Class Action Litigation

law and money 2Seyfarth Synopsis: American and international courts have been debating the tentative legality of disclosing third-party litigation funding. In this vlog video, Seyfarth Shaw Associate Alex Karasik sits down with class action litigator Jerry Maatman to discuss what third-party litigation is, what it means for businesses, and the tactics that businesses can use to get in front of this phenomenon.

Background

A recent trend has emerged in the class action landscape whereby a third-party funder pays the owner of a civil claim an up-front monetary payment in return for the claim owner’s promise to convey a portion of the potential recovery. Class action plaintiffs’ attorneys and third-party funders are incentivized under this approach through tax advantages, whereby the attorneys can defer tax liability on the monetary advancement until the claim pays off while the funders can deduct their expenses and pay tax on any profit at the lower capital-gains rate. Predictably, many of the third-party funders enter into such agreements with plaintiffs’ attorneys confidentially for varying business or personal reasons.

In a novel decision that will profoundly impact the practice of third-party funding of class actions, Judge Illston of the U.S. District Court for the Northern District of California recently granted defendant’s (“Chevron”) motion to compel plaintiff to reveal the identity of who was funding its proposed class action regarding a gas explosion off the coast of Nigeria in Gbarabe v. Chevron Corp., No. 14-CV-173 (N.D. Cal. Aug. 5, 2016). This ruling provides businesses facing class actions, including employers facing workplace class actions, a blueprint as to how to compel plaintiffs to identify stakeholders in class action lawsuits against their companies.

Implications For Employers

A business confronted with class action litigation absolutely would want to know if someone other than the plaintiffs themselves have a financial interest in a “bet-the-company” case. The ruling in Gbarabe arms employers with a potential strategy to unmask third-party funders that may have an interest in seeing their financial demise as a class action defendant. Given that this ruling stemmed from internationally-based class action litigation involving solo practitioners, businesses should be cautioned that courts may not always find litigation funding agreements to be relevant in determining the adequacy of plaintiffs’ counsel. Nonetheless, the arguments presented by Chevron are instructive in showing class action defendants how they can attempt to figure out who is bankrolling litigation battles against them. Finally, this ruling should serve as a cautionary tale to those third-party funders who desire anonymity, and ideally result in a chilling effect of this practice that amounts to tax-incentivized gambling on class action litigation. Workplace class actions can expect to see similar challenges to the adequacy of class counsel with motions to compel the production of litigation funding agreements in the very near future.

 

fireworks-227383_960_720By Gerald L. Maatman, Jr.

Seyfarth Synopsis: In its recent review of Seyfarth’s 2017 Annual Workplace Class Action Litigation Report, EPLiC called it the “must have” resource that corporate counsel “cannot afford to be without it…”

We are humbled and honored by the recent review of our 2017 Annual Workplace Class Action Litigation Report by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here.

EPLiC said: “The Report is a definitive ‘must-have’ for legal research and in-depth analysis of employment-related class action litigation.  Anyone who practices in this area, whether as an attorney, a business executive, a risk manager, an underwriter, a consultant, or a broker cannot afford to be without it. Importantly, the Report is the only publication of its kind in the United States. It is the sole compendium that analyzes workplace class actions from ‘A to Z.’”

We are often asked – “How does it happen – how do you produce your Annual Workplace Class Action Litigation Report”?

The answer is pretty simple – we live, eat, and breathe workplace class action law 24/7.

Each and every morning we check the previous day’s filings of EEOC lawsuits and workplace class actions relative to employment discrimination, ERISA, and wage & hour claims. We do so on a national basis, both in federal courts and all 50 states. Then we check, log, and analyze every ruling on Rule 23 certification motions and subsidiary issues throughout federal and state trial and appellate courts. This is also done on a national basis.  We put this information in our customized database; we analyze and compare the rulings on class action issues and Rule 23 topics, and then we prepare an analysis of each and every decision.

Our class action practitioners – a group of over 175 Seyfarth lawyers – contribute to the process of building the database and analyzing decisional law on a daily basis.

We have being doing this on a 24/7 basis for over 13 years, and publishing the Annual Workplace Class Action Litigation Report in the first week of January of each calendar year.

The result is a compendium of workplace class action law that is unique in its analysis, scope, and comprehensiveness.

We are particularly proud that EPLiC recognized our Report as the “state-of-the-art report” on workplace class action litigation.

Thanks EPLiC. We sincerely appreciate the kudos.

Now, even less than half way through the year, we have tracked and analyzed more class action decisions to this point in 2017 than at the halfway point in past years. On this pace, our 2018 Report will cover more decisions than ever before.

250px-US-CourtOfAppeals-8thCircuit-SealBy Gerald L. Maatman, Jr. and Michael L. DeMarino

Seyfarth Synopsis:  After thirty-three former employees who signed release agreements requiring individual arbitration of ADEA claims collectively sued their employer for age discrimination, the employer moved to compel individual arbitration. The District Court denied the company’s motion. The U.S. Court of Appeals for the Eighth Circuit reversed because it found that the ADEA did not contain a “contrary congressional command” overriding the FAA’s mandate to enforce arbitration agreements.

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Case Background

In McLeod, et. al. v. General Mills, Inc., No. 15-3540, 2017 WL 1363797 (8th Cir. Apr. 14, 2017), thirty-three former employees of General Mills (the “Company”) were offered severance packages and signed release agreements in which they agreed to individually arbitrate claims relating to their termination—including, specifically,  ADEA claims. Id. at *1. Despite agreeing to individual arbitration, the employees collectively sued the Company in the U.S. District Court for the District of Minnesota, alleging various ADEA violations. The Company moved to compel arbitration, and the District Court denied that motion.  Id.

On appeal, the Eighth Circuit reversed the District Court’s denial of the Company’s motion to compel arbitration. The Eighth Circuit held that Section 626(f) of the ADEA does not contain a contrary congressional command to override the Federal Arbitration Act’s (“FAA”) mandate to enforce arbitration agreements. Id. at *2-3. At the core of this holding was the Eighth Circuit’s decision that the “right” to a jury trial and the “right” to proceed in a collective action, are not substantive ADEA rights. Id

This decision is important because it addresses the fundamental question of whether employment agreements that require individual arbitration run afoul of the ADEA and its provisions authorizing plaintiffs to sue collectively.

Unlike other decisions involving the clash of arbitration agreements and 29 U.S.C. § 216(b), the Eighth Circuit’s decision in McLeod resolves the tension between, on the one hand the FAA’s mandate to enforce arbitration agreements, and on the other hand, the ADEA’s requirement in  § 626(f) that a party must prove in a “court of competent jurisdiction” that the waiver of ADEA rights was “knowing and voluntary.”

Because the Eighth Circuit determined that the “waiver” of rights in Section 626(f) refers only to the waiver of substantive ADEA rights and because the “right” to a jury trial and the “right” to proceed in a collective action are not “rights” under § 626(f), it held that there was no “waiver” for purposes of  § 626(f).

Case Background

In 2012, the Company terminated 850 of its employees. These employees were offered severance packages in exchange for signing release agreements. Id at *1. The release agreements required the employees to release the Company from all claims related to their termination, including claims under the ADEA. Id.

The release agreements also contained a dispute resolution provision that required the employees to submit any claim covered by the release agreement to arbitration on an individual basis. Id.

Thirty-three of the employees who were terminated in 2012 sued the Company in the U.S. District Court for the District of Minnesota. Specifically, the employees sought a declaratory judgment that the releases were not “knowing and voluntary,” as required by 29 U.S.C. § 626(f)(1). The employees also asserted collective and individual claims for alleged ADEA violations. Id.

The Company moved to compel arbitration of the employees’ claims, and the District Court denied that motion. Id. The Company subsequently appealed to the Eighth Circuit.

The Eighth Circuit’s Decision

On appeal, the employees argued that ADEA §  626(f) contains the necessary “contrary congressional command” to render their release agreements invalid. Id. at *2. Specifically, the employees relied on two related sections of the ADEA to argue that compelling arbitration results is an effective waiver of their substantive rights under the ADEA. Id. These two sections are § 626(f)(1) and § 626(f)(3).

Section 626(f)(1) of the ADEA prohibits the waiver of any ADEA right or claim — unless the waiver is “knowing and voluntary.” 29 U.S.C. § 626(f)(1). Whereas, § 626(f)(3) describes how to prove a “waiver,” requiring that the “the party asserting the validity of a waiver shall have the burden of proving in a court of competent jurisdiction that a waiver was knowing and voluntary . . . .”  Id (citing 29 U.S.C. § 626(f)(3)). (emphasis added). 

The employees argued that, by moving to compel arbitration of their claims, the Company was asserting the validity of a waiver — by forcing them to forego their “right” to a jury trial and their “right” to proceed by class action. Id.

The Eighth Circuit rejected this argument. “In § 626(f),” it explained, ‘“waiver’ refers narrowly to waiver of substantive ADEA rights or claims — not, as the former employees argued, the ‘right’ to a jury trial or the ‘right’ to proceed in a class action.” Id. (emphasis in original).

In reaching that decision, the Eighth Circuit cited 14 Penn Plaza LLC v. Pyett, 556 U.S. 247 (2009). In that case, the Supreme Court interpreted § 626(f)(1)’s references to “‘right[s] or claim[s]’ to mean substantive rights to be free from age discrimination, not procedural ‘rights’ to pursue age discrimination claims in court.” Id. Noting that Penn Plaza controls, the Eighth Circuit explained that the “specific ‘rights’ the former employees cite are not ‘rights’ under § 626(f)(1).” Id. The Eighth Circuit therefor decided that no “rights or claims” are “waived” by agreeing to bring claims in arbitration. Id.

The Eighth Circuit also rejected the employees’ argument that § 626(b), by incorporating 29 U.S.C. § 216(b), gives them a “right” to bring a collective action. Id. at 3. Before making short shrift of this argument, the Eighth Circuit noted that the ADEA borrows the procedural collective action mechanism from § 216(b) of the Fair Labor Standards Act (“FLSA”). Section 626(b) incorporates § 216(b), which allows an employee to sue on behalf of himself “and other employees similarly situated.” 29 U.S.C. § 216(b). Thus, the Eighth Circuit explained that § 626(b) expressly allows employees to bring collective actions for age discrimination. McLeod, 2017 WL 1363797 at *3.

Although the Eighth Circuit acknowledged that the ADEA expressly authorizes employees to sue collectively, it held that § 626(b) does not create a non-waivable, substantive right to do so. Citing its decision in Owen v. Bristol Care, Inc., 702 F.3d 1050, 1052 (8th Cir. 2013), the Eighth Circuit first explained that “[s]tanding alone, § 216(b) does not create a non-waivable substantive right; rather, its class-action authorization can be waived by a valid arbitration agreement.” Id.  The Eighth Circuit then found no convincing reason why § 626(b)’s incorporation of § 216(b) would “elevate the procedural class-action authorization to a substantive § 626(f)(1) ‘right.’” Id.

Ultimately, the Eighth Circuit concluded that the ADEA does not provide a “contrary congressional command” overriding the FAA’s mandate to enforce agreements to arbitrate ADEA claims, and that the District Court should have granted the Company’s motion to compel arbitration. Id.

Next, the employees argued that an arbitration panel could not grant them their declaratory relief — i.e., decide the question of whether their waiver of substantive ADEA rights was “knowing and voluntary.” Id. at 4. Specifically, the employees argued that this question can only be resolved in court because of § 626(f)(1)’s mandatory language “shall have the burden of proving in a court of competent jurisdiction.” Id. (emphasis added).

The Eighth Circuit declined to decide this issue, finding, instead, that the question was not justiciable. Id. Because the Company had not yet asserted that any of the employees had in fact waived their ADEA claims, and because the employees were seeking declaratory relief only “if and to the extent” the Company asserted that defense, the Eighth Circuit concluded that the employees’ declaratory relief was hypothetical. Id. “No Article III case or controversy arises,” it explained, “when plaintiffs seek a ‘declaratory judgment as to the validity of a defense’ that a defendant ‘may or may not, raise.’” Id. Accordingly, the Eighth Circuit held that the District Court did not have jurisdiction to decide whether the employees’ waiver was “knowing and voluntary.” Id.

Implication For Employers

This decision is important for employers, but less so for the reasons one might imagine. The reality is that this decision does little to alter the ADEA judicial landscape. More than two decades ago the Supreme Court held in Gilmer v. Interstate/Johnson Lane Corp. that ADEA claims could be subjected to compulsory, individual arbitration, even though collective actions are permitted under the ADEA by the identical statutory language as the FLSA. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 32 (1991). While Gilmer did not specifically touch on the interplay between § 626(f) and the FAA, it is a bit surprising that a discussion of Gilmer is altogether absent from the Eighth Circuit’s decision.

One take away is that employers can remain confident that provisions requiring individual arbitration of ADEA claims will not result in a prohibited waiver of an employees’ rights under the ADEA.

This decision also sheds light on an important strategy consideration. Employers that assert waiver as a defense may find themselves litigating the validity of that waiver (i.e., whether the waiver was knowing and voluntary) in court — even though the employees agreed to arbitrate their claims. Hence, employers will likely need to weigh the advantages and disadvantages of defending an ADEA violation on the merits in arbitration versus adopting a waiver defense in court.

00-money-bagBy Gerald L. Maatman, Jr., Jennifer A. Riley, and Thomas E. Ahlering

Seyfarth Synopsis:  In what is being billed as the “largest and strongest TCPA settlement in history,” Judge Kennelly of the U.S. District Court for the Northern District of Illinois recently granted Plaintiffs’ counsel a minimum of $15.26 million in attorneys’ fees.  However, the Court refused to depart from the “sliding-scale structure,” which has become the standard model in the Seventh Circuit for awarding fees in class actions, and declined to award Plaintiffs’ counsel one-third of the common fund (or $24.5 million) as requested.

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Employers who utilize automated calls and text messages as part and parcel of their business continue to be subject to a considerable risk of class actions under the Telephone Consumer Protection Act (“TCPA”).  This is in no small part a product of the fact that TCPA class actions continue to be extremely lucrative for the plaintiffs’ class action bar.  The Court’s recent award of at least $15.26 million in attorneys’ fees in Aranda et al. v. Caribbean Cruise Line, Inc. et al., No. 12-04069, 2017 U.S. Dist. LEXIS 52645 (N.D. Ill., April 6, 2017), serves as the most recent example of the lucrative success that plaintiffs’ attorneys continue to achieve in TCPA class actions.

Case Background

In Aranda, Plaintiffs alleged that Defendants violated the TCPA by placing millions of automated telephone calls to consumers without their consent.  After roughly four years of “hotly contested litigation,” the parties settled on the eve of trial and the settlement provides that defendants will establish a common fund, in an amount no lower than $56 million and no higher than $75 million, from which class members will be paid.  Id. *3.  Following final approval of the class-wide settlement, Plaintiffs’ counsel petitioned for an award of attorneys’ fees in amount equal to one-third of the final common fund total.

The Court’s Decision

Judge Kennelly of the U.S. District Court for the Northern District of Illinois granted in part the fee request of Plaintiffs’ counsel, noting that while the circumstances of the case warranted a higher fee award than those granted in other TCPA class actions, the Court disagreed that the award should be as high as requested and declined to depart from the “sliding-scale structure” used by courts in the Seventh Circuit to award attorney’s fees in class actions.  Id.

The main question addressed by the Court was whether the fee request should be granted based on Plaintiffs counsel’s proposed “flat-percentage” approach or the “sliding scale” model that district courts in the Seventh Circuit often use to award attorneys’ fees for class action settlements as outlined in In Re Synthroid Marketing Litigation, 264 F.3d 712, 721 (7th Cir. 2001).  Id. *4.  The “sliding scale” model consists of breaking class action settlement funds into tiers or bands and awards class counsel a decreasing percentage of each band.  The rationale behind this approach is that “awarding class counsel a decreasing percentage of the higher tiers of recovery enables them to recover the principal costs of litigation from the first bands of the award, while allowing the clients to reap more of the benefit at the margin yet still preserving some incentive for lawyers to strive for these higher awards.”  Id. at *11 (quoting Silverman v. Motorola Sols., Inc., 739 F.3d 956, 959 (7th Cir. 2013)).  Plaintiffs’ counsel argued that an award amounting to one-third of the net common fund accurately reflected the result of a hypothetical negotiation between the plaintiffs and their attorneys under a “market based approach,” citing their typical contingency fees in TCPA cases, an expert indicating that the request was less than a standard rate for individual TCPA cases, and argued that they generated better-than-average value for the class and should be paid accordingly.  Id. *6-7.

The Court agreed with Plaintiffs that the circumstances of the case warranted a higher fee than those granted in other TCPA class actions that resulted in settlement.  Id. *14.  However, the Court did not agree that the case was not one in which “declining marginal percentages are [not] always best” and therefore, this concern would not provide a reason for class members to deviate from the sliding-scale structure in an ex ante negotiation.  Id. *12.  Specifically, counsel would have had the same or virtually the same incentive to fight for a high award whether they were receiving a flat rate or a sliding-scale rate because up until the very end, class counsel were fighting to get any recovery for the class.  Id. *16  The Court also disagreed with Plaintiffs that class members would accept a flat rate because of its low inherent value or because of the possibility that counsel could generate a high recovery through aggressive litigation because it was “not clear that the hypothetical class members in this case would be faced with the binary choice between a high-percentage fee with a  large recovery, on the one hand, and a sliding-scale fee for a small recovery, on the other.”  Id. *17.

Despite this, the Court was “persuaded that plaintiffs and their counsel faced materially greater risks in this case than those faced in the other recent TCPA class actions” and therefore, added at least a 6% premium to the first “band” of recovery on the sliding scale.  Id. *25. Ultimately, the Court also concluded that counsel’s efforts justified increasing the size of the settlement and therefore, plaintiffs in a hypothetical negotiation might agree to pay a risk premium at each band, but also insist that the size of the premium decrease at each band, as the risk of non-recovery decreased.  Id. *27-28.   Therefore, the Court awarded class counsel 36% of the first $10 million ($3.5 million), 30% of the second $10 million ($3.5 million), 24% of the band from $20 million to $56 million ($8.64 million), and 18% of the remainder.  If the common fund reaches its $76 million ceiling, the Court will adjust the award up, in which case the award would amount to roughly 25.6% of the common fund which is slightly higher than the mean and median recoveries for TCPA cases of similar value.  Id. *30-31.

Implications For Employers

This ruling illustrates that TCPA class actions are alive and well – and most notably – continue to be extremely lucrative for the plaintiffs bar.  Employers should ensure that they are in compliance with the TCPA or else risk becoming a target of TCPA litigation.

downloadBy Gerald L. Maatman, Jr., Thomas E. Ahlering, and Alex W. Karasik

Seyfarth Synopsis:  In a first-of-its kind ruling, an employer recently secured the dismissal with prejudice of what is believed to be one of the first Telephone Consumer Protection Act class actions ever brought against a company while acting as an employer – specifically in this instance, the use of robo-calls to contact applicants about employment opportunities. The ruling ought to be required reading for corporate counsel in order to understand this emerging risk and to craft strategies to protect companies against such claims.

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When most people think of class actions brought under the Telephone Consumer Protection Act (“TCPA”), they envision lawsuits against companies using automated voices to tell them they won a free cruise or are eligible to receive a discount on a product.  But in Dolemba v. Kelly Services, Inc., No. 16-CV-4971, 2017 U.S. Dist. LEXIS 13508 (N.D. Ill. Feb. 1, 2017), the Plaintiff, who had previously given her contact information to temporary staffing company Kelly Services, Inc. (“Kelly”) to be contacted regarding employment opportunities, brought a class action against Kelly under the TCPA and Illinois Consumer Fraud Act (“ICFA”) alleging that Kelly made an unauthorized robo-call to her cell phone.  Kelly resisted the claim, filed a motion to dismiss, and Judge Sara Ellis of the U.S. District Court for the Northern District of Illinois granted Kelly’s motion to dismiss both claims with prejudice, finding that the Plaintiff never revoked her consent to be contacted about employment opportunities.

The ruling in Dolemba is believed to be one of the first TCPA class actions ever brought against a company while acting as an employer, thus making this ruling a landmark victory for employers nationwide.  The potential for employers to face similar novel TCPA class actions in the near future is now imminent – and employers can and should add this decision to their arsenal as a powerful tool to help defeat such actions.

Case Background

In March 2007, Plaintiff applied for employment with Kelly, indicating interest in positions using office skills such as accounts payable and accounts receivable.  Id. at *1.  Plaintiff’s employment application included her cellular phone number.  In signing the application, Plaintiff “authorize[d] Kelly to collect, use, store, transfer, and purge the personal information that [she] provided for employment-related purposes.”  Id.  Kelly never offered Plaintiff a job, nor did Plaintiff ever accept employment through Kelly.  She also did not receive any communications from Kelly between the end of 2007 and February 2016.  Id. at *1-2.

On February 27, 2016, Plaintiff received an automated call on her cellular phone from Kelly.  Id. at *1.  Kelly contacted Plaintiff about potential job opportunities.  Because Plaintiff did not answer the call, Kelly left a voicemail message regarding opportunities for employment as a machine operator in the Chicagoland area.  Plaintiff alleged that she had no reason to believe that Kelly still treated her application as active in 2016.  Responding inconsistent with the notion that no good deed goes unrewarded,  Plaintiff brought a class action lawsuit alleging that Kelly violated the TCPA and ICFA by calling her cellular telephone using an automatic telephone dialing system.  As part of its defense strategy, Kelly moved to dismiss Plaintiff’s claims and strike her class allegations.

The Court’s Decision

The Court dismissed Plaintiff’s TCPA and ICFA claims with prejudice.  First, the Court accepted Kelly’s argument that Plaintiff had essentially “pleaded herself out of court” and further found that Kelly met its burden of consent as an affirmative defense.  Id. at *3-4.  Specifically, the Court held that although Plaintiff need not have anticipated or pleaded revocation of consent, she only maintained that she had no reason to believe her employment application was active and she had no further communications with Kelly after consenting to receive employment-related communications.  Id. at *5-6.  Therefore, the Court found that Plaintiff’s consent remained valid at the time Plaintiff filed the case.  Id. at *6.

The Court also rejected Plaintiff’s attempt to “recast her consent” as only agreeing to accept calls relating to specific employment opportunities, holding that “the call [Plaintiff] received clearly related to an employment opportunity.  Although not specifically tailored to the exact job interests [Plaintiff] indicated in her application, it still fell within the broad consent she gave to use her cellular phone number to contact her generally for employment-related purposes regardless of whether that job matched her job interests.”  Id. at *7.  Accordingly, the Court found that because Plaintiff pleaded herself out of court by attaching her employment application, which indicated she consented to receiving calls from Kelly for employment-related purposes, her TCPA claim must be dismissed.

Plaintiff also brought a claim under the ICFA alleging that Kelly engaged in unfair acts and practices by making the allegedly unauthorized robo-call to her cellular phone in violation of §§ 2 and 2Z of ICFA, 815 Ill. Comp. Stat. 505/2, 2Z.  Id. at *8.  The Court explained that to state an ICFA claim, Plaintiff must allege: (1) a deceptive or unfair act or practice by Kelly, (2) Kelly’s intent that Plaintiff rely on the deceptive or unfair practice, (3) the unfair or deceptive practice occurred in the course of conduct involving trade or commerce, and (4) Kelly’s unfair or deceptive practice caused Plaintiff actual damage.  Id. at *8-9.  In dismissing Plaintiff’s ICFA claim, the Court found  that “receiving one pre-recorded message does not rise to the level of an oppressive practice” and that damages such as “loss of time and loss of battery life” are “so negligible from an economic standpoint as to render any damages unquantifiable.”  Id. at *10.  The Court further rejected Plaintiff’s argument that Kelly violated the Illinois Telephone Act because the message did not solicit the sale of goods and or services and therefore, did not fall under the definition of “recorded message” in the Illinois Telephone Act.  Id. at *10-11.  Accordingly, the Court dismissed Plaintiff’s ICFA claims with prejudice.

Implications For Employers

This is a landmark victory for employers, especially companies who utilize automated calls and text messages to contact prospective and/or current employees about job-related opportunities or employment matters.  Employers can almost certainly expect similar lawsuits brought against them under the TCPA.  Fortunately for employers, Kelly’s victory provides a roadmap for how to defeat such cutting edge class actions.

supreme court sealBy Christopher M. Cascino and Gerald L. Maatman, Jr.

Seyfarth Synopsis:  A bankruptcy court overseeing an employer’s Chapter 11 bankruptcy proceeding allowed the employer to pay certain unsecured creditors before paying Worker Adjustment And Retraining Notification Act (“WARN”) creditors – workers who had sued the company – monies owed pursuant to a judgment, even though the bulk of the WARN monies owed were for back wages that hold priority over other unsecured claims under the Bankruptcy Code.  The bankruptcy court allowed the employer to pay the other unsecured creditors pursuant to a settlement agreement between the other unsecured creditors, the secured creditors, and the employer because, according to the bankruptcy court, the other unsecured creditors would not receive any monies absent the settlement, while the WARN creditors would not recover any compensation under or absent the settlement.  Both the district court and U.S. Court Of Appeals For The Third Circuit agreed with the bankruptcy court. In Czyzewski v. Jevic Holding Corp., No. 15-649, 2017 U.S. LEXIS 2024 (U.S. Mar. 22, 2017), the U.S. Supreme Court reversed, finding that the bankruptcy court’s conclusion that the WARN plaintiffs could not recover was questionable and, more significantly, that the bankruptcy court could not alter the Bankruptcy Code’s distribution scheme at the expense of the WARN creditors absent their consent.

Employers undergoing Chapter 11 bankruptcy and WARN litigation should take note that unpaid wage claims will take priority over the claims of other unsecured creditors absent the consent of WARN creditors.

Case Background

Sun Capital Partners (“Sun”), a private equity firm, purchased Jevic Transportation Corp. (“Jevic”), an employer, in a leveraged buyout using monies borrowed from third-party CIT Group (“CIT”).  In the buyout, both Sun and CIT used Jevic’s stock as collateral to finance the purchase.

Two years after the buyout, Jevic declared bankruptcy under Chapter 11.  Immediately prior to filing for bankruptcy, Jevic, without the notice required under WARN, told its employees that it was terminating their employment.  During the bankruptcy, these employees sued, and the bankruptcy court entered a $12.4 million judgment in their favor, making them creditors of Jevic.  The bankruptcy court determined that $8.3 million of this $12.4 million was owed for priority wage claims.  While the WARN creditors argued that Sun was also liable for this judgment as a joint employer with Jevic, the bankruptcy court ultimately ruled against them, finding that Sun was not their employer.

Also during the bankruptcy, other unsecured creditors sued Sun and CIT, arguing that they were the beneficiaries of preferential transfers of Jevic’s assets.  While this lawsuit was pending, Jevic’s assets were depleted to $1.7 million in cash, subject to a lien by Sun, and the preferential transfer lawsuit.

Sun, CIT, Jevic, and the other unsecured creditors decided to settle the fraudulent transfer lawsuit.  At the time the case was settled, the WARN creditors’ joint employer case was still pending, so Sun insisted that any settlement could not include a payment to the WARN creditors or their counsel, as Sun feared the WARN creditors’ counsel would use such payments to fund litigation against Sun.  Under the settlement agreement, CIT agreed to pay $2 million to cover the legal fees and administrative expenses of the other unsecured creditors, while giving Jevic’s remaining $1.7 million to pay taxes, administrative expenses, and pro rata distributions to the other unsecured creditors.  Also pursuant to the settlement, Jevic agreed to dismiss its Chapter 11 bankruptcy case.

Sun, CIT, Jevic, and the unsecured creditors petitioned the bankruptcy court to approve the settlement and dismiss the Chapter 11 case.  The WARN creditors opposed, arguing that the settlement violated the normal priority rules by giving other unsecured creditors priority over the WARN creditors.

While the bankruptcy court agreed that the settlement violated standard priority rules, it found that, because it was dismissing the Chapter 11 case rather than approving a Chapter 11 plan, it did not have to follow the priority rules contained in Chapter 11.  It found authority to do so in Chapter 11’s dismissal provision, § 349(b)(1), which provides that, with dismissal, parties are restored to the status quo ante unless a bankruptcy judge, “for cause, orders otherwise.”  Further, it found that, regardless of the settlement, the WARN creditors would not receive any distributions, while the settlement left the other unsecured creditors in a better position than they would be absent the settlement.  Both the district court and Third Circuit agreed.  The WARN creditors sought certiorari, which the Supreme Court granted.

The Court’s Decision

In a March 22, 2017 opinion authored by Justice Breyer, the Supreme Court reversed.  The Supreme Court began its analysis by considering Jevic’s argument that the WARN creditors lacked standing because they would not have recovered anything if the settlement was not approved.  The Supreme Court found this argument unpersuasive because it relied on two questionable propositions: first, that without violation of the ordinary priority rules, there would be no settlement and, second, that the fraudulent conveyance lawsuit had no value.  2017 U.S. LEXIS 2024, at *19.  With respect to the  first argument, the Supreme Court found it unpersuasive given that Sun ultimately won on the joint employer issue.  Id. at *19-20.  With respect to the second, the Supreme Court found the assumption that the fraudulent conveyance lawsuit had no value questionable in light of the fact it settled for $3.7 million.  Id. at *20.  The Supreme Court thus concluded that the WARN creditors had something to lose if the settlement was approved, and therefore had standing to challenge it.  Id. at *21.

The Supreme Court then turned to the question of whether a bankruptcy court can dismiss a Chapter 11 plan in a way that does not follow the ordinary priority rules without the affected creditors’ consent.  Id.  It decided that it cannot for several reasons.

First, the Supreme Court observed that the distribution scheme contained in the Bankruptcy Code is “fundamental to the Bankruptcy Code’s operation,” and that one would expect more than “statutory silence” to authorize departures from the scheme.  Id. at *22-23.  Second, the Supreme Court concluded that Chapter 11 § 349(b)(1), in providing that the parties are restored to the status quo ante in a dismissal unless a bankruptcy judge, “for cause, orders otherwise,” only allows a bankruptcy judge to “make appropriate orders to protect rights acquired in reliance on the bankruptcy case,” which approval of the settlement did not do.  Id. at *24-25.  Finally, the court concluded that the consequences of allowing a departure from the normal distribution scheme were “potentially serious,” including “changing the bargaining power of different classes of creditors” and “risks of collusion.”  Id. at *30-31.

For these reasons, the Supreme Court reversed the bankruptcy court’s approval of a settlement that, as part of the dismissal of a Chapter 11 case, allowed payment to general unsecured creditors while skipping the higher priority claims of the WARN creditors.

Implications For Employers

Financially distressed employers who are the subject of potential WARN litigation should be aware that, as a result of this decision, they will not be able to pay the claims of general unsecured creditors during bankruptcy absent the consent of WARN creditors.  The case has special implications for employers who own distressed employers, as was the case with Sun in Czyzewski, who want to avoid funding litigation against themselves under a joint employer theory.

washington-monument-754745_960_720Seyfarth Synopsis: Governmental enforcement litigation was a mixed bag in 2016. The U.S. Department of Labor (“DOL”) and the Equal Employment Opportunity Commission (“EEOC”) continued their aggressive enforcement programs, but their effectiveness was down “by the numbers” as compared to previous years. What does this mean for 2017?  In the 6th and final installment in our series of blog postings on workplace class action trends, we examine what employers are likely to see in 2017 on the government enforcement litigation front.

Introduction

Government enforcement lawsuits brought by the DOL and EEOC continued the aggressive litigation programs of both agencies, but by sheer numbers of cases, their enforcement activities were arguably limited in their effectiveness, at least when measured by lawsuit filings and recoveries compared to previous years. Settlement numbers for government enforcement litigation in 2016 decreased substantially as compared to 2015, as did the litigation dockets of the DOL and the EEOC. This trends is aptly illustrated by a comparison of settlement recoveries over the past 7 years. Settlement recoveries in 2016 were the second lowest of any year during that period.

Top 10 Government Enforcement

This trend is critical to employers, as both agencies have a focus on “big impact” lawsuits against companies and “lead by example” in terms of areas that the private plaintiffs’ bar aims to pursue. The content and scope of enforcement litigation undertaken by the DOL and the EEOC in the Trump Administration remains to be seen; most believe there will be wholesale changes, which may well prompt the private plaintiffs’ class action bar to “fill the void” and expand the volume of litigation pursued against employers over the coming year.

Governmental Enforcement Litigation Trends In 2016

On the governmental enforcement front, both the EEOC and the DOL intensified the focus of their administrative enforcement activities and litigation filings in 2016.  At the same time, the number of lawsuits filed and the resulting recoveries by settlement – measured by aggregate litigation filings and the top 10 settlements in government enforcement litigation – were less than half of what the EEOC and DOL achieved in 2015.

The EEOC’s lawsuit count dropped precipitously. By continuing to follow through on the systemic enforcement and litigation strategy plan it announced in April of 2006 (that centers on the government bringing more systemic discrimination cases affecting large numbers of workers), the EEOC filed less cases overall but more systemic lawsuits. This manifested the notion that the Commission’s limited budget and bandwidth are best deployed to matters where a systemic focus is most needed and the largest numbers of alleged victims are at issue.  As 2016 demonstrated, the EEOC’s prosecution of pattern or practice lawsuits is now an agency-wide priority backed up by the numbers.  Many of the high-level investigations started in the last three years mushroomed into the institution of EEOC pattern or practice lawsuits in 2016. These numbers are shown by the following chart:

EEOC Systemic Cases: Filed, Resolved, And On Active Docket
FY 2013 – 2016

Cases Filed

The Commission’s 2016 Annual Report also announced that it expects to continue the dramatic shift in the composition of its litigation docket from small individual cases to systemic pattern or practice lawsuits on behalf of larger groups of workers.  The EEOC’s FY 2016 Annual Report detailed the EEOC’s activities from October 1, 2015 to September 30, 2016.  The EEOC’s Report indicated that:

  • The Commission completed work on 273 systemic investigations in FY 2016, which resulted in 21 settlements or conciliation agreements that yielded a total recovery of $20.5 million for systemic claims; six of the settlements involved 50 alleged victims or more, and 13 settlements included 20 or more alleged victims. The FY 2016 recoveries represent a decrease of systemic recoveries in FY 2015 when the Commission netted $33 million based on resolution of systemic investigations.
  • The EEOC recovered $347.9 million for alleged victims of employment discrimination in FY 2016 through mediation, conciliation, and settlements. This represented a decrease of $10.4 million as compared to FY 2015, when the Commission garnered $356.6 million for its enforcement efforts.
  • For its lawsuits, the EEOC secured $58.3 million in recoveries in FY 2016.  This figure was down $7 million as compared to the FY 2015 recoveries of $65.3 million. However, the EEOC resolved fewer lawsuits than it did last year, and recovered less money from those cases.  Specifically, the EEOC resolved 139 lawsuits during FY 2016 for a total recovery of $52.2 million; by comparison, the EEOC resolved 155 lawsuits in FY 2015 for a total recovery of $65.3 million.
  • The EEOC filed only 86 lawsuits in 2016 (down significantly from the 139 lawsuits it filed in 2015), of which 31 were “multiple victim” lawsuits, with 18 cases involved claims of systemic discrimination on behalf of 20 or more workers, and 13 cases involved multiple alleged discrimination victims of up to 20 individuals.  The EEOC had 165 cases on its active lawsuit docket by year end (down from FY 2015, when it had 218 cases on its docket, of which 48% involved multiple aggrieved parties and 28.5% involved challenges to alleged systemic discrimination).  Overall, this represented increases in these categories in terms of the make-up of the Commission’s litigation being tilted more heavily toward systemic cases.
  • The EEOC also received 91,503 administrative charges of discrimination, which was slightly up from the FY 2015 total of 89,385 charges and the FY 2014 total of 88,778 charges. Thus, charge activity was one of the heaviest in the 52 year history of the Commission.
  • The EEOC also encountered significant criticism in the manner in which it enforced anti-discrimination laws.  This criticism took various forms in terms of judicial sanctions, suits against the Commission by private litigants and States, and questioning by Congress over the EEOC’s alleged lack of transparency.

While the inevitable by-product of these governmental enforcement efforts is that employers are likely to face bigger lawsuits on behalf of larger groups of workers in 2017, the EEOC’s systemic litigation program is not without its detractors.  Several federal judges entered significant sanctions against the EEOC – some in excess of seven figures – for its pursuit of pattern or practice cases that were deemed to be without a good faith basis in fact or law. The U.S. Supreme Court in EEOC v. CRST Van Expedited, Inc., 136 S. Ct. 1642 (2016), examined the propriety of the $4.7 million fee sanction, the largest fee sanction ever leveled against the Commission; while the EEOC had been successful in its initial appeal in reversing the sanction before the Eighth Circuit, the Supreme Court unanimously rejected the EEOC’s position, remanded the fee sanction issue for review, and gave new life to the employer’s efforts to recoup millions of dollars against the Commission.

Fiscal year 2016 also marked another year in the EEOC’s 2012-2016 Strategic Enforcement Plan (“SEP”).  The SEP was created in 2012 as a blueprint to guide the EEOC’s enforcement activity.  Its most controversial and perhaps most far-reaching effect on the agency’s activity is the priority it gives to systemic cases: those pattern or practice, policy, or class-like cases where the alleged discrimination has a broad impact on an industry, profession, company, or geographic area.  Systemic cases have been the main driver of EEOC litigation over the past few years, and likely will be well into the future.  The EEOC is now fighting challenges to its power to bring those cases on a number of fronts.  Among other things, it is aggressively challenging any court’s ability to review how it conducts certain statutorily-mandated procedures before bringing suit, including how it investigates its cases and tries to conciliate those cases with employers.  If successful in those efforts, the EEOC will have greatly eased its path to pursuing systemic cases.

The EEOC is not only expanding its reach in procedural terms, but also it is attempting to broaden the scope of its authority through an expansion of the scope of anti-discrimination laws themselves.  In a number of recent cases, the EEOC has advanced novel legal theories that would, among other things, expand anti-discrimination protections to cover transgender employees and require employers to reasonably accommodate pregnant employees, even those who are experiencing normal pregnancies.  The EEOC continued to push the edge of the legal envelope in 2016, viewing itself as an agency that not only enforces the law, but also one that expands the scope of those laws as it deems appropriate.

For this and other reasons, the agency has come under increasing scrutiny and criticism by Republican members of Congress, business groups, and critics of an allegedly activist agency wasting the taxpayers’ dollars.  Such criticism is unlikely to stem the tide of systemic cases or deter the EEOC from continuing to try to expand its enforcement powers.  Subject to policy-directed changes mandated by the Trump Administration, employers can expect the EEOC will use the next year to continue to push for expansion of its procedural and substantive limits.

The DOL also undertook aggressive enforcement activities in 2016.

The Wage & Hour Division (“WHD”) kept up its aggressive enforcement actions in 2016, particularly in the hotel, restaurant, and retail industries.  Much of WHD’s enforcement and other activities took place under the umbrella of “fissured industries” initiatives, which focus on industries with high usage of franchising, sub-contracting, and independent contractors.  At the conclusion of those enforcement actions, WHD continued to increase its use of civil money penalties, liquidated damages, and enhanced compliance agreements.

Legislatures and government agencies in various states and municipalities also increased their activities on the wage & hour front.  Whether increasing the minimum or living wage, enacting scheduling laws and ordinances, implementing wage theft prohibitions, or increasing the minimum salary level required for exemption, many have already revised or are actively planning to revise laws and rules governing how businesses pay employees in 2017.

With the approaching ten-year anniversary of the last time Congress enacted a minimum wage increase (2007), advocates of a minimum wage increase are likely to turn up the volume on their requests for an increase to the federal minimum wage in 2017.  This may well depend on the politics of the debate, for the incoming Republican Administration appears opposed to such an increase.

Finally, if history is a guide, the incoming Administration is likely to return to the decades-old practice of issuing opinion letters in response to specific requests, which had been abandoned by the Obama Administration’s decision-makers at the DOL.

Over the past several years, the DOL’s Wage & Hour Division (“WHD”) fundamentally changed the way in which it pursues its investigations.  Suffice to say, the investigations are more searching and extensive, and often result in higher monetary penalties for employers. According to the DOL, since early 2009, the WHD has closed 200,000 cases nationwide, resulting in more than $1.8 billion in back wages for over 2 million workers.  In FY 2016, the WHD collected more than $266.5 million in back pay wages, an increase of $20.5 million over the past year. Hence, in 2016, employers finally saw the impact of these changes on the WHD’s enforcement priorities, and 2017 is apt to bring much of the same absent a stark change in priorities under the Trump Administration.

The DOL also focused its activities in 2016 on wage & hour enforcement on what it terms “24/7.” The WHD’s Administrator, Dr. David Weil, was an architect of the WHD’s fissured industry initiative.  This initiative focuses on several priority industries, including food services (both limited service/full service establishments), hotel/motel, residential construction, janitorial services, moving companies/logistics providers, agricultural products, landscaping/horticultural services, healthcare services, home healthcare services, grocery stores, and retail trade.  In FY 2016, the WHD reported recoveries of $143,274,845 for nearly 19,000 workers within these fissured industries.

Not to be outdone, the National Labor Relations Board (“NLRB”) undertook an ambitious agenda in 2016 too.  It reconsidered well-settled NLRB principles on joint employer rules and representative elections, entertained the possibility of extending the protections of the National Labor Relations Act (“NLRA”) to college athletes, and litigated novel claims seeking to hold franchisors liable for the personnel decisions of franchisees. More than any other area impacting workplace litigation, the NLRB also remained steadfast in its view that workplace arbitration agreements limiting class or collective claims are void under § 7 of the NLRA. It pursued a myriad of unfair labor practice charges against employers for alleged violation of the NLRA for use of arbitration agreements with class action and collective action waivers.

Implications For Employers In 2017?

So what are employers likely to see in 2017 on the government enforcement litigation front? In the early days of the Trump Administration, clear direction on litigation policy remain unclear. Most pundits believe that employers can expect less litigation and less regulation than during the Obama Administration. Furthermore, the phenomenon of “regulation by enforcement litigation” is likely no longer the by-product of the DOL and the EEOC’s enforcement litigation programs. Most likely, control of agency budgets may well provide the lever that the Trump White House may use to force its policy choices upon the government enforcement litigation programs of the DOL and the EEOC.

FLSA 3 year graphicWage & hour litigation is a “hot button” issue for employers around the country. In our fifth installment video detailing the six key findings of the Workplace Class Action Report, we look at the numbers and implications behind wage & hour class action certification rulings in 2016 and discuss the FLSA regulations that impact employers in our current economy which has substantially changed since its inception in the 1930s.

As we previously discussed on our blog (here and here), and as profiled in our Workplace Class Action Report for 2017, wage & hour litigation filings decreased for the first time in over a decade in 2016. Nonetheless, wage & hour class action and collective action certification decisions outstripped all other types of certification orders over the past year. Of the 224 wage & hour certification decisions in 2016, there were 195 conditional certification rulings and 29 decertification rulings. In contrast, in 2015, there were 175 wage & hour certification decisions, including 153 conditional certification rulings and 22 decertification rulings. While plaintiffs’ lawyers won more conditional certification motions than compared to prior years, employers also won decertification motions at higher rates than as compared to 2015.

all cert graphic

FLSA 3 year graphic

 

Additional factors set to coalesce in 2017 – including litigation over the new FLSA regulations and the direction of wage & hour enforcement under the Trump Administration – are apt to drive these exposures for Corporate America. To the extent that government enforcement of wage & hour laws is ratcheted down, the private plaintiffs’ bar likely will “fill the void” and again increase the number of wage & hour lawsuit filings. This is especially relevant to the extent that litigation of class actions by plaintiffs’ lawyers are viewed as an investment. Prosecution of wage & hour lawsuits is a relatively low cost investment without significant barriers to entry relative to other types of workplace class action litigation.

Top 10 Wage & Hour

Because the majority of wage & hour lawsuits are collective or class actions, and because the plaintiffs’ bar has shown increasing activity with regard to this type of litigation, employers can expect wage & hour litigation to have a substantial impact on their litigation exposures in 2017 and in years to come.

 

#16-3836 2017 WCAR Front Cover for WordSeyfarth Synopsis: This is the fifth installment of our blog series on key trends for workplace class action litigation in 2016. In terms of the sheer number of rulings, a significant trend saw wage & hour class action and collective action certification decisions outstripping all other types of certification orders over the past year. This reflects the simple truism that with more wage & hour litigation case filings over the last 36 months than all other varieties of workplace class actions, there have been more conditional certification and decertification decisions in that space than in any other area of workplace class action litigation. The takeaway for employers is that the tidal wave of this type of workplace class action claim is not ending anytime soon.

Introduction

An undeniable fact of litigation statistics is that wage & hour certification decisions in 2016 increased geometrically as compared to last year. Of the 224 wage & hour certification decisions in 2016, there were 195 conditional certification rulings and 29 decertification rulings. In contrast, in 2015, there were 175 wage & hour certification decisions, including 153 conditional certification rulings and 22 decertification rulings. While plaintiffs’ lawyers won more conditional certification motions than compared to prior years, employers also won decertification motions at higher rates than as compared to 2015. At the same time, that led to a more rapid and robust development of case law on conditional certification and decertification issues in the wage & hour context.

The Story Behind The Numbers

While shareholder and securities class action filings witnessed an increase in 2016, employment-related class action filings remained relatively flat.

By the numbers, filings for employment discrimination and ERISA claims were basically flat over the past year, while the volume of wage & hour cases decreased for the first time in over a decade.

By the close of the year, ERISA lawsuits totaled 6,530 filings (down slightly as compared to 6,925 in 2015 and 7,163 in 2014), FLSA lawsuits totaled 8,308 filings (down as compared to 8,954 in 2015 and up from 8,066 in 2014), and employment discrimination lawsuits totaled 11,593 filings (an increase from 11,550 in 2015 and a decrease from 11,867 in 2014).

In terms of employment discrimination cases, however, the potential exists for a significant jump in case filings in the coming year, as the charge number totals at the EEOC in 2015 and 2016 reached record levels in the 52-year history of the Commission; due to the time-lag in the period from the filing of a charge to the filing of a subsequent lawsuit, the charges in the EEOC’s inventory will become ripe for the initiation of lawsuits in 2017.

By the numbers, FLSA collective action litigation filings in 2016 far outpaced other types of employment-related class action filings; virtually all FLSA lawsuits are filed and litigated as collective actions.  Up until 2015, lawsuit filings reflected year-after-year increases in the volume of wage & hour litigation pursued in federal courts since 2000; statistically, wage & hour filings have increased by over 450% in the last 15 years.

The fact of the first decrease in FLSA lawsuit filings in 15 years is noteworthy in and of itself. However, a peek behind these numbers confirms that with 8,308 lawsuit filings, 2016 was the second highest year ever in the filing of such cases (only eclipsed by 2015, when 8,954 lawsuits were commenced).

Given this trend, employers may well see record-breaking numbers of FLSA filings in 2017.  Various factors are contributing to the fueling of these lawsuits, including: (i) new FLSA regulations on overtime exemptions in 2016, which have been delayed in terms of their implementation due to legal challenges by 13 states; (ii) minimum wage hikes in 21 states and 22 major cities set to take effect in 2017; and (iii) the intense focus on independent contractor classification and joint employer status, especially in the franchisor-franchisee context. Layered on top of those issues is the difficulty of applying a New Deal piece of legislation to the realities of the digital workplace that no lawmakers could have contemplated in 1938. The compromises that led to the passage of the legislation in the New Deal meant that ambiguities, omitted terms, and unanswered questions abound under the FLSA (something as basic as the definition of the word “work” does not exist in the statute), and the plaintiffs’ bar is suing over those issues at a record pace.

Virtually all FLSA lawsuits are filed as collective actions; therefore, these filings represent the most significant exposure to employers in terms of any workplace laws.  By industry, retail and hospitality companies experienced a deluge of wage & hour class actions in 2016.

This trend is illustrated by the following chart:

FLSA filings

What The Numbers Should Mean To Employers

The story behind these numbers is indicative of how the plaintiffs’ class action bar chooses cases to litigate. It has a diminished appetite to invest in long-term cases that are fought for years, and where the chance of a plaintiffs’ victory is fraught with challenges either as to certification or on the merits. Hence, this reflects the various differences in success factors in bringing employment discrimination and ERISA class actions, as compared to FLSA collective actions.

Obtaining a “first stage” conditional certification order is possible without a “front end” investment in the case (e.g., no expert is needed unlike the situation when certification is sought in an ERISA or employment discrimination class action) and without conducting significant discovery due to the certification standards under 29 U.S.C. § 216(b).  Certification can be achieved in a shorter period of time (in 2 to 6 months after the filing of the lawsuit) and with little expenditure of attorneys’ efforts on time-consuming discovery or with the costs of an expert. As a result, to the extent that litigation of class actions by plaintiffs’ lawyers are viewed as an investment, prosecution of wage & hour lawsuits is a relatively low cost investment without significant barriers to entry relative to other types of workplace class action litigation. As compared to ERISA and employment discrimination class actions, FLSA litigation is less difficult or protracted, and more cost-effective and predictable. In terms of their “rate of return,” the plaintiffs’ bar can convert their case filings more readily into certification orders, and create the conditions for opportunistic settlements over shorter periods of time. The certification statistics for 2016 confirm these factors.

An increasing phenomenon in the growth of wage & hour litigation is worker awareness. Wage & hour laws are usually the domain of specialists, but in 2016 wage & hour issues made front-page news.  The widespread public attention to how employees are paid almost certainly contributed to the sheer number of suits.  Big verdicts and record settlements also played a part, as success typically begets copy-cats and litigation is no exception. Yet, the pervasive influence of technology is also helping to fuel this litigation trend. Technology has opened the doors for unprecedented levels of marketing and advertising by the plaintiffs’ bar – either through direct soliciting of putative class members or in advancing the overall cause of lawsuits. Technology allows for the virtual commercialization of wage & hour cases through the Internet and social media.

Against this backdrop, wage & hour class actions filed in state court also represented an increasingly important part of this trend.  Most pronounced in this respect were filings in the state courts of California, Florida, Illinois, Massachusetts, New Jersey, New York, and Pennsylvania.  In particular, California continued its status in 2016 as a breeding ground for wage & hour class action litigation due to laxer class certification standards under state law, exceedingly generous damages remedies for workers, and more plaintiff-friendly approaches to class certification as well as wage & hour issues under the California Labor Code.  For the fourth year out of the last five, the American Tort Reform Association (“ATRA”) selected California as one of the nation’s worst “judicial hellholes” as measured by the systematic application of laws and court procedures in an unfair and unbalanced manner.  Calling California one of the worst of the worst jurisdictions, the ATRA described the Golden State as indeed that for plaintiffs’ lawyers “seeking riches and the expense of employers …” and where “lawmakers, prosecutors, and judges have long aided and abetted this massive redistribution of wealth.”