Class Action Defense

June 11, 2024 by Class Action Defense

Wisconsin Federal Court Rules That EEOC Racial Discrimination Suit Cannot Proceed With Allegations Of Single Racial Slur

By Gerald L. Maatman, Jr., Jennifer A. Riley, Tiffany E. Alberty and George J. Schaller

Duane Morris Takeaways: In Equal Employment Opportunity Commission v. Lakeside Plastics, Inc., No. 1:22-CV-01149 (E.D. Wis. June 3, 20244), Judge William C. Griesbach of the U.S. District Court for the Eastern District of Wisconsin granted Defendant’s motion for summary judgment and denied the EEOC’s motion for partial summary judgment. The Court reasoned that the single use of a racial slur in the workplace without direction to an African-American employee was not sufficient to show severe and pervasive harassment for a hostile work environment claim. The Court also held that a supervisor is not a similarly-situated comparator to a subordinate, regardless if they were subject to the same standards and engaged in similar conduct, dismissing the EEOC’s wrongful termination claim.

Case Background

The EEOC filed suit on behalf of Brian Turner, an African-American worker, for alleged violations under Title VII of the Civil Rights Act of 1964 (“Title VII”) against Lakeside Plastics, Inc. (“Lakeside”). Id. at 1. The EEOC alleged Turner was discriminated against when he was subject to a hostile work environment and his employment with Lakeside was terminated based upon his race, or alternatively that Turner’s employment termination was in retaliation for engaging in protected activity. Id.

Turner was employed by temporary staffing firm QPS Employment Group (“QPS”) and began his employee assignment at Lakeside on June 6, 2010, as a Production Technician I. Id. at 3. On three separate occasions, Turner asserted that he experienced verbal harassment from another production technician named Curt Moraski. Id. at 5-6.

First, during work Turner and Moraski discussed being from Milwaukee and in their conversation Moraski commented racial slurs about his time in the area. Id. at 5. Turner reported this conversation to one of his team leads. Id. Second, in an offsite incident, Turner alleged he was traveling home when Moraski pulled up, threated Turner, and directed racial slurs at Turner. Id. Finally, after the offsite incident, Turner reported to Lakeside that he did not feel comfortable working around Moraski. Id. at 6. Lakeside assigned Turner to label boxes for the day with Moraski; no issues arose at that time. Id.

On July 1, 2019, Lakeside ended Turner’s assignment based on “holistic considerations,” including a review of his attendance records and a note from team lead, Max Berndt, that demonstrated Turner’s poor performance, poor attendance, inability to take direction, and inability to get along with others. Id. at 7-8. That same day QPS informed Turner that he was terminated from his Lakeside assignment. Id. at 8.

Shortly thereafter, Lakeside received a complaint from Alex Adams, a white employee, made about Moraski “threatening [Adams].” Id. at 8-9. Lakeside also received complaints from other employees about Moraski’s behavior. Id. at 8. Moraski denied making any threats against anyone. Id. at 9. Moraski was subsequently terminated on Aug 1, 2019, due to his violation of Lakeside’s workplace violence policy. Id.

On Aug. 1, Lakeside advised a QPS representative that Moraski threatened additional employees, aside from Turner, around the time of Turner’s employment. Id. at 9. QPS inquired whether Turner could return to work at Lakeside, to which Lakeside responded that it was open to rehiring Turner. Id.

Following discovery, Lakeside brought a motion for summary judgment on all of the EEOC’s claims and the EEOC filed a cross-motion for partial summary judgment as to Lakeside’s affirmative defenses. Id. at 1.

The Court’s Decision

The Court granted Lakeside’s motion for summary judgment on the grounds that Lakeside did not subject Turner to a hostile work environment, did not terminate Turner because of his race, and did not retaliate against Turner for his complaints of harassment.

The EEOC asserted that Lakeside discriminated against Turner by subjecting him to a hostile work environment based on his race. Id. at 10. The EEOC argued that Moraski’s exchanges with Turner, at both on-site and off-site locations, created a hostile work environment. Id. Central to the EEOC’s assertions was that “harassment involving the N-Word is sufficiently severe to create a hostile work environment.” Id. at 12. The Court reasoned that “a single, isolated event can be found to create a hostile work environment,” but the EEOC must present evidence “which a factfinder could reasonably conclude that the harassing conduct was severe or pervasive.” Id.

In this instance, the Court disagreed that the EEOC showed Moraski’s alleged use of racial slurs was sufficiently severe or pervasive. Id. The Court determined Moraski “did not direct” racial slurs at Turner during the conversation at Lakeside and the racial slurs directed at Turner off-site were reported to Turner’s lead, who immediately took preventative measures by assigning Turner to a new work location. Id. at 12. Similarly, Moraski’s instruction on labeling boxes did not create “a reasonable inference that any hostility Turner encountered was connected to his race.” Id. at 13.

The Court opined that “Moraski’s conduct was undoubtedly offensive and inappropriate, and he was ultimately terminated by Lakeside based on complaints of similar behavior … but with no racially derogatory component.” Id. Given the totality of the circumstances, the Court concluded that Moraski’s conduct was not severe or pervasive such that a jury could reasonably conclude that Lakeside’s work environment was “permeated with discriminatory intimidation, ridicule, and insult.” Id. Therefore, the Court granted Lakeside’s summary judgment motion as to the EEOC’s hostile work environment claim.

The EEOC next asserted that Lakeside terminated Turner because of his race. Id. at 14. The Court reviewed Turner’s termination under the “holistic approach” standard relied on by the EEOC and focused on whether a reasonable jury could conclude that Turner “suffered the adverse employment action because of his … protected class.” Id. The Court agreed with Lakeside’s legitimate business reason for terminating Turner based on “poor attendance, an inability to take direction, and an inability to get along with others.” Id. In so holding, the Court determined that Lakeside took a holistic approach in reviewing Turner’s performance and took Turner’s attendance into consideration despite the fact that no one recommended to human resources that Turner be terminated based on his attendance. Id. at 15. Accordingly, the Court granted Lakeside’s motion for summary judgment on the EEOC’s wrongful termination claims.

The Court also granted Lakeside’s motion for summary judgment on the EEOC’s alternative retaliation claim and held that Lakeside had an “independently sufficient reason to terminate Turner’s assignment” through Turner’s “violations of the attendance policy on three days.” Id. at 17-18. The Court further found that the EEOC could not establish retaliation on the basis that Lakeside refused to rehire Turner, because Lakeside was open to rehiring Turner, although a position was not extended. Id. at 18.

Implications For Employers

Employers that are confronted with EEOC-initiated litigation involving allegations of race discrimination should recognize this opinion draws a fine line on what courts may consider pervasive in terms of the frequency, location, and direction of discriminatory comments.

Further, from a practical standpoint, employers should ensure workplace policies are in place for employees to report any instance of discrimination, including race discrimination, and provide procedures for employers to promptly investigate those allegations.

June 10, 2024 by Class Action Defense

Illinois Federal Court Rules That A Plaintiff Cannot Evade The Jurisdiction Of The Court That He Voluntarily Invoked

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Ryan T. Garippo

Duane Morris Takeaways: On June 3, 2024, in Loonsfoot, et al. v. Stake Center Locating, LLC, No. 23-CV-3171, 2024 WL 2815422 (S.D. Ill. June 3, 2024), Judge David Dugan of the U.S. District Court for the Southern District of Illinois denied a plaintiffs’ motion to dismiss his own lawsuit – a wage & hour class action – for lack of subject matter jurisdiction. This decision highlights one of the rare circumstances where a company may want to oppose a plaintiff’s proposed dismissal of his class action and force the plaintiff to address the merits of his arguments early in the litigation.

Case Background

Plaintiff Michael Loonsfoot (“Plaintiff”), a former employee of Stake Center Locating, LLC (“Stake Center”), brought claims for alleged wage & hour violations. Stake Center is a company that provides “utility locating services across the country.” Id. at *1. From December 2021 through June 2024, Plaintiff worked in a variety of different roles for Stake Center. Plaintiff, however, believed that his former employer allegedly deprived him of wages for “compensable ‘off the clock’ work” and failed to include certain amounts when calculating his overtime wages. Id.

Based on those allegations, Plaintiff filed a lawsuit against Stake Center in the U.S. District Court for the Southern District of Illinois for alleged violations of the Illinois Minimum Wage Law and the Illinois Wage Payment and Collection Act. In order to pursue those claims in federal court, Plaintiff argued that “jurisdiction is proper under [the Class Action Fairness Act (“CAFA”)] because the proposed class has more than 100 members, the minimal diversity requirement is met, and the amount in controversy exceeds $5 million dollars.” Id. at *2. Stake Center appeared, filed its answer, and then moved for judgment on the pleadings.

In response, Plaintiff filed a motion to dismiss his own complaint on the basis that the court lacked subject-matter jurisdiction to hear the dispute. Plaintiff argued that because Stake Center denied the Plaintiff’s general allegation that “[t]his Court has original subject matter over this action pursuant to the jurisdictional provisions of the Class Action Fairness Act” as well as similar allegations, jurisdiction must not be proper. Id.

The Court’s Opinion

The Court easily dispensed with what it called Plaintiff’s “unusual litigation tactic.” Id. at *3. The Court noted that where “the party that invoked the court’s jurisdiction in the first place” subsequently files a motion to dismiss “such motions are [considered] ‘unseemly.’” Id. (citing Napoleon Hardwoods, Inc. v. Professionally Designed Benefits, Inc., 984 F. 2d 821, 822 (7th Cir. 1993)). The Court explained that “[g]iven the procedural posture of the case, Plaintiff cannot unilaterally dismiss the action” and thus, decided to address the jurisdictional issue under the CAFA. Id. at *1, n. 2.

The Court analyzed the elements of original jurisdiction under the CAFA. It held that “there is no dispute that the parties are minimally diverse”; “that the proposed class exceeds 100 class members”; and that “the amount in controversy exceeds $5 million” as pled. Id. at *4. The Court further noted that “Plaintiff provides no legal authority for the contention that a Defendant’s denial of an allegation in an answer is controlling on any issues, including the existence of subject matter jurisdiction.” Id. at *2, n. 5. The Court, therefore, denied Plaintiffs’ motion to dismiss his own complaint — against the backdrop of Stake Center’s argument that Plaintiff was “only seeking dismissal to avoid a ruling on the pending Motion for Judgment on the Pleadings.” Id. at *1.

Implications For Companies

It should go without saying that it is atypical for a company to “decline[ ] Plaintiff’s request to consent to dismissal of” a class action lawsuit. Id. at *1, n. 2. That said, the defendant here astutely recognized that Plaintiff’s dismissal request was simply a procedural dance to avoid addressing the merits of the employer’s dispositive motion. The defendant recognized that the Plaintiff’s lawsuit would just be refiled in state court — which likely would be a less favorable forum to the corporate defendant.

For that reason, if corporate counsel has a winning argument that it can raise in a Rule 12 motion, it often makes sense to put plaintiffs to their proofs in federal court, and not indulge in procedural gymnastics that will only lead to a case being heard in a less favorable forum.

June 10, 2024 by Class Action Defense

The Class Action Weekly Wire – Episode 60: Digital Frontier Survival Guide For Corporate Counsel: Cybersecurity And Data Privacy Best Practices

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and special counsel Justin Donoho with their discussion of best practices for corporate counsel to address liabilities and lawsuits emerging from the cybersecurity and data privacy landscape. Recent years have seen an exponential rise in class action lawsuits and mass arbitrations as a result of cybersecurity incidents and data privacy allegations, involving a growing list of technologies. In light of these developments, implementation of data privacy and security best practices is a corporate imperative for mitigating risk and deterring litigation.

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

Episode Transcript

Jerry Maatman: Thank you, loyal blog listeners and readers for joining us on this week’s installment of the Class Action Weekly Wire. This is our 60th podcast in our series, and I’m privileged and honored to welcome Justin to be our guest on today’s podcast. Welcome, Justin.

Justin Donoho: Thank you, Jerry. Great to be here.

Jerry: So, today we’re going to be discussing a hot topic: cybersecurity, data breach, and privacy class actions in general, and things that can be done to get ahead of the curve and to mitigate or eliminate these particular risks. And, Justin, I know you’re a thought leader in this space, so we wanted to discuss with you today some of the trends and thoughts you have in this particular space.

Justin: That’s generous, but thank you. And yes, in the past few years we’ve seen an explosion of class action lawsuits alleging cybersecurity incidents where criminals have compromised organizations’ computer networks and stolen their data or held it hostage for ransom payments. Lately, we’ve also seen a spike in data privacy class actions alleging companies’ unauthorized use of advertising technologies on their websites – like the Meta Pixel and Google Analytics, which send users web browsing information to Meta and Google, which are the world’s two largest advertising agencies – and other website advertising technologies, or “adtech.” We are tracking both of these types of cases, cyber security and data privacy, quite extensively, and unfortunately can report that they continue to proliferate in 2024.

Jerry: Thanks, Justin. You did a post on the Duane Morris Class Action Defense Blog this past week that got some of the highest reviews and most clicks among our readership in terms of advice you had for corporations to get ahead of these risks. What are some of the key things that you think companies ought to be thinking about, considering, and implementing to mitigate their risks?

Justin: Yes, thank you. First, let’s talk about the use of arbitration agreements that mitigate the risks of both class actions and mass arbitrations. Our audience is likely familiar with the arbitration agreement defense when it comes to defeating class actions. This defense was largely successful over the last decade in making claims just go away. But times have changed – those arbitration agreements need to be tweaked to mitigate the risks as well as mass arbitrations, which can cost companies millions of dollars to defend. Mass arbitrations are becoming increasingly popular, especially for cybersecurity and data privacy class actions that bring high-dollar novel claims for statutory damages with class sizes often totaling millions of people. Enterprising plaintiffs’ attorneys with big war chests and litigation funders are increasingly using mass arbitrations to pressure organizations into agreeing to multimillion dollar settlements just to avoid the massive arbitration costs. Proactive measures organizations are taking to mitigate this risk include adding mechanisms in their arbitration clauses, such as predispute resolution clauses; mass arbitration waivers; bell weather procedures; arbitration case filing requirements, and more.

This area of the law is developing quickly. One case we are watching will be one of the first appellate cases to address the latest trend of mass arbitrations – it’s Wallrich v. Samsung, in the Seventh Circuit. At issue there is whether the district court erred in ordering the defendant facing data privacy claims to pay over $4 million in mass arbitration fees.

Jerry: Well, I know this is a hot area and an ever evolving area in terms of arbitration issues. But also you touched on another area, and that would be data breach class actions. This, to me, is an area that, just as like the tsunami wave breaking on the beach, that the claims have doubled from 2019 to 2020, then doubled again in 2021 to 2022. Last year there were 1,320 data breach class actions brought countrywide. And this year, so far, we’ve tracked about 600. And so the crest of the wave is anywhere from ending. What do you think in this area of data breach class actions in terms of what companies can do to address this risk?

Justin: Yeah, exactly, Jerry. It’s important that companies keep pace with a tsunami wave of their own in their pursuit of continuously improving their IT practices and cybersecurity measures. There are definitely some cybersecurity best practices that companies can be doing, not only to prevent cyber security incidents from happening in the first place, but also to defend against one of plaintiffs’ main argument in many of these class actions – that organizations failed to use reasonable cybersecurity measures.

Each organization will have its own priorities, to be sure, but here are just a few typical ones:

improve IT governance;
comply with industry guidelines such as ISO, COBIT, ITIL, NIST, and C2M2;
deploy multi-factor authentication, network segmentation, and other multi-layered security controls;
stay current with identifying, prioritizing, and patching security holes – as new ones do continuously arise;
design and continuously improve a cybersecurity incident response plan;
routinely practice handling ransomware incidents with tabletop exercises – tabletop exercises may even be covered by your insurance company; and
implement and continuously improve security information and event management systems and processes.

Jerry: There’s another emerging litigation trend with respect to web browsing. And you had mentioned Meta Pixel and Google Analytics – and as someone who has a computer science degree and understands what’s going on, how do you translate that for corporate counsel in terms of the risk posed by the plaintiffs’ bar focusing on those particular activities?

Justin: Well, this is a very popular type of case right now, for sure. One first step that companies can do to is to to mitigate these risks of those types of cases is to find out if, and to what extent, they may be using these website advertising technologies. Millions do. Some companies served with an adtech lawsuit have not even known that any adtech was installed on their websites. It could have been installed by a vendor without the proper authorization of protections. Or even as a default, without any human intent, through the use of some web publishing tools.

Organizations should consider whether to have an audit performed before any litigation arises as to which adtech is, or has been installed, on which web pages, when and which data types were transmitted as a result. Multiple experts specialize in adtech audits just like this and also serve as expert witnesses, should any litigation arise. An adtech audit is relatively quick and inexpensive, and it might be cost beneficial for an organization to perform an adtech audit before litigation arises. It might convince an organization to turn off some of its unneeded adtech now, thereby cutting off any potential damages relating to that adtech in a future lawsuit. It could also assist in presently updating and modernizing website terms of use and data privacy policies to more fully inform users about the company’s use of adtech and vendor agreements to prohibit vendors from incorporating any unwanted adtech into the company’s websites. These updates to company documents could help defeat some of the high-dollar fraud claims and other claims we constantly see in these types of cases.

Jerry: Those are great insights, and I would recommend to all our blog listeners and readers to take a look at Justin’s blog post from this past week – I called it an essential reference or desk guide, or survival packet, to navigate through the thicket of all these particular issues.

Well, thank you, Justin, for joining us for this week’s Class Action Weekly Wire.

Justin: Thanks for having me, Jerry.

June 7, 2024 by Class Action Defense

Colorado Federal Court Rejects Reconsideration Of Class Certification For A Nationwide Deceptive Practices Class As Well As State-Specific Classes

By Gerald L. Maatman, Jr., Jennifer A. Riley, Tiffany E. Alberty, and Ryan T. Garippo

Duane Morris Takeaways: On May 30, 2024, In Re HomeAdvisor, Inc. Litigation, No. 16-CV-01849 (D. Colo. May 30, 2024), Chief Judge Philip Brimmer of the U.S. District Court for the District of Colorado denied a motion for reconsideration of his prior order denying of class certification of a putative nationwide and states-specific classes. This decision further illuminates plaintiffs’ substantial burden of maintaining a nationwide class action, particularly when state law claims are involved.

Case Background

Plaintiffs are eleven individuals, and one corporation (collectively “Plaintiffs”), who sued HomeAdvisor, Inc. and similar entities (collectively “HomeAdvisor”) for misrepresentations of the quality of the leads it sells to its home service professionals. HomeAdvisor operates an online marketplace that helps connect home service professionals with homeowners in need of home improvement services, by collecting information from homeowners, and selling that information onto the home service professionals as a “lead.” Id. at 1. Plaintiffs, however, claim that HomeAdvisor misrepresents the quality of the leads that it sells. HomeAdvisor advertises that its leads are “high quality” and from “project-ready customers.” Id. at 2. Yet, Plaintiffs claim that they often receive leads that are valueless because they lead to “wrong or disconnected phone numbers, contain “wrong contact information,” relate back to individuals who “never even heard of HomeAdvisor” or who are “not homeowners,” or are for “customers” who completed the project months before the lead was received. Id.

Consequently, Plaintiffs sued HomeAdvisor seeking to recover damages, claiming that the “leads were ‘garbage,’” and ultimately moved for class certification. Id. at 3. In January 2024, the Court granted Plaintiffs’ motion for class certification in part, and denied it in part. The Court certified a nationwide misappropriation class and three state misappropriation classes. At the same time, the Court denied Plaintiffs’ request to certify a nationwide deceptive practices class and nine state deceptive practices classes. These state-specific classes arose out of claims under California, Colorado, Florida, Idaho, Illinois, Indiana, New Jersey, New York, and Ohio state law.

The Court’s denial was based upon the finding that Plaintiffs failed to establish the predominance and superiority requirements under Rule 23(b)(3). The Court held that plaintiffs failed to present any analysis to support certification of the state law claims, and because the Tenth Circuit case law requires claim-specific analysis, Plaintiffs’ failure to do so was fatal to their request for class certification. Shortly thereafter, Plaintiffs filed a motion for reconsideration asking, in part, for the Court to reconsider its ruling on the state law claims. Plaintiffs claimed that the Court did not adequately consider a choice-of-law provision within HomeAdvisors’ terms and conditions, and that they would have prevailed under the laws of all the state-specific claims.

The Court’s Opinion

While it observed that the federal rules do not specifically provide for motions for reconsideration, the Court considered both of Plaintiffs’ requests raised in the motion.

As to the choice-of-law provision, which purportedly specifies that Colorado law applies, Plaintiffs argued that the Court erred in its choice of law analysis by not considering that provision. Plaintiffs contended that either under a theory of estoppel, or based on HomeAdvisors’ contractual terms and conditions, that the choice-of-law provision should apply to all the state law claims. The Court, however, rejected Plaintiffs’ argument because they failed to make the estoppel argument in their original class certification motion, and only provided a two-sentence argument in a “perfunctory matter” without any supporting legal authority. Id. at 8. The Court refused to entertain these new arguments. Similarly, because Plaintiffs failed to raise the terms and conditions choice-of-law provision in their original motion, and contradicted the enforceability of the terms and conditions in their pleadings, the Court found these arguments unpersuasive. As a result, the Court declined to reconsider its decision, which refused to certify a nationwide deceptive practices class applying Colorado law.

Further, with regard to the state-specific analysis, Plaintiffs attempted to revive their arguments for certification by arguing that the Court erred in not applying an alternative deceptive practices theory under nine states’ deceptive practices laws. However, vital to Plaintiffs’ deceptive practices claim was the Rule 23 predominance requirement, which in the Tenth Circuit, requires a “claim-specific analysis.” Id. at 9. Accordingly, the Court held that Plaintiffs are required to identify (1) “which elements would be subject to class-wide proof;” (2) “which elements would be subject to individual proof;” and (3) “determine which of these issues would predominate.” Id. (citing Brayman, Sherman and CGC Holding Co., LLC v. Broad & Cassel, 773 F.3d 1076 (10th Cir. 2014)). Yet, Plaintiffs never identified these elements and alleged 43 common law and statutory claims under states’ laws. The Court opined that barebones allegations of “fraud, unjust enrichment and breach of implied contract” were insufficient to identify the elements of each unique states’ laws, as the Court recognized significant variations in each state law. Explicitly, the Court noted, “it is not the Court’s job to research the elements of [43] laws when plaintiffs failed to undertake the analysis in their motion.” Id. at 10.

Finally, and as a practical matter, the Court reasoned that even if the predominance element existed, the docket would be unmanageable as Plaintiffs presented no evidence as to how the Court would conduct a single trial, for nine state classes, with 43 claims.

Implications For Companies

The holding in In Re HomeAdvisor, Inc. Litigation highlights the required specificity for class action plaintiffs to certify nationwide deceptive practices claims. If they cannot proceed on a nationwide theory, plaintiffs must identify the elements of each and every states law, if they want to prevail at the certification stage. Where these elements are not identified, employers have an opportunity to raise these deficiencies with the Court, and that can ultimately change the landscape of which (if any) class claims will survive through the certification stage. Corporate counsel, therefore, should take note of these developments and ensure (where applicable) that similar arguments are raised at this stage of the proceedings.

June 6, 2024 by Class Action Defense

Federal Panel Approves Procedural Rule Governing Initial Case Management In MDL Cases

By Gerald J. Maatman, Jr., Jennifer A. Riley, and Derek S. Franklin

Duane Morris Takeaways: On June 4, 2024, the U.S. Judicial Conference Committee on Rules of Practice and Procedure (“Committee”) approved additions to Rule 16.1 of the Federal Rules of Civil Procedure to address case management in multidistrict litigation proceedings (“MDLs”). The additions to Rule 16.1 provide a framework for initial management of MDLs by instructing judges to: (1) schedule an initial case management conference; (2) order the parties to submit a pre-conference report; and (3) enter an initial case management order after the conference. Pending judicial and congressional approval, Rule 16.1 will mark the first formal guidance specifically addressing MDL procedures and will allow for more efficient and merits-driven MDL case management.

The Committee’s procedural rules are required reading for corporations embroiled in MDL proceedings.

Background

According to 2023 federal court data, more than 70% of federal civil cases are part of a multidistrict litigation. Many of those proceedings are consolidated class actions. Yet, as of now, there are no procedural rules specifying how judges should manage MDL cases.

To address that issue, the Committee on Civil Rules formed an MDL Subcommittee in 2017 to explore possible additions to the Federal Rules of Civil Procedure concerning MDLs.

Proposal Of Rule 16.1 For Public Comment

In August 2023, the MDL Subcommittee published a proposed draft of Rule 16.1 for public comment. While the Rule aimed to address concerns from plaintiffs’ and defense attorneys, it drew considerable feedback from both sides.

For example, defense attorneys called for the proposed Rule to be more stringent in weeding out frivolous claims by mandating — rather than merely permitting — initial exchanges of information by the parties. On the other hand, some plaintiffs’ attorneys’ submitted comments arguing there was no need for the Rule altogether, and that it would hinder judges’ ability to take an individualized approach to their cases.

Commenters on both sides also voiced concerns about language in the proposed Rule designating a “coordinating counsel” to work with MDL litigants in the early stages of cases.

Approval Of Rule 16.1

In April 2024, the MDL Subcommittee approved a revised version of Rule 16.1 reflecting a compromise among those participated in the public commenting process. The revised Rule directs MDL judges to: (i) schedule an initial management conference; (ii) order the parties to submit a pre-conference case management report; and (iii) enter an initial case management order after the conference.

On June 4, 2024, the Committee voted in favor of submitting the Rule for final approval by the U.S. Supreme Court and for transmittal to Congress.

Heeding the feedback of defense counsel who criticized the lack of mandatory language in the proposed Rule, the approved revisions make it a requirement for the parties to prepare a pre-conference report “unless the court orders otherwise.”

The updated Rule also removes the hotly-contested proposed language that would have enlisted a “coordinating counsel” to assist MDL litigants with the initial case management conference and pre-conference report. Instead, Rule 16.1 will allow transferee judges to deal with leadership appointments based on the particular needs of each case.

The date of May 1, 2025 is the target deadline for adoption of Rule 16.1 by U.S. Supreme Court and transmittal to Congress. If those requisite steps occur, the Rule will take effect on December 1, 2025.

Takeaways For Companies

Rule 16.1 is set to become the first federal procedural rule directly addressing MDL procedures.

While it may not confer radical changes that some public commenters sought, the Rule is a concrete and unprecedented step, nonetheless, toward establishing a consistent initial roadmap in MDL cases. It will also act as an added safeguard against meritless MDL claims by requiring more transparency early in the litigation process.

Corporate counsel should take note of the pending adoption of Rule 16.1 to be more equipped to effectively handle MDLs, while continuing to monitor the Rule’s status as it heads to Congress and the U.S. Supreme Court to receive the final “green light.”

June 6, 2024 by Class Action Defense

Virginia Federal Court Rejects Class Claims In Navy Discrimination Suit

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Zachary J. McCormack

Duane Morris Takeaways: On May 30, 2024, in Oliver v. Navy Federal Credit Union, No. 1:23-CV-1731, 2024 U.S. Dist. LEXIS 96704 (E.D. Va. May 30, 2024), Judge Leonie M. Brinkema of the U.S. District Court for the Eastern District of Virginia denied class certification in a suit accusing Navy Federal Credit Union (“Navy Federal”) of racial discrimination in violation the Fair Housing Act (“FHA”) and the Equal Credit Opportunity Act (“ECOA”). In denying certification of the proposed class, Judge Brinkema reasoned that the circumstances of each loan application process are so individualized, that to promote the efficient use of resources, the Court allowed the nine plaintiffs to proceed on their federal ECOA and FHA disparate impact claims individually, but not as a class action.

Navy Federal persuaded the Court that its loan approval statistics themselves do not show it acted with discriminatory intent considering plaintiffs failed to show specific facts alleging they were qualified for the mortgage products they sought. However, the Court ruled that the nine plaintiffs sufficiently pled that statistical disparities revealed a disparate impact among non-white loan applicants and that Navy Federal’s underwriting process may have caused these inconsistencies. Therefore, the Court dismissed plaintiffs’ disparate treatment claims, but allowed the disparate impact claims to proceed past Navy Federal’s motion to dismiss.

Case Background

Navy Federal is an American global credit union headquartered in Vienna, Virginia, and is the largest natural member credit union in the United States, both in asset size and in membership, with an estimated $178 billion in assets and 13.5 million members. On February 20, 2024, nine plaintiffs brought a civil action individually and on behalf of other members of a putative class of similarly-situated applicants who applied for original residential purchase mortgages, refinancings, and home equity lines of credit, and were either denied financing or offered financing at less favorable terms than they initially sought. Id. at *5. Specifically, plaintiffs alleged they were the victims of disparate treatment and disparate impact discrimination under both federal and state civil rights laws due to Navy Federal’s mortgage underwriting policies, which had a disparate impact on minority loan applicants and Navy Federal’s refusal to correct those discrepancies constituted intentional discrimination. Id.

Like all mortgage lenders, Navy Federal is required to submit data to the Consumer Financial Protection Bureau under the Home Mortgage Disclosure Act (“HMDA”). Id. at *6. In the complaint filed in February, the plaintiffs relied on three independent reports analyzing Navy Federal’s publicly-available HMDA data. Id. Through these reports, plaintiffs asserted that a disparity in outcomes for minority loan applicants demonstrated that Navy Federal was on notice of the discriminatory impact of its mortgage lending program, and did not act to address the disparity, thus establishing direct or circumstantial evidence of an intent to discriminate. Id.

The first report, from August 2021, analyzed the public 2019 HMDA data and identified financial institutions which had significant racial disparities in mortgage lending. Id. Navy Federal, identified as one such lender, was twice as likely to deny black applicants who applied for mortgages as compared to similarly situated white applicants. Id. at *7. The second report, from November 2022, found that — even after taking credit scores into consideration — credit unions denied mortgages to minority applicants at rates up to 1.9 times higher than similarly qualified white applicants. Id. The third report, from December 14, 2023, involved Cable News Network’s findings that, in 2022, Navy Federal approved mortgages for 48% of black applicants, 56% of Latino applicants, and 77% of white applicants. Id. Navy Federal had the largest disparity of loan approvals among the 50 largest U.S. lenders, according to CNN. Id. at *8.

The Court’s Decision

Plaintiffs asserted two theories of discrimination under the FHA and the ECOA — disparate treatment and disparate impact. Id. at *11. Although similar, a disparate treatment claim requires intentional discrimination, whereas a disparate impact claim requires showing Navy Federal’s loan underwriting process had a disproportionate adverse impact on minorities. Id.

Regarding the disparate treatment claims, Navy Federal persuaded Judge Brinkema that the statistics in these reports themselves did not show it acted with discriminatory intent. Id. at *19. The Court concluded that Plaintiffs failed to show plausible direct or circumstantial evidence of discriminatory intent, and failed to allege facts showing that plaintiffs were qualified for the mortgage products they sought. Id. at *20. Therefore, the Court dismissed those claims. Id.

In analyzing the disparate impact claims, Judge Brinkema ruled that the suit’s nine remaining plaintiffs sufficiently pled that statistical disparities revealed a statistical impact among non-white loan applicants and that Navy Federal’s underwriting process may have caused these inconsistencies. Id. at *22. Allowing these claims to move past the motion to dismiss stage, the Court opined that, during discovery, if the plaintiffs can link Navy Federal’s underwriting process to the precise disparities and adverse consequences experienced by the borrowers — taking into consideration their individualized application criteria — then the Court may revisit whether the claims can survive summary judgment. Id.

Navy Federal also argued its notice of claim provisions precluded several allegations. Id. Judge Brinkema, however, determined that additional notice to Navy Federal would not been futile. Ultimately, Judge Brinkema dismissed the disparate treatment claims, and allowed the disparate impact claims to proceed as well as plaintiffs’ claim for declaratory relief under 28 U.S.C. § 2201.

Implications Of The Decision

Under the HMDA, mortgage lenders are required to submit data to the Consumer Financial Protection Bureau, and therefore should be prepared to defend against disparate impact and disparate treatment claims weaponizing these publicly available statistics. This order illustrates the importance of statistical data in both class action disparate treatment claims and disparate impact claims. It serves as a cautionary tale depicting how reports analyzing HMDA data could bolster claims of discrimination under the ECOA and FHA. Corporate counsel should take note of the Court’s reliance on HMDA data as evidence of discriminatory lending procedures which could have disproportionate adverse effect on minorities, and continue to monitor this space for future developments.

June 6, 2024 by Class Action Defense

The Class Action Weekly Wire – Episode 58: Key BIPA Developments In Class Action Litigation

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jennifer Riley and associate Tyler Zmick with their discussion of significant rulings and developments in the biometric privacy class action sphere.

Episode Transcript

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

Tyler Zmick: Thanks, Jen, very happy to be here.

Jennifer: Today on the podcast we are discussing the Illinois Biometric Information Privacy Act, or sometimes called BIPA, as well as notable decisions from courts over the past 18 months, highlighting a recent 2024 ruling. Tyler, could you give our listeners a brief overview of the BIPA?

Tyler: Absolutely, Jen. So the statute was enacted in 2008, and BIPA is a state law that regulates the collection, use, and handling of biometric identifiers and biometric information by private entities. Subject to a couple limited exceptions, BIPA generally prohibits the collection or use of a person’s biometric data without first providing the required notice, obtaining their written consent, and also posting a publicly available retention and destruction schedule.

Jennifer: Thanks very much for that overview. There are two major Illinois Supreme Court rulings from 2023 that govern the BIPA landscape and significantly impacted the way BIPA litigation is playing out. Tyler, you no doubt know which two cases I’m referring to – could you tell our listeners a bit about them?

Tyler: Sure, absolutely. So, these two decisions, which are a little bit old at this point – they were both issued in February of 2023 – had a profound impact on the interpretation of BIPA and the landscape of BIPA litigation. So the first ruling was issued in a case called Tims v. Black Horse Carriers, and in that case the Illinois Supreme Court held that a 5 year statute of Limitations applies to all claims brought under BIPA. So this really adds to the risks that employers and other companies who do business in Illinois face in terms of class action exposure, as the court rejected defendants attempts to argue that a shorter one or two year statute of limitations applies.

The other ruling, issued later in February of 2023, came in a case called Cothron v. White Castle, and in that case the court decided whether each fingerprint or other type of biometric data being scanned is its own discrete violation of the statute. And so, as background, the Seventh Circuit, the federal appellate court, was uncertain how to answer that sort of novel question of state law. And so it kicked it over to the Illinois Supreme Court to ask for clarification, and the court held that BIPA claims accrue not only once upon the initial collection or disclosure of biometric data, but rather each independent time that a company collects or discloses biometric information. And so this ruling, it really exponentially increased the monetary damages in BIPA class actions that a company can face, especially in the employment context – because you generally have a fact pattern where employees are scanning their fingerprints to clock in and out. And so they’re doing that multiple times a day when they start their shifts, when they go on their lunch breaks, and then when they clock in after lunch, and then clock out for the day. And so Cothron basically held that each time they scan their fingerprint is a separate and independent violation. And this could, for just one employee amount to, you know, over 200 work days per year – we’re talking a lot of potential damages.

All of that said, the Illinois Supreme Court acknowledged that it’s ruling on the violation issue and the accrual issue was somewhat Draconian, and so that invited the Illinois legislature to tackle the issue by clarifying that, you know, maybe a violation only occurs upon the first scan of biometric data. The legislature, as it’s you know, customary to do, took its time, drag its feet a little bit, but they did get around to passing a statutory amendment that now clarifies that for purposes of collecting or disclosing biometric data, the violation only occurs the first time that a company scans that type of information. And so both houses of the Illinois legislature have actually approved and passed the amendment. As of today, the governor is waiting to sign the bill, he’s expected to do so. Once Governor Pritzker signs off, that law will take effect, and Cothron will basically be no longer good law on a going forward basis.

Jennifer: Thanks, Tyler, great overview. So the Tims and Cothron rulings really eviscerated two of the key BIPA defenses used by companies over the past several years, however, companies still can use other defenses – such as whether biometric data was actually collected, used, or stored; such as whether and to what extent alleged violations actually occurred in Illinois for purposes of satisfying extra territoriality limitations; as well as the constitutionality of the potentially excessive or crushing damages that could resolve from a finding that each scan was a separate violation; companies can also call upon Rule 23(b)(3) arguments regarding whether a class action really is the appropriate vehicle to litigate a bit of a dispute based on superiority or predominance concerns.

Tyler: Exactly, Jen. You know, those defenses do exist, however, companies really need to be aware of the dangers associated with collecting or storing biometric data without BIPA compliant policies in place. As just one example, very recently the U.S. District Court for the Northern District of Illinois granted class certification to a class action plaintiffs where there are at least 160,000 class members, probably much more. And the case involves Amazon’s “virtual try-on” technology. Basically, it is a virtual technology where a person can upload a photo or video of themselves and then superimpose maybe make up or other fashion products onto their face to see how the product would look, and plaintiffs claim that that technology involves biometric data in the form of scans of face geometry. And in granting class certification in this case, the court dealt Amazon a significant blow in its efforts to block class certification. This decision is really the most recent example of success by the plaintiffs’ bar in a string of victories for class action privacy lawsuits across Illinois, and it illustrates that even the largest and most sophisticated companies can face legal exposure in connection with their biometric collection and retention practices.

Jennifer: We will certainly keep listeners updated on the developments in that case. What about settlement numbers in 2023, in BIPA class actions – what were the monetary totals paid out to plaintiffs?

Tyler: Sure – in BIPA related class actions, 2023 saw robust settlements, but actually a decline when compared to 2022. So if you’re looking at the top 10 BIPA class action settlements in 2023, they totaled $147.86 million, and that is compared to in 2022, $278.9 million.

Jennifer: Well, perhaps a bit of good news then, for employers and companies on the declining settlement value front. Thanks so much for being here again today, Tyler, and thank you so much to our listeners for tuning in.

Tyler: Thanks for having me, Jen, and thanks again to all of our listeners.

Jennifer: See you next week on the Class Action Weekly Wire!

June 5, 2024June 5, 2024 by Class Action Defense

No Standing, No Settlement: Sixth Circuit Vacates Settlement In Class Action Lawsuit Challenging COVID-19 Vaccine Mandate

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

Duane Morris Takeaways: On June 3, 2024, in Albright et al v. Ascension Michigan et al, No. 23-1996 (6th Cir. June 3, 2024), a three-judge panel of the Sixth Circuit reversed and remanded a district court’s approval of a nationwide class action settlement because the plaintiffs lacked Article III standing. The case illustrates the fundamental requirement of federal court jurisdiction that all named plaintiffs have an alleged injury traceable to the settling defendants. The decision is required reading for litigants seeking court approval of a Rule 23 class action settlement.

Case Background

On July 12, 2022, over 100 current or former employees sued the Michigan-based Ascension healthcare organization for alleged violations of Title VII and Michigan state law occurring at its Michigan hospitals. The plaintiffs claimed that the defendant entities discriminated against them based on religion and unlawfully denied their request for a religious exemption from the organization’s mandatory COVID-19 vaccination policy. The plaintiffs sought to represent a Rule 23 class of solely-Michigan-based workers.

On April 24, 2023, the parties jointly moved the U.S. District Court for the Western District of Michigan for preliminary approval of a Rule 23 settlement. In the proposed settlement agreement, the settling parties expanded the scope of the lawsuit to the parent company of the Michigan defendant entities and 24 affiliate hospitals, clinics, and other entities in Alabama, Washington, D.C., Indiana, Kansas, Maryland, Michigan, Missouri, New York, Oklahoma, Texas, Tennessee and Wisconsin. Two days later, the district court preliminarily approved the settlement and issuance of notice to the class.

The settling parties filed an amended complaint to facilitate the proposed nationwide class action settlement of claims challenging the mandatory vaccination policy in place at Ascension’s various entities. The amended complaint reflected the same Michigan-based plaintiffs as the original complaint.

About 2,700 of the 4,000 workers who received notice opted-in to the settlement, with 281 workers opting out. Nine opt-ins who had worked for the newly-added entities objected to the settlement on August 23, 2023.

After a final fairness hearing held on October 5, 2023, the district court granted the settling parties’ motion for final approval of the settlement on November 2, 2023 over the objections of the nine objectors.

The objectors filed two notices of appeal to the Sixth Circuit, which were consolidated together. In addition to opposing the settlement on standing grounds, the objectors argued that, by expanding the scope of the settlement class to a nationwide group, the proposed settlement diluted the value of back pay payouts each class member would receive.

The Sixth Circuit’s Ruling

The panel judges of the Sixth Circuit, in a brief unpublished opinion, unanimously ruled that the settlement failed on standing grounds.

For Article III standing to exist, the defendant’s alleged actions must have caused the plaintiff to suffer a concrete “injury-in-fact.” In a class action, for any defendant, at least one named plaintiff must have an injury traceable to the defendant.

Writing for the panel, Circuit Judge Cole reasoned that the named plaintiffs had no injury traceable to the 25 entities added to the lawsuit for settlement purposes. In expanding the scope of the defending entities without “add[ing] any new named plaintiffs to match the additional affiliate defendants,” the settling parties failed to establish subject matter jurisdiction for the district court to approve the settlement. Id. at 3.

Absent standing, the Sixth Circuit concluded that the 95 Michigan-based named plaintiffs could not settle claims on behalf of thousands of other employees who had worked for Ascension entities outside of Michigan.

Accordingly, the Sixth Circuit vacated the district court’s orders approving the class-wide settlement, certifying the settlement class, and awarding attorneys’ fees and expenses to plaintiffs’ counsel. The Sixth Circuit remanded the case to the district court for further proceedings.

Implications For Employers

The ruling in Ascension illustrates that standing challenges to putative class actions are a powerful tool not only at the pleading stage, but at all phases of class action litigation.

Prior to resolving any Rule 23 claims — particularly for nationwide settlements — it is essential for counsel defending class actions to vet the standing of each named plaintiff. Otherwise, just as the litigants in Ascension experienced, even a settlement approved in final form by a district court is vulnerable to being unraveled on appeal.

June 3, 2024June 3, 2024 by Class Action Defense

Four Best Practices For Deterring Cybersecurity And Data Privacy Class Actions And Mass Arbitrations

By Justin Donoho

Duane Morris Takeaway: Class action lawsuits and mass arbitrations alleging cybersecurity incidents and data privacy violations are rising exponentially. Corporate counsel seeking to deter such litigation and arbitration demands from being filed against their companies should keep in mind the following four best practices: (1) add or update arbitration clauses to mitigate the risks of mass arbitration; (2) use cybersecurity best practices, including continuously improving and prioritizing compliance activities; (3) audit and adjust uses of website advertising technologies; and (4) update website terms of use, data privacy policies, and vendor agreements.

Best Practices

Add or update arbitration agreements to mitigate the risks of mass arbitration

Many organizations have long been familiar with the strategy of deterring class and collective actions by presenting arbitration clauses containing class and collective action waivers prominently for web users, consumers, and employees to accept via click wrap, browse wrap, login wrap, shrink wrap, and signatures. Such agreements would require all allegedly injured parties to file individual arbitrations in lieu of any class or collective action. Moreover, the strategy goes, filing hundreds, thousands, or more individual arbitrations would be cost-prohibitive for so many putative plaintiffs and thus deter them from taking any action against the organization in most cases.

Over the last decade, this strategy of deterrence was effective.^[1] Times have changed. Now enterprising plaintiffs’ attorneys with burgeoning war chests, litigation funders, and high-dollar novel claims for statutory damages are increasingly using mass arbitration to pressure organizations into agreeing to multimillion dollar settlements, just to avoid the arbitration costs. In mass arbitrations filed with the American Arbitration Association (AAA) or Judicial Arbitration and Mediation Services (JAMS), for example, fees can total millions of dollars just to defend only 500 individual arbitrations.^[2] One study found upfront fees ranging into the tens of millions of dollars for some large mass arbitrations.^[3] Companies with old arbitration clauses have been caught off guard with mass arbitrations, have sought relief from courts to avoid having to defend these mass arbitrations, and this relief was rejected in several recent decisions where the court ordered the defendant to arbitrate and pay the required hefty mass arbitration fees.^[4]

If your organization has an arbitration clause, then one of the first challenges for counsel defending many newly served class action lawsuits these days is determining whether to move to compel arbitration. Although it could defeat the class action, is it worth the risk of mass arbitration and the potential projected costs of mass arbitration involved? Sometimes not.

Increasingly organizations are mitigating this risk by including mechanisms in their arbitration clauses such as pre-dispute resolution clauses, mass arbitration waivers, bellwether procedures, arbitration case filing requirements, and more. This area of the law is developing quickly. One case to watch will be one of the first appellate cases to address the latest trend of mass arbitrations — Wallrich v. Samsung Electronics America, Inc., No. 23-2842 (7th Cir.) (argued February 15, 2024, at issue is whether the district court erred in ordering the BIPA defendant to pay over $4 million in mass arbitration fees).

Use cybersecurity best practices, including continuously improving and prioritizing

IT organizations have long been familiar with the maxim that they should continuously improve their cybersecurity measures and other IT services. Continuous improvement is part of many IT industry guidelines, such as ISO 27000, COBIT, ITIL, the NIST Cybersecurity Framework (CSF) and Special Publication 800, and the U.S. Department of Energy’s Cybersecurity Capability Maturity Model (C2M2). Continuous improvement is becoming increasingly necessary in cybersecurity, as organizations’ IT systems and cybercriminals’ tools multiply at an increased rate. The volume of data breach class actions doubled three times from 2019-2023:

Continuous improvement of cybersecurity measures needs to accelerate accordingly. As always, IT organizations need to prioritize. Priorities typically include:

improving IT governance;
complying with industry guidelines such as ISO, COBIT, ITIL, NIST, and C2M2;
deploying multifactor authentication, network segmentation, and other multilayered security controls;
staying current with identifying, prioritizing, and patching security holes as new ones continuously arise;
designing and continuously improving a cybersecurity incident response plan;
routinely practicing handling ransomware incidents with tabletop exercises (may be covered by cyber-insurers); and
implementing and continuously improving security information and event management (SIEM) systems and processes.

Measures like these to continuously improve and prioritize: (a) will help prevent a cybersecurity incident from occurring in the first place; and (b) if one occurs, will help the victim organization of cybertheft defend against plaintiffs’ arguments that the organization failed to use reasonable cybersecurity measures.

Audit and adjust uses of website advertising technologies

In 2023, plaintiffs filed over 250 class actions alleging that Meta Pixel, Google Analytics, and other similar software embedded in defendants’ websites secretly captured plaintiffs’ web browsing data and sent it to Meta, Google, and other online advertising agencies, respectively. This software, often called website advertising technologies or “adtech” (and often referred to by plaintiffs as “tracking technologies”) is a common feature on many websites in operation today — millions of companies and governmental organizations have it.^[5] These lawsuits generally allege that the organization’s use of adtech violated federal and state wiretap statutes, consumer fraud statutes, and other laws, and often seek hundreds of millions of dollars in statutory damages. The businesses targeted in these cases so far mostly have been healthcare providers but also span nearly every industry including retailers, consumer products, and universities.

Several of these cases have resulted in multimillion-dollar settlements, several have been dismissed, and the vast majority remain undecided. The legal landscape in this area has only begun to develop under many plaintiffs’ theories of liability, statutes, and common laws. The adtech alleged has included not only Meta Pixel and Google Analytics but also dozens of the hundreds or thousands of other types of adtech. All this legal uncertainty multiplied by requested statutory damages equals serious business risk to any organization with adtech on its public-facing website(s).

An organization may not know that adtech is present on its public-facing websites. It could have been installed on a website by a vendor without proper authorization, for example, or as a default without any human intent by using some web publishing tools.

Organizations should consider whether to have an audit performed before any litigation arises as to which adtech is or has been installed on which web pages when and which data types were transmitted as a result. Multiple experts specialize in such adtech audits and serve as expert witnesses should any litigation arise. An adtech audit is relatively quick and inexpensive and it might be cost-beneficial for an organization to perform an adtech audit before litigation arises because: (a) it might convince an organization to turn off some of its unneeded adtech now, thereby cutting off any potential damages relating to that adtech in a future lawsuit; (b) in the event of a future lawsuit, such an audit would not be wasted — it is one of the first things adtech defendants typically perform upon being served with an adtech lawsuit; and (c) an adtech audit could assist in presently updating and modernizing website terms of use, data privacy policies, and vendor agreements (next topic).

Update and modernize website terms of use, data privacy policies, and vendor agreements

Organizations should consider whether to modify their website terms of use and data privacy policies to describe the organization’s use of adtech in additional detail. Doing so could deter or help defend a future adtech class action lawsuit similar to the many that are being filed today, alleging omission of such additional details, raising claims brought under various states’ consumer fraud acts, and seeking multimillion-dollar statutory damages.

Organizations should consider adding to contracts with website vendors and marketing vendors clauses that prohibit the vendor from incorporating any unwanted adtech into the organization’s public-facing websites. That could help disprove the element of intent at issue in many claims brought under the recent explosion of adtech lawsuits.

Implications For Corporations: Implementation of these best practices is critical to mitigating risk and saving litigation dollars. Click to learn more about the services Duane Morris provides in the practice areas of Class Action Litigation; Arbitration, Mediation, and Alternative Dispute Resolution; Cybersecurity; Privacy and Data Protection; Healthcare Information Technology; and Privacy and Security for Healthcare Providers.

[1] In 2015, for example, a large study found that of 33 banks that had engaged in practices relating to debit card overdrafts, 18 endured class actions and ended up paying out $1 billion to 29 million customers, whereas 15 had arbitration clauses and did not endure any class actions. See Consumer Protection Financial Bureau (CPFB), Arbitration Study: Report to Congress, Pursuant to Dodd-Frank Wall Street Reform and Consumer Protection Act § 1028(a) at Section 8, available at https://files.consumerfinance.gov/f/201503_cfpb_arbitration-study-report-to-congress-2015.pdf. These 15 with arbitration clauses paid almost nothing—less than 30 debit card customers per year in the entire nation filed any sort of arbitration dispute regarding their cards during the relevant timeframe. See id. at Section 5, Table 1. Another study of AT&T from 2003-2014 found similarly, concluding, “Although hundreds of millions of consumers and employees are obliged to use arbitration as their remedy, almost none do.” Judith Resnik, Diffusing Disputes: The Public in the Private of Arbitration, the Private in Courts, and the Erasure of Rights, 124 Yale L.J. 2804 (2015).

[2] AAA, Consumer Mass Arbitration and Mediation Fee Schedule (amended and effective Jan. 15, 2024), available at https://www.adr.org/sites/default/files/Consumer_Mass_Arbitration_and_Mediation_Fee_Schedule.pdf; JAMS, Arbitration Schedule of Fees and Costs, available at https://www.jamsadr.com/arbitration-fees.

[3] J. Maria Glover, Mass Arbitration, 74 Stan. L. Rev. 1283, 1387 & Table 2 (2022).

[4] See, e.g., BuzzFeed Media Enters., Inc. v. Anderson, 2024 WL 2187054, at *1 (Del. Ch. May 15, 2024) (dismissing action to enjoin mass arbitration of claims brought by employees); Hoeg v. Samsung Elecs. Am., Inc., No. 23-CV-1951 (N.D. Ill. Feb. 2024) (ordering defendant of BIPA claims brought by consumers to pay over $300,000 in AAA filing fees); Wallrich v. Samsung Elecs. Am., Inc., 2023 WL 5935024 (N.D. Ill. Sept. 12, 2023) (ordering defendant of BIPA claims brought by consumers to pay over $4 million in AAA fees); Uber Tech., Inc. v. AAA, 204 A.D.3d 506, 510 (N.Y. App. Div. 2022) (ordering defendant of reverse discrimination claims brought by customers to pay over $10 million in AAA case management fees).

[5] See, e.g., Customer Data Platform Institute, “Trackers and pixels feeding data broker stores,” reporting “47% of websites using Meta Pixel, including 55% of S&P 500, 58% of retail, 42% of financial, and 33% of healthcare” (available at https://www.cdpinstitute.org/news/trackers-and-pixels-feeding-data-broker-data-stores/); builtwith, “Facebook Pixel Usage Statistics,” offering access to data on over 14 million websites using the Meta Pixel, stating, “We know of 5,861,028 live websites using Facebook Pixel and an additional 8,181,093 sites that used Facebook Pixel historically and 2,543,263 websites in the United States” (available at https://trends.builtwith.com/analytics/Facebook-Pixel).

May 31, 2024 by Class Action Defense

Webinar Replay: Privacy Class Action Litigation Trends

Duane Morris Takeaways: The significant stakes and evolving legal landscape in privacy class action rulings and legislation make the defense of privacy class actions a challenge for corporations. As a new wave of wiretapping violation lawsuits target companies that use technologies to track user activity on their websites, there is significant state legislative activity regarding data privacy across the country. In the latest edition of the Data Privacy and Security Landscape webinar series, Duane Morris partners Jerry Maatman, Jennifer Riley, and Colin Knisely provide an in-depth look at the most active area of the plaintiffs’ class action bar over the past year.

The Duane Morris Class Action Defense Group recently published its desk references on privacy and data breach class action litigation, which can be viewed on any device and are fully searchable with selectable text. Bookmark or download the e-books here: Data Breach Class Action Review – 2024 and Privacy Class Action Review – 2024.