Rule 23 – Class Action Defense

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

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

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

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

Background Of The Case

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

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

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

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

The Court’s Ruling Denying Class Certification

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

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

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

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

Implications For Employers

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

November 16, 2022 by Class Action Defense

When Consistency Creates Commonality

By Jonathan A. Segal

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

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

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

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

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

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

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

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

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

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

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

Stay tuned!

October 31, 2022 by Class Action Defense

Consumer Fraud Class Actions On The Rise In The Cannabis Industry – With More To Come With Interstate Sales

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

Duane Morris Takeaways: Cannabis products – such as vapes, pre-rolled joints, tinctures, gummies, and beverages – are consumer packaged goods that are required under state law to be marketed with packaging and labeling that demonstrates their safety to consumers. Although the U.S. state-licensed cannabis industry has been one of the fastest-growing industries in the U.S. over the past decade, consumer fraud lawsuits arising out of alleged packaging and labeling problems, which are a common risk for CPG manufacturers in other industries, have, until now, not been a major consideration for the cannabis supply chain. However, that is changing. As three recent lawsuits suggest, consumer fraud class actions may be on the rise in the industry. Given the media attention cases like these attract, and the potential for damages for thousands or millions of potential consumers, the cannabis supply chain should take notice. As discussed below, this is going to be especially true once cannabis products are permitted to be sold interstate.

Key Cases

In Centeno et al. v. DreamFields Brands Inc., and Med for America, Inc., a consumer class action filed on October 20, 2022, in the Superior Court of California for Los Angeles County, two putative class representatives filed a putative class action against the manufacturers of Jeeter-branded pre-roll joints on behalf of “all persons who, while in the State of California and within the applicable statute of limitations period, purchased or more Jeeter Products.” The complaint alleges that the putative class representatives purchased a variety of Jeeter-branded pre-rolled joints based on the high THC potencies stated on the labeling of such products, but those products were actually lower in THC than stated on the labeling. Given that products with greater THC potency are priced higher than products with lower THC, the putative class representatives claim they paid a premium they would not have paid had they known the true THC potency of the Jeeter products they purchased, and thus they suffered an economic loss for which they should be made whole. Their complaint alleges that “millions of other consumers” bought Jeeter pre-rolled joints and suffered the same economic loss. As the Complaint asserts:

If Defendants told the truth — that is, that its products’ THC content is substantially lower than represented on the label — the price of its Products would fall dramatically. If consumers knew the truth — that the Products contain substantially less THC than the label says — Defendants could not sell their Products for its current prices. Indeed, as explained above, cannabis products with lower declared amounts of THC content sell for substantially less than ones with higher declared amounts of THC content. Accordingly, if Defendants told the truth about the THC content of their products, they would have had to lower the price, and Plaintiffs and class members would have paid less.

In addition to seeking for themselves and the class of “millions of consumers” damages for the amounts overpaid for the Jeeter-branded pre-rolls, the putative class representatives also seek punitive damages, attorneys’ fees, and injunctive relief to stop the allegedly fraudulent labeling under California’s unfair competition and false advertising statutes, as well as various common law claims.

We previously wrote about a number of separate actions filed against Curaleaf, the largest U.S. cannabis product manufacturer in 2021, arising out of allegations that Curaleaf mislabeled tinctures containing THC that were marketed as containing CBD. One of those cases, Williamson v. Curaleaf, Inc., a consumer class action filed in the U.S. District Court for the District of Oregon on May 30, 2022, was reported last week to have settled for payments of $150 to $200 for as many as 500 class members who are alleged to have consumed the mislabeled Curaleaf tinctures. Like the class action complaint filed in Centeno arising out of the mislabled Jeeter pre-rolls, Williamson’s class action complaint sought statutory damages, punitive damages, and attorneys’ fees under Oregon’s consumer fraud statute known as the unfair Trade Practices Act.

In addition to Centeno and Williamson, we previously wrote about Plumlee v. Steep Hill Inc., a putative class action filed in the U.S. District Court for the Eastern District of Arkansas against cannabis testing lab and cannabis cultivators NSMC-OPCO LLC, Bold Team LLC and Osage Creek Cultivation LLC, which, like Centeno, arose out of allegations that the operators falsified the amount of THC in their cannabis products. As in Centeno, Plumlee seeks class-wide damages for economic loss, i.e., amounts overpaid for mislabeled cannabis products, and as in Centeno and Williamson, Plumlee seeks punitive damages and attorneys’ fees for the alleged fraudulent conduct. Interestingly, although the claims in Plumlee are sound in consumer fraud, Plumlee asserts that the defendants acted together to form an enterprise in violation of the Racketeer Influenced and Corrupt Organizations Act. As we previously wrote, these claims could just as easily been asserted as consumer fraud.

Future Litigation Prospects

There are a few reasons cannabis consumer fraud class actions may not have been attractive to the plaintiffs’ class action bar in recent years. First, given that cannabis products may only be manufactured and sold in the same state, the size of a class and the amount of damages are limited to consumers in a single state, as opposed to the type of nationwide class action one see with other CPGs. Indeed, Centeno, Williamson, and Plumlee, assert claims on behalf of a single state-wide class.

Second, most state cannabis markets have only recently – in the past few years – begun to grow into markets of hundreds of thousands or millions of consumers, and thus a single state class a few years ago would likely have been too small to warrant the investment in an expensive litigation by plaintiffs’ counsel.

Third, and similarly, defendants’ pockets are deeper today as a result of the increased sales over time than they were just a few years ago. For these reasons, the continued growth of state cannabis markets is likely to result in more cannabis consumer fraud class actions.

However, the interstate sale of cannabis products is really going to change the risk spectrum from consumer fraud class actions.

Once interstate sales of cannabis products are permitted, the mass marketing and distribution of cannabis products to consumers in multiple states in a region, if not nationally, will open the door to claims asserted on a nationwide basis that a cannabis consumer product was mislabeled. While such claims would be asserted under state-specific consumer fraud laws, they may be asserted on behalf of consumers around the country, resulting in significant exposure to the cannabis supply chain, i.e., growers, processors, labs, and dispensaries, for economic loss and punitive damages, as well as attorneys’ fees. These types of claims are routinely filed by the plaintiffs’ class action bar on behalf of nationwide classes arising out of the alleged mislabeling of other CPGs, and that bar will no doubt have cannabis products in their sights when interstate sales cannabis begin.