It noted that a “rule” under the NYSAPA is a fixed, general principle applied without consideration of other relevant facts and circumstances, as distinguished from ad hoc decision-making based on individual facts and circumstances. Id.
The Court reasoned that “rules” direct what action should be taken regardless of individual circumstances and apply to future courses of conduct. It held that a “policy” dictating specific results without regards to other relevant circumstances is subject to the NYSAPA’s rulemaking requirements. Id. at 8.
In this case, the Court found that the workers had alleged that the NYDOL dismissed each of their complaints because their unions had entered into collective bargaining agreements with their employers that called for mandatory arbitration of their claims. Id. at 8-9. The workers also alleged that the NYDOL’s practice or policy of dismissing complaints on this basis was rigidly applied without regard to aides’ individualized circumstances or any mitigating factors. Id. The NYDOL investigator’s statement to one worker that the NYDOL was required to terminate all investigations of the workers due the collective bargaining agreements and that “there is no getting around it” was further evidence in support of the workers’ petition that the NYDOL engaged in improper rulemaking. Id. at 9.
The Court ultimately gave the workers’ petition a liberal construction, accepted its pleaded facts as true, and gave them the benefit of every possible inference, denying the NYDOL’s motion to dismiss the petition. Id. The Court determined that the workers’ petition sufficiently alleged the NYDOL’s application of a fixed, general principle of dismissing every complaint that was subject to a mandatory arbitration agreement as opposed to an “ad hoc decision” based on individual facts and circumstances. Id.
Implications For Businesses
The Chen decision illustrates that under appropriate circumstances, judges will not hesitate to question broadly-applicable “policies” of state agencies akin to “rules” under state law. As evidenced in this case, such scrutiny includes denying state agency motions to dismiss claims brought by aggrieved workers who feel an agency failed to follow its own procedural requirements in closing investigations into their claims. It also serves as a timely reminder for all employers of the ever-present possibility that state agencies may still investigate workers’ claims despite the existence and application of perfectly valid mandatory arbitration agreements. Employers should always remain cautious any time a state agency closes an investigation before completion due to the possibility such closure may later be found to have been improper by a court. Employer skepticism of broadly applicable state agency policies concerning workers’ claims that results in uniform outcomes is also warranted, especially when an agency confirms such position in press releases!
Duane Morris Takeaways: Privacy and data breach class action litigation are among the key issues that keep businesses and corporate counsel up at night. There was over $1 billion dollars procured in settlements and jury verdicts over the last year for these types of “bet-the-company” cases. At the ALM Law.com Legalweek 2024 conference in New York City, Partner Alex W. Karasik of the of the Duane Morris Class Action Defense Group was a panelist at the highly anticipated session, “Trends in US Data Privacy Laws and Enforcement.” The conference, which had over 6,000 attendees, produced excellent dialogues on how cutting-edge technologies can potentially lead to class action litigation. While A.I. took the main stage, along with an epic keynote speech from revered actor, Bryan Cranston, privacy and data-management issues were firmly on the radar of attendees.
Legalweek’s robust agenda covered a wide-range of global legal issues, with a prominent focus on the impact of technology and innovation. Some of the topics included artificial intelligence, data privacy, biometrics, automation, and cybersecurity. For businesses who deploy these technologies, or are thinking about doing so, this conference was informative in terms of both their utility and risk. The sessions provided valuable insight from a broad range of constituents, including in-house legal counsel, outside legal counsel, technology vendors, and other key players in the tech and legal industries.
I had the privilege of speaking about how data privacy laws and biometric technology have impacted the class action litigation space. Joining me on the panel was Christopher Wall (Special Counsel for Global Privacy and Forensics, and Data Protection Officer, HaystackID); Sonia Zeledon (Associate General Counsel Compliance, Risk, Ethics, and Privacy, The Hershey Company); and Pallab Chakraborty (Director of Compliance & Privacy, Xilinx). My esteemed fellow panelists and I discussed how the emerging patchwork of data privacy laws – both in the U.S. and globally – create compliance challenges for businesses. I provided insight on how high-stakes biometric privacy class action litigation in Illinois can serve as a roadmap for companies, as similar state statutes are emerging across the country. In addition, I explored how artificial intelligence tools used in the employee recruitment and hiring processes can further create potential legal risks. Finally, I shared my prediction of how the intersection of ESG and privacy litigation will continue to emerge as a hot area for class action litigation into 2024 and beyond.
Finally, and probably the most important update to many of you, Bryan Cranston’s keynote address was awesome! Covering the whole gamut of the emotional spectrum, Bryan was fascinating, inspirational, and hilarious. Some of the topics he discussed included the importance of family, the future impact of A.I. on the film industry, his mescal brand, and a passionate kiss during his first acting scene at 19. Bryan was a tough act follow!
Thank you to ALM Law.com, the Legalweek team, my fellow panelists, the inquisitive attendees, the media personnel, and all others who helped make this week special
By Alex W. Karasik, Gerald L. Maatman, Jr. and George J. Schaller
Duane Morris Takeaways: In Mobley v. Workday, Inc., Case No. 23-CV-770 (N.D. Cal. Jan 19, 2024) (ECF No. 45), Judge Rita F. Lin of the U.S. District Court for the Northern District of California dismissed a lawsuit against Workday involving allegations that algorithm-based applicant screening tools discriminated applicants on the basis of race, age, and disability. With businesses more frequently relying on artificial intelligence to perform recruiting and hiring functions, this ruling is helpful for companies facing algorithm-based discrimination lawsuits in terms of potential strategies to attack such claims at the pleading stage.
Case Background
Plaintiff, an African-American male over the age of forty with anxiety and depression, alleged that he applied to 80 to 100 jobs with companies that use Workday’s screening tools. Despite holding a bachelor’s degree in finance and an associate’s degree in network systems administration, Plaintiff claimed he did not receive not a single job offer. Id. at 1-2.
On July 19, 2021, Plaintiff filed an amended charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”). On November 22, 2022, the EEOC issued a dismissal and notice of right to sue. On February 21, 2023, Plaintiff filed a lawsuit against Workday, alleging that Workday’s tools discriminated against job applicants who are African-American, over the age of 40, and/or disabled in violation of Title VII, the ADEA, and the ADA, respectively.
Workday moved to dismiss the complaint, arguing that Plaintiff failed to exhaust administrative remedies with the EEOC as to his intentional discrimination claims; and that Plaintiff did not allege facts to state a plausible claim that Workday was liable as an “employment agency” under the anti-discrimination statutes at issue.
The Court’s Decision
The Court granted Workday’s motion to dismiss. First, the Court noted the parties did not dispute that Plaintiff’s EEOC charge sufficiently exhausted the disparate impact claims. However, Workday moved to dismiss Plaintiff’s claims for intentional discrimination under Title VII and the ADEA on the basis of his failure to exhaust administrative remedies. Workday argued that the EEOC charge alleged only claims for disparate impact, not intentional discrimination.
Rejecting Workday’s argument, the Court held that it must construe the language of the EEOC charge with “utmost liberality since they are made by those unschooled in the technicalities of formal pleading.” Id. at 5 (internal quotation marks and citations omitted). The Court acknowledged that the thrust of Plaintiff’s factual allegations in the EEOC charge concerned how Workday’s screening tools discriminated against Plaintiff based on his race and age. However, the Court held that those claims were reasonably related to his intentional discrimination claims, and that the EEOC investigation into whether the tools had a disparate impact or were intentionally biased would be intertwined. Accordingly, the Court denied Workday’s motion to dismiss on the basis of failure to exhaust administrative remedies.
Next, the Court addressed Workday argument that Mobley did not allege facts to state a plausible claim that it was liable as an “employment agency” under the anti-discrimination statutes at issue. The Court opined that Plaintiff did not allege facts sufficient to state a claim that Workday was “procuring” employees for these companies, as required for Workday to qualify as an “employment agency.” Id. at 1. For example, Plaintiff did not allege details about his application process other than that he applied to jobs with companies using Workday, and did not land any job offers. The complaint also did not allege that Workday helped recruit and select applicants.
In an attempt to salvage these defects at the motion hearing and in his opposition brief, Plaintiff identified two other potential legal bases for Workday’s liability — as an “indirect employer” and as an “agent.” Id. To give Plaintiff an opportunity to attempt to correct these deficiencies, the Court granted Workday’s motion to dismiss on this basis, but with leave for Plaintiff to amend. Accordingly, the Court granted in part and denied in part Workday’s motion to dismiss.
Implications For Businesses
Artificial intelligence and algorithm-based applicant screening tools are game-changers for companies in terms of streamlining their recruiting and hiring processes. As this lawsuit highlights, these technologies also invite risk in the employment discrimination context.
For technology vendors, this ruling illustrates that novel arguments about the formation of the “employment” relationship could potentially be fruitful at the pleading stage. However, the Court’s decision to let Plaintiff amend the complaint and have one more bite at the apple means Workday is not off the hook just yet. Employers and vendors of recruiting software would be wise to pay attention to this case –and the anticipated wave of employment discrimination lawsuits that are apt to be filed – as algorithm-based applicant screening tools become more commonplace.
Duane Morris Takeaway: During the past year, the label “ESG” became “mainstream,” and discussion of its impact became a recurring topic of conversation in boardrooms across the country. ESG refers to broadly to “environmental, social, and governance,” which many companies have embraced as part of their business plans and corporate missions.
Watch the video below as Duane Morris partner Jerry Maatman discusses the impact of ESG on class action litigation and how this trend will evolve in 2024.
DMCAR Trend #9 – ESG Class Action Litigation Hit Its Stride
ESG was not immune to lawsuits, and we saw a steady influx of class action litigation in two particular ESI spheres – (i) product advertising and (ii) employment and DEI-related lawsuits.
The former focused on product advertising and, in particular, on allegations that marketing campaigns touting products as “green” or “sustainable” or “carbon neutral,” among other things, are false, misleading, and deceptive. Commonly called “greenwashing,” these claims generally refer to false or misleading statements about the environmental benefits or about the performance of particular products or operations and, in particular, tend to target statements touting the “green” or “sustainable” or “eco-friendly” characteristics of such products or operations.
Most often, plaintiffs’ class action attorneys file greenwashing lawsuits as class actions. These lawsuits largely focus on claims that defendants marketed products as “environmentally responsible,” “sustainably sourced,” or “humanely raised,” arguing that such misleading claims induce purchasers to pay a premium for “greener” products.
In Smith, et al. v. Keurig Green Mountain, Inc., No. 4:18-CV-06690 (N.D. Cal.), for example, the plaintiffs filed a class action lawsuit asserting various claims, including breach of warranty, misrepresentation, and violation of the California Unfair Competition Law, targeting Keurig’s representations regarding its K-cup coffee pods. In particular, Keurig marketed its K-cups as recyclable with labeling that consumers could “[h]ave [their] cup and recycle it, too.” The plaintiffs claimed that, in fact, the K-cups were not recyclable. In 2019, the court denied Keurig’s motion to dismiss, and, in 2020, the court granted the plaintiff’s motion for class certification. In February 2023, the court granted final approval of class action settlement for $10 million.
In Dwyer, et al. v. Allbirds, 598 F. Supp. 3d 137 (S.D.N.Y. 2022), the plaintiff filed a similar greenwashing class action alleging that defendant marketed its shoes, in part, based on their sustainability using statements like “Sustainability Meets Style” and “Environmentally Friendly.” The plaintiff brought claims for breach of express warranty, fraud, and unjust enrichment and asserted violations of §§ 349-350 of the New York General Business Law. Allbirds maintained a website showing the carbon footprint associated with its products based on a life-cycle analysis (LCA), and showing the environmental impact of its materials based on the third-party Higg Material Sustainability Index (Higg MSI). The plaintiff attacked the LCA tool and the Higg MSI standard as incomplete measurements of product sustainability. The court granted Allbirds’ motion to dismiss for failure to state a claim.
In Lizama, et al. v. H&M Hennes & Mauritz LP, No. 4:22-CV-1170 (E.D. Mo. 2023), the plaintiffs filed a class action complaint alleging that the retailer deceptively attempted to “greenwash” its allegedly environmentally damaging practices. H&M’s “Conscious Choice” collection included items made from recycled and organic materials that H&M marketed as “more sustainable.” The plaintiffs alleged that, in fact, H&M’s clothing was not sustainable because the synthetic materials in the collection had a negative environmental impact. The plaintiffs asserted claims for violation of various California and Missouri statutes and sought to certify various sub-classes. On May 12, 2023, the court granted the defendant’s motion to dismiss the California claims for lack of personal jurisdiction and dismissed the Missouri claims because it found the alleged statements not misleading as a matter of law.
Relative to employment and DEI-related lawsuits, the plaintiffs’ class action bar focused numerous claims based on allegations that companies failed to live up to their representations regarding diversity, equity, and inclusion or breached their DEI commitments.
Plaintiffs anchored many of their class claims on board-related DEI commitments, employment discrimination, and workplace safety issues. In the corporate DEI cases, plaintiffs asserted claims that companies allegedly failed to live up to their DEI commitments or failed to abide by their DEI policies or practices. In many of the ESG-related employment discrimination cases, plaintiffs focused on claims that corporate officers or directors breached their fiduciary duties by failing to address employment discrimination, by adopting policies that discriminate, or by failing to address safety concerns.
In Bucks County Employees Retirement System v. Norfolk Southern Corp., No. 2:23-CV-982 (N.D. Ga. 2023), for instance, the plaintiff filed a securities class action against the defendant and three of its managers alleging that they misrepresented the corporation’s worker safety practices prior to a chemical train derailment, leading investors to purchase company stock at inflated levels. The plaintiff alleged that the defendants committed to safety as a “core value” in their public statements and SEC filings but, in reality prioritized more lucrative practices at the expense of safety, such as longer and heavier trains and lower headcounts. The plaintiff asserted that such culture of “increased risk-taking” made the company more vulnerable to derailments.
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 Takeaway: Generative AI hit mainstream in 2023 and quickly become one of the most talked-about and debated subjects among corporate legal counsel across the country, as numerous companies jumped to incorporate AI while attempting to manage its risks. In 2023, we saw the tip of the iceberg relative to the ways that generative AI is poised to transform class action litigation.
In the video below, Duane Morris partner Jennifer Riley discusses the latest AI class action rulings, and what companies can expect to see in AI litigation in 2024.
DMCAR Trend #8 – Generative AI Began Transforming Class Action Litigation
Opportunities For Enhanced Efficiency
As the COVID 19 pandemic brought video-conferencing tools into the mainstream, such tools enabled more litigants to conduct and to attend more hearings, more depositions, and more mediations in less time. While the debate continues as to their effectiveness, generative AI is poised to enable lawyers to far surpass those gains in efficiency, potentially enabling the plaintiffs’ class action bar to do “more with less” like never before, leading to more lawsuits that can be handled by fewer lawyers in less time and a potential surge of class actions on the horizon.
Less than a year into the generative AI movement, we have seen the technology influence various aspects of the legal process, including by assisting legal professionals in analyzing vast amounts of data; automating the review of documents, contracts, and communications; increasing the speed and potentially enhancing the accuracy of e-discovery; and automating and enhancing the dissemination of information in the class action settlement administration process.
Legal research, for example, traditionally required a time-consuming undertaking that involved sifting through dozens of decisions and secondary authorities. AI tools are enhancing this process through natural language search capabilities and machine learning algorithms that streamline the process and enhance the results. Document review similarly traditionally required a time-consuming and painstaking process. AI tools are using machine learning and text analytics, for example, to sort and categorize large datasets with increasing accuracy. By quickly analyzing extensive document sets, AI tools can expedite the discovery process, making litigation more efficient and cost-effective.
Likewise, AI has the potential to revolutionize the process of administering class action settlements. The participation in claims-made settlements, for instance, often falls within the range of 15% to 35%, depending upon various factors such as the type and method of notice. AI can be used in a variety of ways, including to find potential class members and thereby raise claim rates, while reducing administrative costs, increasing the amount available for distribution as well as the ultimate settlement payout.
In sum, the legal industry is poised to leverage this transformative technology to make leaps in enhancing the efficiency and effectiveness of the class action litigation process.
Risk Of Class Claims
While improving the efficiency with which the plaintiffs’ class action bar can litigate class actions, generative AI is providing an ocean of raw material for potential claims. Upon hitting the mainstream, AI promptly became the subject of class claims, which span multiple theories and areas of law.
While generative AI might improve the speed of interactions, for instance, users have the ability to exploit AI to generate massive amounts of false information or to simply inadvertently rely upon errors in AI-generated communications, giving rise to claims. Similarly, the SEC has warned businesses against “AI washing,” or making false claims regarding their AI capabilities, likening it to the greenwashing phenomenon that has been the target of an agency crackdown. The plaintiffs’ class action bar is using such representations about AI to fuel class claims for consumer fraud based on allegedly misleading or deceptive representations about the efficacy of AI technology. In Matsko, et al. v. Tesla, Case No. 22-CV-5240 (N.D. Cal. Sept. 14, 2022), for instance, a plaintiff filed a class action alleging that Tesla exaggerated the capabilities of its software and asserting various causes of action for breach of warranty and violation of California consumer protection laws, among others.
Companies that incorporate AI to streamline their decision-making processes likewise face the prospect of class action suits. Plaintiffs have filed suits against insurers that used algorithms to adjudicate claims, for example, as well as against agencies that used programs to deny or reduce government benefits. In Kisting-Leung, et al. v. Cigna Corp., Case No. 23-CV-01477 (E.D. Cal. 2023), for instance, a group of California consumers filed a class action complaint against a national health insurance company alleging that its use of an algorithm to deny certain medical claims constituted breach of the implied covenant of good faith and fair dealing, unjust enrichment, intentionally interfered with contractual relations, and violated California’s Unfair Competition Law.
The developers of generative AI products have not remained immune. Such companies have faced a slew of class action lawsuits alleging privacy violations. In a series of lawsuits beginning in June and July 2023, the plaintiffs’ class action bar has alleged that, by collecting publicly-available data to develop and train their software, developers of generative AI products stole private and personal information from millions of individuals. In P.M., et al. v. OpenAI LP, No. 3:2023-CV-03199 (N.D. Cal. 2023), a group of plaintiffs filed a class action suit against OpenAI LP and Microsoft, Inc. alleging that by collecting publicly-available information from the internet to develop and train its generative AI tools, including ChatGPT, Dall-E, and Vall-E, OpenAI stole private information from millions of people, violating their privacy and property rights, among other claims. In J.L., et al. v. Alphabet Inc., No. 3:23-CV-03440 (N.D. Cal. 2023), the same plaintiffs’ firm filed a class action lawsuit against Google, similarly alleging that, by collecting internet data to train its tools like Bard, Imagen and Gemini, Google infringed privacy rights and violated the Copyright Act.
Developers of generative AI tools similarly have faced claims. Plaintiffs have filed class action lawsuits claiming that, by collecting and using internet data to train generative AI models, developers violated copyright laws. In Andersen, et al. v. Stability AI, Ltd., Case No. 23-CV-00201 (N.D. Cal. Oct. 20, 2023), for example, plaintiffs filed a class action on behalf of artists alleging that Stability AI, Ltd. and Stability AI, Inc. “scraped” billions of copyrighted images from online sources, without permission, to train their models to generate new images without ascribing credit to the original artists. In Doe v. GitHub, Inc., 22-CV-06823 (N.D. Cal. May 11, 2023), the plaintiffs, a group of developers who allegedly published licensed code on GitHub’s website, filed a class action lawsuit against GitHub, the online code repository, as well as Microsoft and OpenAI claiming that GitHub improperly used that code to train its AI-powered coding assistant, Copilot, without appropriate attribution in violation of copyright management laws.
As technology continues to grow and change, and the plaintiffs’ class action bar continues to flex its creativity, the number and types of claims are likely to expand and evolve during the upcoming year.
By Gerald L. Maatman, Jr., Jennifer A. Riley, and Kathryn Brown
Duane Morris Takeaways: On January 16 and 17, 2024, in Messer v. Bristol Compressors International, LLC, No. 1:18-CV-00040 (W.D. Va.), on remand from a Fourth Circuit decision, Judge James P. Jones of the U.S. District Court for the Western District of Virginia issued an opinion and order entering judgment in the amount of $2,407,471.90 for severance pay benefits owed under an ERISA employee benefits plan based on violations of the 60-day notice requirement of the Worker Adjustment and Retraining Notification Act (WARN Act), 29 U.S.C. § 2102(a)(1). The multi-million dollar ruling stems from a 2018 WARN-covered “plant closing” and follows an earlier award on November 23, 2021 of $1.39 million to certain class members for damages including back pay and interest owed pursuant to the WARN Act for the same notice violation underlying the recent ruling.
The decision highlights the extremely technical nature and high stakes of WARN Act litigation in the class action context.
Case Background
On July 31, 2018, Bristol Compressors International (BCI) notified employees that it would close its manufacturing facility in Bristol, Virginia, and their employment would terminate on or before September 30, 2018. BCI implemented several rounds of terminations over the next three and a half months, beyond the originally anticipated date of September 30, 2018 for the final terminations. However, BCI did not issue additional notice under the WARN to those whose employment ended after September 30, 2018. The manufacturing facility ultimately closed on November 16, 2018.
On October 19, 2018, a group of former employees sued BCI- under the WARN Act. The plaintiffs alleged that the company failed to provide 60 days’ notice of their terminations in accordance with the specific requirements of the WARN Act.
On June 20, 2019, the Court granted the plaintiffs’ motion for certification of three sub-classes of former employees terminated due to the plant closing under Rules 23(a) and 23(b)(3). Sub-class One included employees involuntarily terminated between July 31, 2018 and August 31, 2018. Sub-class Two included employees involuntarily terminated after August 31, 2018 who signed a stay bonus agreement that included an express waiver of claims under the WARN Act. Sub-class Three included employees involuntarily terminated after August 31, 2018 who had not signed a stay bonus agreement.
Following a bench trial, the Court in 2020 granted summary judgment to BCI on the plaintiffs’ claim for benefits owed under a company severance pay plan. The Court found that BCI validly terminated its severance pay plan before the employment terminations. In a separate 2020 opinion, the Court dismissed upon summary judgment the WARN Act claims of four class members whose employment ended on October 19, 2018. The Court reasoned that BCI’s July 31, 2018 notification was adequate to prepare them for their later job losses. The plaintiffs appealed those prior rulings to the Fourth Circuit.
The Fourth Circuit’s Ruling
On April 3, 2023, the Fourth Circuit, in an unpublished opinion, reversed and remanded parts of the 2020 rulings. Messer v. Bristol Compressors International, LLC, 2023 U.S. App. LEXIS 7826 (4th Cir. Apr. 3, 2023) (per curiam).
The Fourth Circuit reversed the denial of severance pay benefits to the class, concluding the company did not terminate the severance pay plan in accordance with the ERISA’s requirements for modifying or terminating an ERISA-governed benefits plan. As a result, the severance pay plan was in effect when the employment terminations occurred.
The Fourth Circuit affirmed the decision upholding the release of claims under the WARN Act to members of Sub-class Two. However, because the release of claims in the stay bonus agreements those class members signed explicitly carved out claims for vested benefits under the company’s “written benefit plans,” members of Sub-class Two did not waive their claims for severance pay benefits owed to them under the ERISA-governed employee benefit plan.
The Fourth Circuit also vacated the grant of summary judgment to BCI on the WARN Act claims of the four plaintiffs whose employment ended on October 19, 2018. The Fourth Circuit pointed to the regulation under the WARN Act providing that, if an employer postpones a covered plant closure for 60 days or more, additional 60 days’ notice under the WARN Act is owed to affected employees. See 20 C.F.R. § 639.10. Because the company issued no additional notice to those four individuals after July 31, 2018, but terminated their employment after September 30, 2018, the Fourth Circuit opined that a WARN Act violation was established.
The District Court’s Decision
On remand, the Court granted the plaintiffs’ unopposed motion for summary judgment on the two issues on which the Fourth Circuit reversed and remanded. Consistent with the Fourth Circuit’s ruling, the Court held that all class members were entitled to severance pay benefits under the severance pay plan, plus interest, and the four plaintiffs whose employment ended on October 19, 2018 were in addition owed back pay and prejudgment interest for a 60-day period.
On January 17, 2014, the Court ordered the case closed, with leave granted to class counsel to file a supplemental motion for attorneys’ fees and costs within 30 days.
Implications For Employers
The Messer case is illustrative of the many decisions in recent years in which plaintiffs have recovered multi-million dollar judgments following class certification of WARN Act claims. Employers should remain vigilant to the WARN Act, and the potential exposure to 60 days’ worth of back pay, lost benefits and prejudgment interest in the event of violations, well before implementing any mass layoff or plant closure that may trigger its strict notification requirements.
By Gerald L. Maatman, Jr. and Sean P. McConnell
