By Gerald L. Maatman, Jr. and John S. Marrese

Seyfarth Synopsis:  In In Re Subway Footlong Sandwich Mktg. & Sales Practices Litig., No. 16-1652 (7th Cir. Aug. 25, 2017), the U.S. Court of Appeals for the Seventh Circuit overturned a district court’s approval of a class action settlement involving Subway sandwich purchasers who sued for alleged consumer fraud.  The Seventh Circuit called the settlement “worthless” in terms of alleged relief to the class. The decision illustrates that companies defending class action litigation cannot exit such lawsuits by simply “buying peace” by paying-off plaintiffs’ lawyers without providing any value to the class. In this respect, it is one of those unique rulings that is well worth a read by corporate counsel and business executive alike.

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In In Re Subway Footlong Sandwich Mktg. & Sales Practices Litig., No. 16-1652, 2017 U.S. App. LEXIS 16260 (7th Cir. Aug. 25, 2017), the U.S. Court of Appeals for the Seventh Circuit addressed the propriety of an injunctive relief settlement for a class of Subway “Footlong” sandwich purchasers.

A number of state-law consumer protection class actions were filed against Subway based on Subway’s alleged failure to ensure that its Footlong sandwiches were actually 12 inches long.  Id. at *3-5.  Limited discovery showed that the claims had little merit. Subway had always taken steps to ensure that its sandwiches were proper length, but bread length nonetheless varies due to natural and unpreventable variation in the bread-baking process.  Id. at *5.

Rather than pursue resolution on the merits, the parties reached a class-wide settlement for injunctive relief whereby Subway agreed to implement redundant and futile measures in an attempt to ensure Footlongs lived up to their name.  Id. at *7.  Plaintiffs’ attorneys received $520,000 in return for attorneys’ fees.  Id. at *8.  The district court approved of the settlement over objections by certain class members.  Id.

On appeal, the Seventh Circuit reversed, finding that the settlement was “worthless” to the class.  Id. at *14.

Case Background

In 2013, after an online photo went viral showing one customer’s Footlong Subway sandwich was in fact only 11 inches, a slew of plaintiffs’ attorneys filed putative class actions against Subway for damages and injunctive relief.  Id. at *3-4.   The class actions were consolidated in a multidistrict litigation in the U.S. District Court for the Eastern District of Wisconsin.  Id. at *4-5.

Limited discovery revealed that the claims had little merit as: (i) Subway had taken steps to ensure that its Footlongs were in fact 12 inches long; (ii) the minor variability in bread length revealed was due to natural and unpreventable variability in the baking process; and (iii) irrespective of bread length, customers received the same amount of meat, cheese, and other toppings on a sandwich.  Id. Such facts eliminated any hope of certification of a damages class under Rule 23(b)(3), so class counsel focused on certification of a Rule 23(b)(2) injunctive relief class instead.  Id. at *5-6.

The parties subsequently reached a settlement for injunctive relief whereby Subway agreed to implement measures aimed at ensuring Subway Footlongs were in fact 12 inches long, including: (i) requiring franchisees to use a measuring tool for sandwiches; (ii) requiring corporate quality-control inspectors to measure baked bread and check oven operation during regularly scheduled visits; and (iii) posting a notice on its website and in restaurants notifying customers of the variability in baked bread.  Id. at *7.

In return, the plaintiffs agreed to cap their requests for attorneys’ fees at $525,000 and incentive awards at $1,000.  Id. The district court preliminarily approved the settlement, and class counsel filed a motion seeking $520,000 in fees for class counsel and $500 incentive awards for each named plaintiff.  Id. at *8.

A professional objector who was also a member of the class objected to the settlement.  However, the district court overruled the objection, approved the settlement, and certified a class of persons nationwide who had purchased six-inch and Footlong Subway sandwiches between 2003 and 2015.  Id.

The objector appealed.

The Decision

On appeal, the U.S. Court of Appeals for the Seventh Circuit reversed the district court’s approval of the class action settlement.  Id. at *14.

The Seventh Circuit found that the settlement was “worthless” and that “[n]o class action settlement that yields zero benefits for the class should be approved[.]”  Id. at *11.  The Seventh Circuit explained that irrespective of the measures Subway promised to take under the settlement, “there’s still the same small chance that Subway will sell a class member a sandwich that is slightly shorter than advertised.”  Id. at *13 (emphasis in original).

Moreover, the Seventh Circuit found that class members’ right under the settlement to hold Subway in contempt for violating the injunction did not add any value.  Id. at *14.  “Contempt as a remedy to enforce a worthless settlement is itself worthless.  Zero plus zero equals zero.”  Id.

Finally, though not part of its holding, the Seventh Circuit expressed its disdain for the Footlong lawsuits by proclaiming that, because the consolidated class actions sought worthless relief, they “should have been dismissed out of hand.” Id. at *14 (internal quotations and citation omitted).

Implication For Employers

As shown by the Seventh Circuit’s decision, paying-off class action plaintiffs’ counsel can be a poor strategy for efficient resolution of class litigation.  If an employer wishes to realize the cost-savings of early settlement, it must ensure that settlement provides actual value to the class and fees to class counsel commensurate with that value.  Otherwise, expected cost-savings are squandered on opposing objectors (or the trial judge), with the possibility that the trial or an appellate court rejects the settlement and returns the litigation to where settlement talks began.

As an alternative approach, employers should consider efficient and realistic paths to summary judgment.  That approach can make good sense in the face of attorney-driven class litigation with no emotional appeal like the Subway case.  The Seventh Circuit’s emphatic command that meritless class actions should be “dismissed out of hand” should give employers and counsel more confidence in that regard.

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.

santa1Happy Holiday season to our loyal readers of the Workplace Class Action Blog!

Our elves are busy at work this holiday season in wrapping up our start-of-the-year kick-off publication – Seyfarth Shaw’s Annual Workplace Class Action Litigation Report.

We anticipate going to press in early January, and launching the 2017 Report to our readers from our Blog.

This will be our Thirteenth Annual Report, and the biggest yet with analysis of over 1,300 class certification rulings from federal and state courts in 2016.  The Report will be available for download as an E-Book too.

The Report is the sole compendium in the U.S. dedicated exclusively to workplace class action litigation, and has become the “go to” research and resource guide for businesses and their corporate counsel facing complex litigation. We were again honored this year with a review of our Report by Employment Practices Liability Consultant Magazine (“EPLiC”). Here is what EPLiC said: “The Report is a ‘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, risk manager, underwriter, or broker cannot afford to be without it. Importantly, the Report is the only publication of its kind in the United States.”  You can read more about the review here.  Furthermore, EPLiC recognized our Report as the “state-of-the-art word” on workplace class action litigation.

The 2017 Report will analyze rulings from all state and federal courts – including private plaintiff class actions and collective actions, and government enforcement actions –  in the substantive areas of Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, and the Class Action Fairness Act of 2005. It also features chapters on EEOC pattern or practice rulings, state law class certification decisions, and non-workplace class action rulings that impact employers. The Report also analyzes the leading class action settlements for 201 for employment discrimination, wage & hour, and ERISA class actions, as well as settlements of government enforcement actions, both with respect to monetary values and injunctive relief provisions.

Information on downloading your copy of the 2017 Report will be available on our blog in early January. Happy Holidays!

supreme courtBy Gerald L. Maatman, Jr., Pamela Q. Devata, and Rebecca S. Bjork

This morning the Supreme Court of the United States issued an important ruling that will affect employers’ ability to defend against a variety of lawsuits brought as class actions, including employment discrimination, Equal Pay Act, Worker Adjustment & Retraining Notification Act, and Fair Credit Reporting Act cases.  In a 6-3 decision in Campbell-Ewald Co. v. Gomez, No. 14-857 (U.S. Jan. 20, 2016), which our readers can review here, the Supreme Court ruled that when a party defending against a claim in a federal lawsuit makes an offer to a named plaintiff under Rule 68 to pay money to completely cover the alleged damages he is seeking and his accumulated costs to that point, and the plaintiff does not accept it, the lawsuit nonetheless may proceed. As explained below, this decision is a game-changer because it denies defendants the opportunity to use Rule 68 to moot the claims of named plaintiffs, and therefore end the class action, by removing the basis for subject-matter jurisdiction under the “cases and controversies” clause of Article III of the U.S. Constitution.

What Is Federal Rule of Civil Procedure 68?

Rule 68 is a relatively obscure provision. Known as the “offer of judgment” rule, it shifts costs to a plaintiff who rejects an offer which is more favorable than the ultimate judgment. Sub-section (a) of Rule 68 states that at least 14 days before a trial date, “a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued.  If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service.  The clerk must then enter judgment.”  That portion of Rule 68 is straightforward, and operates as a form of settlement to spare the courts of the obligation to carry through with the trial.

Defendants’ increasing use of Rule 68 offers in employment-related class actions arose from the language of sub-section (d), which states:  “If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.”  This provision serves to put pressure on the plaintiff to weigh the risks of proceeding to trial, given that he or she will be ultimately liable to pay the offeror the costs it incurred after the date the offer of judgment was rejected. Thus, the purpose of Rule 68 is plainly to encourage settlement and avoid unnecessary trials.  It essentially permits a defendant to make a settlement offer that raises the stakes for the plaintiff who continues to litigate.  It accomplishes this goal by providing that if the plaintiff does not accept the offer within 14 days and the ultimate judgment obtained by the plaintiff is not greater than the offer, the plaintiff must pay the statutory costs incurred by the defendant after the date the offer is made.  Simply put, Rule 68 shifts to the plaintiff the cost of litigating a lawsuit that the defendant should not have been forced to defend.

The Supreme Court recently interpreted Rule 68 in a 2013 case involving a collective action (a case entitled Genesis HealthCare Corp. v. Symczk, 133 S. Ct. 1523 (2013) – the procedures that require individuals to opt-in to obtain relief in a lawsuit brought by a representative plaintiff, such as under the Equal Pay Act.  But due to a concession made by the plaintiff in that case, the Supreme Court did not reach the key question it decided today in Campbell-Ewald.  As Justice Ginsburg, who wrote the majority opinion today put it, “Is an unaccepted offer to satisfy the named plaintiff’s individual claim sufficient to render a case moot when the complaint seeks relief on behalf of the plaintiff and a class of persons similarly situated?”  Campbell-Ewald, slip op. at 1.

What Did The Supreme Court Rule Today About Unaccepted Offers Of Judgment?

Today, Justices Ginsburg, Kagan, Sotomayor, Kennedy, and Breyer, with Justice Thomas concurring, denied defendants the option of arguing that because the named plaintiff did not accept a full settlement offer under Rule 68 before filing the motion for class certification, he or she does not have a sufficient interest in the controversy to create jurisdiction under Article III of the U.S. Constitution, and both the individual and class claims must be dismissed for lack of subject-matter jurisdiction.  The U.S. Courts of Appeal for the Third, Fourth, and Sixth Circuits had previously ruled that an unaccepted offer under Rule 68 can moot a named plaintiff’s claim in this way, while the First, Second Fifth, Seventh, and Eleventh Circuits had held it could not.  The Supreme Court entered the fray to resolve this split amongst the circuits.  Id. at 5-6.

Under Article III, only “cases” or “controversies” can create federal court jurisdiction, and if the named plaintiff no longer has a personal stake in the outcome of the lawsuit – as opposed to an interest in simply the class action aspects of it – the case must be dismissed as moot.  This was the Supreme Court’s holding in 2013 when it last interpreted Rule 68 in the context of representative lawsuits.  Id. at 6.  In Genesis HealthCare Corp. v. Symczyk, the plaintiff had conceded that the unaccepted offer of judgment made by the defendant in that case served to moot her individual claim, and the Supreme Court considered only whether the lawsuit was justiciable based solely on her interest in pursuing collective action allegations against the defendant.  The answer in that case was “no,” but Justice Kagan in dissent argued that the Supreme Court should have reached the issue that plaintiff conceded – and should have ruled that an unaccepted offer does not moot the plaintiff’s individual claim in the first place.  Campbell-Ewald, slip op. at 7-8.

The Supreme Court now has adopted Justice Kagan’s view in that dissent, and reached the issue explicitly, because Mr. Gomez did not make the same concession Ms. Symczyk made – namely, that his failure to respond to Campbell-Ewald’s offer made his individual claim moot.  Gomez had alleged that Campbell-Ewald, a marketing communications company hired by the U.S. Navy to assist in recruiting volunteers, had violated the Telephone Consumer Protection Act (“TCPA”) by retaining a subcontractor who sent text messages to his telephone encouraging him to serve in the Navy, messages he did not consent to receive.  Id. at 1-3.  He filed a class action lawsuit under the TCPA seeking to represent a nationwide class and obtain treble statutory damages plus costs and attorneys’ fees. Id. at 3.  Before his motion for class certification was due, Campbell-Ewald proposed to settle his individual claim by paying him the amount of money he could receive in statutory damages under the TCPA, plus costs, by serving on him a Rule 68 offer of judgment.  Id. at 3-4.  The 14-day time period for Gomez to respond elapsed, and Campbell-Ewald then moved to dismiss the case under Rule12(b)(1) for lack of subject-matter jurisdiction, arguing his claim had become moot because the offer provided him with complete relief, and therefore the class claims were moot as well.  Id. at 4.

Both the District Court and the U.S. Court of Appeals for the Ninth Circuit denied the motion to dismiss (but made differing rulings regarding the doctrine of “derivative sovereign immunity” that are not relevant here). Today’s majority at the Supreme Court affirmed the Ninth Circuit, and held that “Gomez’s complaint was not effaced by Campbell’s unaccepted offer to satisfy his individual claim.”  Id. at 8.  The Supreme Court did so by applying “basic principles of contract law” that an offer made but not accepted has no force, and is “only a proposal, binding neither Campbell nor Gomez.” Id. at 8-9.  It also noted that by not responding to the offer, Gomez was left “emptyhanded,” so his individual claim was not made moot by the unaccepted offer, so that claim “retains its vitality during the time involved in determining whether the case could proceed on behalf of a class.”  Id. at 11.

The dissenting Justices argued that this case presents a classic case of mootness because Campbell-Ewald offered to give Gomez the maximum amount that he could recover, “but it turns out he wants more.  He wants a federal court to say he is right.  The problem for Gomez is that the federal courts exist to resolve real disputes, not to rule on a plaintiff’s entitlement to relief already there for the taking.”  Id. slip op. at 1 (dissenting opinion, Roberts, J.). Because the plaintiff filed suit “seeking redress for an alleged injury, and the defendant agrees to fully redress that injury, there is no longer a case or controversy for purposes of Article III.”  Id. at 4 (emphasis in original).  Essentially, according to the dissenters, once an offer to completely redress the plaintiff’s injury has been made, there is no need for a court to redress that injury, and the adversity necessary to confer subject matter jurisdiction no longer exists.  Id. at 4.

What Should Employers Do Now, If They Wish To Use Rule 68 To Try And End Class Actions?

Although employers and other defendants facing class action lawsuit lost an important strategy today in the Supreme Court, due to the expense of defending against class certification motions, they still may use Rule 68 to attempt to create settlement leverage, and may even be able to re-invent the Rule 68 procedure to try to moot plaintiff’s claims.  Importantly, the majority limited the holding to situations where there is merely an “offer” to settle the claims.  They expressly reserved and did not decide the question of whether the outcome would be different if a defendant invokes Rule 68 and “deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.”   Id. at 11.  Further, the majority did not eviscerate the requirement of Rule 68(d), which shifts costs of an unaccepted offer of judgment to the plaintiff going forward.  The majority noted that the “built-in sanction” for a plaintiff who rejects an offer remains: “the offeree must pay the costs incurred after the offer was made.”  Id. at 9.

So in the end, it is likely that parties defending against claims will continue to use Rule 68, and will do so in these two specific ways that ironically were explicitly suggested by Justice Ginsburg’s majority opinion.  And one prediction we will make here is that, as a result, it is likely that litigation over Rule 68 will turn on disputes over whether creating an “account payable” to a plaintiff satisfies the Rule’s requirement that an “offer” be made to the plaintiff.  Stay tuned as we continue to follow developments in this important area of class action law.

#16-3130 2016 WCAR Tickit Icon R!By Gerald L. Maatman, Jr.

Our 2016 Workplace Class Action Report is now available. At 853 pages, it analyzes 1,314 rulings and is our biggest and best Report ever.

Click here to order your copy in eBook format. Click here to download Chapter 1 on the 2015 Executive Summary/Key Trends. Our annual webinar on the Report is now set for February 1, 2015, and a link to register for the webinar is here.

The Report is the sole compendium in the U.S. dedicated exclusively to workplace class action litigation, and has become the “go to” research and resource guide for businesses and their corporate counsel facing complex litigation. We were humbled and honored by the review of our Report by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here. EPLi said: “The Report is the singular, definitive source of information, research, and in-depth analysis on employment-related class action litigation. Practitioners and corporate counsel should not be without it on their desk, since the Report is the sole compendium of its kind in the United States.”

The 2016 Report analyzes rulings from all state and federal courts – including private plaintiff class actions and collective actions, and government enforcement actions –  in the substantive areas of Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, and the Class Action Fairness Act of 2005. It also features chapters on EEOC pattern or practice rulings, state law class certification decisions, and non-workplace class action rulings that impact employers. The Report also analyzes the leading class action settlements for 2015 for employment discrimination, wage & hour, and ERISA class actions, as well as settlements of government enforcement actions, both with respect to monetary values and injunctive relief provisions.

We hope our loyal blog readers will enjoy it!

Executive Summary

Workplace class action litigation often poses unique “bet-the-company” risks for employers. An adverse judgment in a class action has the potential to bankrupt a business. Likewise, the on-going defense of a class action can drain corporate resources long before the case reaches a decision point. Companies that do business in multiple states are also susceptible to “copy-cat” class actions, whereby plaintiffs’ lawyers create a domino effect of litigation filings that challenge corporate policies and practices. Hence, workplace class actions can adversely impact a corporation’s market share, jeopardize or end the careers of senior management, and cost millions of dollars in defense fees. For these reasons, workplace class action litigation risks are at the top of the list of problems that keep business leaders up at night.

Skilled plaintiffs’ class action lawyers and governmental enforcement litigators are not making that challenge any easier. They are continuing to develop new theories and approaches to prosecuting complex employment litigation. In turn, the events of the past year in the workplace class action world demonstrate that the array of litigation issues facing businesses are continuing to accelerate while also undergoing significant change. Governmental enforcement litigation pursued by the U.S. Equal Employment Commission (“EEOC”) and the U.S. Department of Labor (“DOL”) also manifests an aggressive “push-the-envelope” agenda of two activist agencies, with regulatory oversight of workplace issues continuing as a high priority. The combination of these factors are challenging businesses to integrate their litigation and risk mitigation strategies to navigate these exposures. These challenges are especially acute for businesses in the context of complex workplace litigation.

Key Trends Of 2015

An overview of workplace class action litigation developments in 2015 reveals five key trends.

First, class action dynamics increasingly have been shaped and influenced by recent rulings of the U.S. Supreme Court. Over the past several years, the Supreme Court has accepted supreme courtmore cases for review – and issued more rulings than ever before that have impacted the prosecution and defense of class actions and government enforcement litigation. The past year continued that trend, with several key decisions on complex employment litigation issues, and more cases accepted for review that are posed for rulings in 2016. While the Supreme Court led by Chief Justice John Roberts is often thought to be pro-business, the array of its key rulings impacting class action workplace issues is anything but one-dimensional. Some decisions may be viewed as hostile to the expansive use of Rule 23, while others are hospitable and strengthen the availability of class actions. Further, the Supreme Court has declined several opportunities to impose more restraints on class actions, and by often deciding cases on narrow grounds, it has left many gaps to be filled in by and thereby fueled disagreements arising amongst lower federal courts. Suffice it to say, the range of rulings form a complex tapestry that precludes an overarching generalization that the Supreme Court is pro-business or pro-worker on class actions.

Second, the monetary value of employment-related class action settlements reached an all-time high in 2015. The plaintiffs’ employment class action bar and governmental enforcement litigators successfully translated their case filings into larger class-wide settlements at unprecedented levels. The top ten settlements in various employment-related categories totaled $2.48 billion over the past year as compared to $1.87 billion in 2014. As success in the class action litigation context often serves to encourage pursuit of more class actions by “copy-cat” litigants, 2016 is apt to see the filing of more class actions than in previous years.

#15-3099 2015 WCAR Infographics - Aggregate Settlement Amounts R

Third, federal and state courts issued more favorable class certification rulings for the plaintiffs’ bar in 2015 than in past years. In addition to converting their class certification rulings into class action settlements with higher values and pay-outs, plaintiffs’ lawyers continued to craft refined and more successful class certification theories to counter the more stringent Rule 23 certification requirements established in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), and Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). In the areas of employment discrimination, wage & hour, and ERISA class actions, the plaintiffs’ bar scored exceedingly well in securing class certification rulings in 2015. Statistically, the plaintiffs’ bar secured class certification at an astounding rate of 75% of cases in 2015. In sum, class actions continue to be certified in significant numbers and certain “magnet” jurisdictions continue to issue decisions that encourage or, in effect, force the resolution of large numbers of claims through class action mechanisms.

#15-3099 2015 WCAR Infographics - U.S. Circuit Courts of Appeal R7

Fourth, complex employment-related litigation filings are up from past years, but by far and away, wage & hour class actions and collective actions are the leading type of “high stakes” lawsuits being pursued by the plaintiffs’ bar. Case filing statistics for 2015 reflected that wage & hour litigation outpaced all other categories of lawsuits, and increased yet again over the past year, with no end in sight of the crest of the tidal wave of case filings. Additional factors set to coalesce in 2016 – including new FLSA regulations, the impact of digital technology, and increased scrutiny of independent contractor and joint employer relationships – are apt to drive these exposures even higher for Corporate America.

Fifth, government enforcement lawsuits brought by the DOL and EEOC continued the aggressive litigation programs of both agencies. Settlement numbers for government enforcement litigation in 2015 increased substantially over 2014, as did the litigation dockets of the DOL and the EEOC. 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.

Implications For Employers

The one constant in workplace class action litigation is change. More than any other year in recent memory, 2015 was a year of great change in the landscape of Rule 23. As these issues play out in 2016, additional chapters in the class action playbook will be written.

The lesson to draw from 2015 is that the private plaintiffs’ bar and government enforcement attorneys are apt to be equally, if not more, aggressive in 2016 in bringing class action and collective action litigation against employers.

These novel challenges demand a shift of thinking in the way companies formulate their strategies. As class actions and collective actions are a pervasive aspect of litigation in Corporate America, defending and defeating this type of litigation is a top priority for corporate counsel. Identifying, addressing, and remediating class action vulnerabilities, therefore, deserves a place at the top of corporate counsel’s priorities list for 2016.

jhh

By Gerald L. Maatman, Jr.

Each year the American Tort Reform Association (“ATRA”) publishes its “Judicial Hellholes Report” and examines problems in state court systems and challenges for corporate defendants in the fair and unbiased administration of justice. The ATRA’s 2015 Report was recently published; a copy is here, as well as an executive summary here.

Insofar as the Report identifies and defines a judicial hellhole as a jurisdiction where judges in civil cases systematically apply laws and procedures in an unfair and unbalanced manner, the Judicial Hellholes Report is an important read for corporate counsel facing class action exposures. In sum, if one has to litigate class actions and make decisions with respect to venue strategy, the Report is a “must read.”

The 2015 Hellholes

The ATRA included 8 jurisdictions on its hellholes list – including, in order, (1) California, (2) New York (especially in its treatment of asbestosis litigation in New York City), (3) Florida, (4) Missouri, (5) Illinois (especially Madison County, Illinois), (6) Louisiana, (7) Texas (especially Hidalgo County, Texas and the U.S. District Court for the Eastern District of Texas), and (8) Virginia (especially Newport News, Virginia)  – where it ranked the venues as the “most unfair” in their handling of civil litigation.

The 2015 “Watch List”

The ATRA included 6 jurisdictions on its “watch list,” including New Jersey (especially Atlantic County), Mississippi (in the Delta region), Montana, Nevada, Virginia (principally in the Newport News area), and Pennsylvania (especially in Philadelphia). Just a notch below the 6 hellholes, the “watch list” jurisdictions also present significant challenges for corporate defendants.

Implications For Employers

The Judicial Hellholes Report dovetails with the experience of employers in high-stakes workplace class actions, as California, Florida, Illinois, Massachusetts, Nevada, New Jersey, New York, and Pennsylvania are among the leading states where plaintiffs’ lawyers file employment discrimination and wage & hour class actions in state courts. These jurisdictions are linked by class certification standards that are more plaintiff-friendly and generous damages recoveries under state laws.

workshopBy Gerald L. Maatman, Jr.

Happy Holiday season to our loyal readers of the Workplace Class Action Blog!

Our elves are busy at work this holiday season in wrapping up the galley proofs of our start-of-the-year kick-off publication – Seyfarth Shaw’s Annual Workplace Class Action Litigation Report.

We anticipate going to press in the first week of January, and launching the 2016 Report to our readers from our Blog.

This will be our Twelfth Annual Report, and the biggest yet with analysis of over 1,250 class certification rulings from federal and state courts in 2015. As last year, the Report will be available for download as an E-Book too.

The Report is the sole compendium in the U.S. dedicated exclusively to workplace class action litigation, and has become the “go to” research and resource guide for businesses and their corporate counsel facing complex litigation. We were humbled and honored by the review of our Report by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here. EPLiC said: “The Report is the singular, definitive source of information, research, and in-depth analysis on employment-related class action litigation. Practitioners and corporate counsel should not be without it on their desk, since the Report is the sole compendium of its kind in the United States.”

The 2016 Report will analyze rulings from all state and federal courts – including private plaintiff class actions and collective actions, and government enforcement actions –  in the substantive areas of Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, and the Class Action Fairness Act of 2005. It also features chapters on EEOC pattern or practice rulings, state law class certification decisions, and non-workplace class action rulings that impact employers. The Report also analyzes the leading class action settlements for 2015 for employment discrimination, wage & hour, and ERISA class actions, as well as settlements of government enforcement actions, both with respect to monetary values and injunctive relief provisions.

Information on downloading your copy of the 2016 Report will be available on our blog in early January. Happy Holidays!

moneyBy Timothy F. Haley

Two former employees sued Microsoft Corporation (“Microsoft”) in a class action, alleging that it unlawfully suppressed their wages by entering into multiple employee non-solicitation agreements with its competitors. The case – Ryan, et al. v. Microsoft Corp., No. 14-CV-4634 (N.D. Cal.) – was spawned by the same U.S. Department of Justice (“DOJ”) investigation that eventually resulted in several class action wage suppression antitrust suits brought against a number of Silicon Valley technology companies. In those cases, Judge Lucy Koh of the U.S. District Court for the Northern District of California eventually approved settlements totaling $435 million. In Re High-Tech Employee Antitrust Litigation, No. 11-CV-02508, 2015 U.S. Dist. LEXIS 118051, at *12-13 (N.D. Cal. Sept. 2, 2015). In Ryan however, Judge Koh concluded that plaintiffs delayed too long before filing suit and dismissed all counts of their First Amended Complaint with prejudice. Ryan v. Microsoft Corp., 14-CV-04634, 2015 U.S. Dist. LEXIS 158944 (N.D. Cal. Nov. 23, 2015).

U.S. Department Of Justice Investigation

In 2009, the DOJ initiated an investigation of the employment and recruitment practices of a number of Silicon Valley technology companies. In 2010, the DOJ filed two lawsuits against seven different companies. Each of the defendants entered into stipulated final judgments in which they agreed to injunctions preventing them from entering into or maintaining any agreement not to solicit each other’s employees. Id. at *3‑4. In 2009, the DOJ also opened an investigation into possible antitrust violations by Microsoft, but on October 29, 2014, it informed Microsoft that it would not pursue a case against it. Id. at *27.

Plaintiff’s First Amended Complaint

Plaintiff’s class action complaint, which was filed on October 16, 2014, asserted four causes of action under the following statutes: (1) Section 1 of the Sherman Act, 15 U.S.C. §1; (2) California’s Cartwright Act, Cal. Bus & Prof. Code §16720; (3) California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code, §§17200, et seq.; and (4) California Business and Professions Code §§16600, et seq. Id. at *13. Each of the claims was subject to a four year statute of limitations. Accordingly, the Court concluded that Plaintiffs must allege that the causes of action accrued on or after October 16, 2010, or that the statute of limitations were tolled until at least October 16, 2010. Id. at *22. The Court had previously dismissed the Plaintiffs’ original complaint on the grounds that the statutes of limitations had expired. In granting leave to amend, the Court warned that failure to cure the timeliness problem would result in dismissal of the complaint with prejudice. Id. at *18-19, 34.

Plaintiffs’ Claims Accrued Before October 16, 2010

Under the Sherman Act, a claim accrues when a Defendant commits an unlawful act that injures the Plaintiff.  Plaintiffs’ alleged that they were injured by the anti-solicitation agreements because they were not contacted or offered employment by competitors of Microsoft. But the last such agreement was allegedly reached in 2009. Thus, unless tolling applied, the four year statute of limitations expired in 2013. Id. at *23.

Under California law, a claim accrues when it is complete with all of its elements – wrongdoing, harm, and causation. Once again, the latest that all of those elements could have occurred would have been in 2009. Thus, without tolling, the Court concluded that the applicable statutes of limitations expired in 2013. Id. at *24-25.

No Tolling Doctrine Applied

Regarding the Sherman Act claim, the Court rejected Plaintiffs’ arguments that statutory tolling should apply during the pendency of the DOJ investigation, that the continuing violation doctrine applied, and that Microsoft fraudulently concealed the violations.  Statutory tolling did not apply because the DOJ never filed a complaint against Microsoft.  Id. at *29. The continuing violation doctrine did not apply because merely maintaining the alleged unlawful agreements did not constitute an overt act necessary for application of the doctrine. Id. at *37-38. Finally, fraudulent concealment was not adequately alleged because, among other things, insufficient facts supporting the doctrine were pled to satisfy the heightened pleading requirements of Rule 9(b). Id. at *42-43.

The Court also rejected Plaintiffs’ argument that the California discovery rule applied to Plaintiffs’ UCL claim. While the California discovery rule might apply to a UCL claim grounded in fraud, it does not apply in cases like this one where the UCL claim involves solely unfair competition. Id. at *65.

Finally, the Court also rejected Plaintiffs’ argument that California’s “continuous accrual” rule applied. The “continuous accrual” rule requires a separate recurring invasion of the Plaintiff’s rights. Here, while entering into a new anti-solicitation agreement could constitute a separate recurring invasion, merely maintaining an existing agreement did not.  Accordingly, the doctrine did not apply. Id. at *70.

Implication For Employers

In recent years employers have seen a rash of class actions alleging conspiracies among employers to suppress wages. Judge Koh’s decision provides very favorable authority to assist an employer in defeating an untimely claim on statute of limitations grounds. For example, some courts have stated that antitrust conspiracies often involve factual circumstances known only to the conspirators and, therefore, apply a relaxed Rule 9(b) standard. Judge Koh clearly did not do so in this case and rejected the Plaintiffs’ fraudulent concealment argument for failing to meet the heightened pleading standard. The ruling is also equally strong on all of the other tolling arguments raised by the Plaintiffs.

 

thanksgivingBy Gerald L. Maatman, Jr.

Happy Thanksgiving to our loyal readers of the Workplace Class Action Blog!

We are busy at work as the holiday season begins in finalizing our start-of-the-year kick-off publication – Seyfarth Shaw’s Annual Workplace Class Action Litigation Report.

We anticipate going to press in the first week of January, and launching the 2016 Report to our readers from our Blog.

This will be our Twelfth Annual Report, and the biggest yet with analysis of over 1,300 class certification rulings from federal and state courts in 2015. As in past years, the Report will be available for download as an E-Book too.

The Report is the sole compendium in the U.S. dedicated exclusively to workplace class action litigation, and has become the “go to” research and resource guide for businesses and their corporate counsel facing complex litigation. We were humbled and honored by the review of our Report by Employment Practices Liability Consultant Magazine (“EPLiC”) — the review is here EPLiC said: “The Report is the singular, definitive source of information, research, and in-depth analysis on employment-related class action litigation. Practitioners and corporate counsel should not be without it on their desk, since the Report is the sole compendium of its kind in the United States.”

The 2016 Report will analyze rulings from all state and federal courts – including private plaintiff class actions and collective actions, and government enforcement actions –  in the substantive areas of Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, and the Class Action Fairness Act of 2005. It also features chapters on EEOC pattern or practice rulings, state law class certification decisions, and non-workplace class action rulings that impact employers. The Report also analyzes the leading class action settlements for 2015 for employment discrimination, wage & hour, and ERISA class actions, as well as settlements of government enforcement actions, both with respect to monetary values and injunctive relief provisions.

Information on downloading your copy of the 2016 Report will be available on our blog in early January. Happy Holidays!

thCAD0SFA4By Christopher DeGroff, Gerald L. Maatman, Jr., and Jennifer A. Riley

On November 19, 2015, the EEOC released its annual 2015 Performance and Accountability Report (“PAR”). The Report reflects the progress of the EEOC’s continued efforts to meet the enforcement priorities outlined in its 2012 strategic enforcement plan (“SEP”), including its systemic litigation initiative. For employers, this is perhaps the most important document issued by the Commission. In short, it should be required reading for corporate counsel and professionals involved in compliance efforts relative to workplace litigation issues.

In its SEP, among other things, the EEOC underscored its efforts to champion bigger, more media-focused “systemic” cases, including pattern or practice cases where the alleged discrimination “has a broad impact on an industry, occupation, business, or geographic area.” In the SEP, the EEOC set forth a goal to ensure that systemic cases make up at least 20% of its annual litigation docket and at least 22% to 24% of its litigation docket by 2016. (Read more here.)

As background, the PAR is a “scorecard” of sorts for the EEOC. It provides a report on its activities during the past fiscal year, from October 1, 2014 through September 30, 2015, including its progress toward meeting the goals outlined in the SEP, and provides a preview of what we can expect to see from the EEOC in the upcoming months.

In sum, although the Report acknowledges that the EEOC filed fewer systemic lawsuits in FY 2015, the number of systemic investigations and recoveries exceeded FY 2014 levels. Despite significant setbacks in FY 2014 (read more here), the agency’s statistics trumpeted in the PAR show that, rather than backing down, the EEOC was inspired to be even more aggressive in FY 2015.

The EEOC’s Overall Results

The EEOC’s results reflect a mixed bag for employers.  The EEOC’s totals represent a slight increase in charges filed (93,727 in 2013, compared with 88,778 in 2014, and 89,385 in 2015), and a slight increase in merits lawsuits (131 in 2013, compared with 133 in 2014, and 142 merits lawsuits in 2015).

However, the EEOC’s report reflects a steady decrease in the number of systemic lawsuits, both in the number filed (21 in 2013, compared with 17 in 2014, and 16 in 2015), and in the number of systemic lawsuits on-going in the court system (54 in 2013, compared with 57 in 2014, and 48 in 2015).

Although the agency completed more systemic investigations in 2015 than it completed in 2014, the EEOC’s numbers did not meet 2013 levels. In 2015, the agency completed more investigations than it completed in 2014, but fewer investigations than it completed in 2013 (300 in 2013, compared with 260 in 2014, and 268 in 2015).  The agency recovered more as a result of those investigations than it recovered in 2014, but less than it recovered in 2013 ($63 million in 2013, compared with $13 million in 2014, and $40 million in 2015).

Charges:   A Bigger Backlog

Monthly-Reports (2)The EEOC reported that it received 89,385 charges alleging employment discrimination in 2015.  The number was up slightly over the number received in 2014 (88,778), but remains below the record-breaking recession-period numbers that we saw between 2008 and 2013.  During those years, the numbers steadily rose from 95,402 in 2008, to 93,277 in 2009, to 99,922 in 2010, and 99,947 in 2011, before starting a gradual decline to 99,412 in 2012 to 93,727 in 2013.

As of the end of FY 2015, the EEOC had a backlog of 76,408 charges, a slight increase of 750 charges over the backlog at the conclusion of FY 2014.

Settlements: Recoveries Soar

In its Report, the EEOC reported a surge in the total amount of monetary settlements.  Its administrative enforcement program produced $356.6 million from claim resolutions, up over $60 million from the $296.1 million that it collected in FY 2014.  The EEOC resolved 155 merits lawsuits in the federal district courts, for a total monetary recovery of $65.3 million, a substantial increase ($42.8 million) over the $22.5 million that it collected during FY 2014.  In addition, the EEOC resolved 6,360 complaints and secured more than $94.9 million in relief for federal employees and applicants who requested hearings in FY 2015.

Lawsuits: More Suits, Smaller Share Of Systemic Cases

In its 2015 PAR, the EEOC reported that, during fiscal year 2015, the EEOC filed 142 merits lawsuits, including 100 individual suits, and 42 suits involving “discriminatory policies or multiple victims,” of which 16 (or 11%) involved challenges to alleged systemic discrimination. According to the EEOC, in the 16 systemic lawsuits, the EEOC challenged a variety of types of alleged systemic discrimination, including an alleged age-based refusal to hire, a refusal to accommodate religious beliefs, an imposition of unnecessary medical restrictions, and a systematic failure to maintain records.

Whereas these numbers reflect an upward trend in the number of merits lawsuits, the growth of systemic lawsuits was stagnant. In 2013, the EEOC reported that it had filed 131 merits lawsuits, compared with 133 merits lawsuits in 2014, and 142 merits lawsuits in 2015.  However, in 2013, the EEOC reported that 21 (16%) of those lawsuits were systemic suits, compared with 17 (13%) systemic lawsuits in 2014, and 16 (11%) systemic lawsuits in 2015.  These numbers might explain the agency’s effort in 2015 to report 40 (18.3%) “multiple victim” cases.

At the end of FY 2015, the EEOC had 218 cases on its active district court docket, of which 48 (22%) involved challenges to systemic discrimination. These numbers also reflect a decrease over the past two years.  At the end of FY 2013, the agency had 231 cases on its active docket, of which 54 (23%) involved challenges to systemic discrimination.  At the end of 2014, the agency had 228 cases on its active docket, of which 57 (or 25%) involved challenges to systemic discrimination.

Our “peek behind the numbers” suggests that the Commission’s prosecution of systemic lawsuits has stressed its budget, attorney workloads, and overall capacities. Big cases equate to significant hours of attorney time, and the EEOC’s capacity to file and prosecute an increasing number of systemic lawsuits has hit somewhat of a ceiling or cap due to budgetary and attorney workload limitations.

Systemic Investigations

With respect to investigations in FY 2015, the agency reported that it completed 268 systemic investigations and issued 109 cause findings. It resolved 70 systemic investigations by voluntary conciliation agreements and obtained over $33.5 million in remedies as a result of its systemic initiative.

While reflecting an increase over FY 2014, these numbers still did not achieve the agency’s FY 2013 results. One year ago, the EEOC reported completing only 260 systemic investigations and securing only $13 million in monetary relief. At the end of 2013, the EEOC had launched 300 systemic investigations, resulting in 63 settlements or conciliation agreements, and had recovered approximately $40 million in remedies.

Overall Implications For Employers

Do these numbers mean that the EEOC is backing off its systemic initiative? Not a chance in our view.  Although the EEOC filed fewer systemic lawsuits in FY 2015, the number of 7_Top_HR_Mistakes_Companies_Make_NEW_BANNER (2)systemic investigations and recoveries exceeded FY 2014 levels, and its recoveries represented a climb toward its FY 2013 numbers. As we predicted a year ago, rather than backing down, these numbers signal that the EEOC’s FY 2014 defeats inspired it to more aggressively pursue its agenda.

We expect the EEOC to continue to search for and to initiate systemic investigations to continue this upward trend in 2016. In its FY 2015 PAR, the EEOC continued to highlight its emphasis on “maximizing [its] impact” through its focus on systemic discrimination. The EEOC noted that, at the end of FY 2015, it employed more lead systemic investigators “whose work is dedicated exclusively to development and coordination of systemic investigations,” and more social science research staff.

The EEOC also noted that it continued its efforts to develop means to coordinate systemic investigations across offices. In particular, the EEOC reported that its Systemic Watch List, a software tool that matches ongoing investigations or lawsuits, has “proven integral” to improved coordination. The EEOC also reported that it completed its expansion of the CaseWorks system, a “central shared source of litigation support tools” that facilitate the collection and review of electronic discovery and enable “collaboration” in the development of cases for litigation.

In short, we do not expect the EEOC to back off its systemic initiative in 2016, but to be more aggressive in pursuing those cases that fit within its agenda. So numbers aside, these metrics reflect an agency committed to “big impact” lawsuits that “send a message” to the employer community.

Readers can also find this post on our EEOC Countdown blog here.