By Gerald L. Maatman, Jr., Pamela Q. Devata, & Robert T. Szyba

Seyfarth Synopsis: Following remand from the U.S. Supreme Court, the Ninth Circuit found that the plaintiff suing Spokeo, Inc. under the Fair Credit Reporting Act alleged sufficient injury to establish standing to proceed in federal court and to proceed with his class action.

On August 15, 2017, the U.S. Court of Appeals for the Ninth Circuit issued the latest opinion in the Robins v. Spokeo, Inc. litigation that gave us last year’s U.S. Supreme Court opinion on Article III standing (which we discussed here).  After the Supreme Court found that the Ninth Circuit, in its prior February 2014 opinion (found here), had analyzed only whether the alleged injury was particular to Plaintiff, it remanded the case back for the second part of the analysis to determine whether Plaintiff alleged a concrete injury-in-fact, as required by Article III.

This new ruling is a “must read” for employers, as it has the potential to allow plaintiffs to launch more workplace class actions.

Case Background

The case was originally filed in the U.S. District Court for the Central District of California in 2010 against Spokeo, Inc., which operates an online search engine by the same name that compiles publicly available information on individuals into a searchable database on the internet.  The plaintiff alleged that Spokeo’s database showed inaccurate information about him, such as that he had a greater level of education and more professional experience than he in fact had, that he was financially better off than he actually was, and that he was married (he was not) with children (he did not have any).  Instead of any actual damages, the plaintiff alleged that Spokeo, as a consumer reporting agency, failed to “follow reasonable procedures to assure maximum possible accuracy of the information concerning” Plaintiff, and that its violation of section 1681e(b) of the Fair Credit Reporting Act (FCRA) was “willful” in order to seek statutory damages of between $100 and $1,000 for himself, as well as for each member of a putative nationwide class.

U.S. Supreme Court Decision

The issue of whether the plaintiff had standing to sue for the alleged statutory violation made its way to the U.S. Supreme Court, which in 2016 (in a 6 to 2 opinion by Justice Samuel A. Alito, Jr.) explained that “an invasion of a legally protected interest” that is both “concrete and particularized” is required to establish standing to proceed in federal court.  To be concrete, the alleged injury must “actually exist” and must be “real” and not “abstract.”  The Court further discussed that plaintiffs do not “automatically” meet the injury-in-fact requirement where the violation of a statutory right provides a private right of action.   The plaintiff here, therefore, “could not, for example, allege a bare procedural violation divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.”  Because the Ninth Circuit had not completed both parts of the standing analysis, however, the case was remanded for further review.

Ninth Circuit’s Standing Analysis

In light of the Supreme Court’s directive, the Ninth Circuit opened by affirming the threshold principle that “even when a statute has allegedly been violated, Article III requires such violation to have caused some real—as opposed to purely legal—harm to Plaintiff.”  The Court explained that intangible harms, such as restrictions on First Amendment freedoms and harm to one’s reputation, can be concrete enough for standing, though the Court noted this is a “murky area.” Either way, Plaintiff cannot simply point to a statutory cause of action to establish an injury-in-fact.

Turning to its standing analysis of the plaintiff’s particular allegations, the Ninth Circuit conducted a two-step inquiry:

  1. “whether the statutory provisions at issue were established to protect [the plaintiff’s] concrete interests (as opposed to purely procedural rights)”; and, if so
  2. “whether the specific procedural violations alleged in [the] case actually harm, or present a material risk of harm to, such interests.”

First, the Ninth Circuit cited a long history of protections against dissemination of false information about individuals that underlies the FCRA, including common law protections against defamation and libel, to find that the interests protected by the FCRA are real and concrete.  The harm alleged in the case, the Ninth Circuit concluded, “has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit,” even if it is not the exact historical harm itself.

In the second step, the Ninth Circuit reasoned that in many cases, “a plaintiff will not be able to show a concrete injury simply by alleging that a consumer-reporting agency failed to comply with one of the FCRA’s procedures.”  The statute may be violated, but the violation alone is not enough.  Here, however, the plaintiff pointed to multiple examples of information (e.g., his education level, etc.) that might be relevant to a prospective employer.  A court also has to look at the nature of the inaccuracy as part of its analysis.  Even if the inaccuracy has a debatable negative impact (e.g., a greater level of education could make a plaintiff deemed to be overqualified and passed over for a job), the information is nevertheless relevant, and the Court held, its dissemination is not simply a technical statutory violation.  The Ninth Circuit also pointed out that the injury alleged in this case was not speculative because the dissemination of information already occurred, and the dissemination itself was the harm.  The Court commented that further alleged harm, such as being able to point to an actual missed job, was not required.

Outlook

Overall, the Ninth Circuit’s decision adopted an expansive interpretation of the type of harm that will suffice for Article III standing, though indicating that this interpretation will not extend so far as to find standing to sue for bare statutory or procedural violations.  In the present case, however, the Ninth Circuit focused on the specific allegedly inaccurate information to find harm, in line with Justice Ginsburg’s dissent (found here) to the Supreme Court’s majority, which was concerned more with the reporting of allegedly false information that “could affect [the plaintiff’s] fortune in the job market.”  Further allegations of actual injury, according to the Ninth Circuit, were not required to establish standing.  However, the Ninth Circuit stopped from opining on other specific circumstances and noted that the specific facts will need to be considered to determine if the threshold of “concrete harm” is satisfied.

Thus, the Ninth Circuit provides further guidance on standing, affirming that bare statutory violations continue to be insufficient.  The specific factual allegations of such cases, however, may present courts with greater latitude to find standing in civil litigation alleging violations of the FCRA, as well as cases under ERISA, the Americans With Disabilities Act, and a host of other workplace statutes.  As courts address similar inquiries, we are likely to see increased guidance regarding standing.   Additionally, with this decision, there seems to be more evidence of a potential split among the federal Courts of Appeals, which could result in another petition to the U.S. Supreme Court.

supreme-court-546279_960_720By Gerald L. Maatman, Jr., Michael L. DeMarino, and John S. Marrese

Seyfarth Synopsis:  In Microsoft Corp. v. Baker, No. 15-457 (U.S. June 12, 2017), the U.S. Supreme Court ruled on a procedural issue that is of importance in any class action in terms of when and in what circumstances a plaintiff may appeal orders that terminate their rights in a case. In that respect, the decision is required reading for any employer involved in class action litigation.

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In Microsoft Corp. v. Baker, No. 15-457, 582 U.S. ___ (2017), the Supreme Court was confronted with the question of whether courts of appeal have jurisdiction to review an order denying class certification after the named plaintiffs  have voluntary dismissed their claims with prejudice.

Litigants have an immediate right to appellate review only of “final decisions of the district courts,” as set forth in 28 U.S.C. § 1291. The denial of class certification is not a final order and, therefore, not necessarily entitled to such immediate review.  Nonetheless, Fed. R. Civ. P. 23(f) provides litigants the opportunity to appeal an adverse class certification decision, which the appellate court has unfettered discretion to review or not.

If the appellate court decides not to exercise discretion over such an appeal, plaintiffs still have options to ultimately obtain appellate review, including petitioning the district court to certify the interlocutory order for appeal pursuant to 28 U.S.C.  § 1292 or pursuing the litigation to a final judgment at which point the class certification denial becomes final and appealable.  However, as the Supreme Court’s decision in Baker makes clear, what plaintiffs may not do is circumvent that process by dismissing a case with prejudice after the denial of class certification in order to manufacture the appellate court’s jurisdiction over such an appeal. According to the Supreme Court, such a tactic impermissibly stretches Section 1291, circumvents the rules governing interlocutory appeals, including 23(f), and leads to protracted and piecemeal litigation.

Case Background

Plaintiffs, purchasers of Microsoft’s Xbox 360 console, filed a class action alleging design defect of the console.  (Slip Op. 8.)  The district court struck Plaintiffs’ class allegations based on the denial of class certification in a previously-filed case of the same nature, finding that comity mandated its decision.  (Id. at 8-9.)

Plaintiffs petitioned the Ninth Circuit for appellate review of the interlocutory order under Rule 23(f), but the Ninth Circuit declined to exercise jurisdiction.  Id. at 9.  Rather than pursue their individual claims further, Plaintiffs moved to voluntarily dismiss their claims with prejudice and represented to the district court that they would appeal the order striking their class allegations thereafter. (Id. at 10.)  Microsoft stipulated to the voluntary dismissal with prejudice, but argued that Plaintiff would have no right to appeal.  The district court granted the stipulated motion to dismiss.  Id.

As promised, Plaintiffs only appealed the district court’s decision to strike their class allegations.  Id.  The Ninth Circuit held that it had jurisdiction to entertain the appeal under the 28 U.S.C. § 1291, rejecting Microsoft’s argument that Plaintiffs had impermissibly circumvented Rule 23(f).  Id.  Then the Ninth Circuit reversed the district court’s decision to strike Plaintiffs’ class allegations. Id. at 11.  The Ninth Circuit expressed no opinion as to the merits of class certification, but merely found that comity did not require denial on the pleadings; such a decision would more properly be made on Plaintiffs’ eventual motion for class certification.  Id.

The Supreme Court granted certiorari to address a Circuit split over the question: “Do federal courts of appeals have jurisdiction under [28 U.S.C.] § 1291 and Article III of the Constitution to review an order denying class certification (or . . . an order striking class allegations) after the named plaintiffs have voluntarily dismissed their claims with prejudice?”  Id.

The Decision

The Supreme Court, sitting with eight justices, unanimously found that the Ninth Circuit had improperly exercised discretion over Plaintiffs’ appeal.

Justice Ginsburg, authoring the opinion of the Court in which Justices Kennedy, Breyer, Sotomayor and Kagan joined, ruled that Plaintiffs’ voluntary dismissal with prejudice did not transform the district court’s denial of class certification into a final order.  Such a tactic, the Supreme Court concluded, impermissibly attempts to subvert the final judgment rule in § 1291 as well as the process Congress implemented for refining that rule and providing for appeals of interlocutory orders.  Id. at 12.

The Supreme Court explained that Plaintiffs’ tactic encouraged “protracted litigation and piecemeal appeals” as well as indiscriminate review of interlocutory orders.  Id.  Indeed, as the Supreme Court pointed out, under Plaintiffs’ theory, “the decision whether an immediate appeal will lie resides exclusively with the plaintiff” because plaintiff “need only dismiss her claims with prejudice whereupon she may appeal the district court’s order denying class certification.” Id. at 12-13. Thus, if Plaintiffs here had subsequently been denied class certification on remand from the Ninth Circuit, they could have again voluntarily dismissed and forced an appeal of that decision, thereby circumventing the purpose of Rule 23(f) and, in conjunction, the rulemaking process Congress bestowed upon the Supreme Court.  Id. at 13-16.

Justice Thomas, joined by Chief Justice Roberts and Justice Alito issued a concurring opinion, concurring only in the judgment.  Justice Thomas agreed that Plaintiffs could not appeal under the circumstances of this case, but under a different rationale.  Specifically, Justice Thomas concluded that Plaintiffs’ voluntary dismissal with prejudice had indeed resulted in a final appealable order.  However, such dismissal destroyed any live case or controversy.  Accordingly, Plaintiffs had no standing under Article III of the Constitution to bring the appeal.

Implication for Employers

A decision on class certification is often the most significant event in the life of class litigation.  As such, plaintiffs who are denied certification craft inventive strategies to circumvent rules limiting their appellate rights.  With the Baker decision, one such strategy is no longer available to plaintiffs.  Employers should pay careful attention to alternative tactics similarly contravening the purpose and structure of the federal statutes and rules governing appellate review.

100px-US-CourtOfAppeals-9thCircuit-Seal_svgBy Gerald L. Maatman, Jr., Christopher J. DeGroff and Alex W. Karasik

Seyfarth Synopsis: After the U.S. Supreme Court clarified in McLane Co. v. EEOC, No. 15-1248, 2017 U.S. LEXIS 2327 (U.S. 2017), that the scope of review for employers facing EEOC administrative subpoenas was the abuse-of-discretion standard, a relatively high bar of review, the Ninth Circuit applied that standard of review on remand and vacated the District Court’s original decision that denied the enforcement of an EEOC subpoena.

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An often contentious issue in EEOC investigations involves the scope of administrative subpoenas, which can be burdensome for employers when the subpoenas seek a broad range of company-wide information.  When analyzing the standard of review for decisions relating to the enforcement of EEOC subpoenas, in McLane Co. v. EEOC, No. 15-1248, 2017 U.S. LEXIS 2327 (U.S. Apr. 3, 2017), the U.S. Supreme Court held that such decisions were examined under an abuse-of-discretion standard.  The abuse-of-discretion standard sets a relatively high bar for review, as we blogged about here.  Following the U.S. Supreme Court’s remand to the Ninth Circuit in McLane, the Ninth Circuit vacated the District Court’s denial of enforcement of the subpoena and sent the matter back to the District Court for further proceedings.  EEOC v. McLane Co., No. 13-15126, 2017 U.S. App. LEXIS 9027 (9th Cir. May 24, 2017).

For employers, this is an important case to follow as it provides clarification as to the standard of review used when Appellate Courts address district court subpoena enforcement decisions.

Background

The EEOC issued an administrative subpoena as part of its investigation into a charge of discrimination filed by a former employee of a McLane subsidiary.  Id. at *3.  The employee alleged that McLane discriminated against her on the basis of sex when it fired her after she failed to pass a physical capability strength test.  Relevant here, the subpoena requested “pedigree information” (name, Social Security number, last known address, and telephone number) for employees or prospective employees who took the test.  Following the Court’s precedent at the time, the Ninth Circuit applied a de novo review to the District Court’s ruling that the pedigree information was not relevant to the EEOC’s investigation.  Id. at *3-4.  The U.S. Supreme Court vacated the Ninth Circuit’s judgment after holding that a district court’s decision whether to enforce an EEOC subpoena should be reviewed for abuse of discretion.  The U.S. Supreme Court remanded the case to the Ninth Circuit so that the Ninth Circuit could re-evaluate the District Court’s ruling under the proper standard of review.

 The Ninth Circuit’s Decision On Remand

After reviewing the District Court’s decision under the abuse-of-discretion standard, the Ninth Circuit still held that the District Court abused its discretion by denying enforcement of the subpoena.  Id. at *4.  The District Court found that the pedigree information was not relevant “at this stage” of the EEOC’s investigation because the evidence McLane had already produced would “enable the [EEOC] to determine whether the [strength test] systematically discriminates on the basis of gender.”  Id.  The Ninth Circuit rejected this approach, noting that the District Court’s ruling was based on the wrong standard for relevance.  The Ninth Circuit stated that under Title VII, the EEOC may obtain evidence if it relates to unlawful employment practices and is relevant to the charge under investigation.  Quoting EEOC v. Shell Oil Co., 466 U.S. 54, 68-69 (1984), the Ninth Circuit opined that the relevance standard encompasses “virtually any material that might cast light on the allegations against the employer.”  Id. at *5.

Applying Shell Oil, the Ninth Circuit found that the pedigree information was relevant to the EEOC’s investigation since conversations with other McLane employees and applicants who have taken the strength test “might cast light” on the allegations against McLane.  Id.  McLane argued that, given all of the other information it had produced, the EEOC could not show that the production of nationwide pedigree information was relevant to the Charge or its investigation under either a disparate treatment or disparate impact theory.  Id. at *6. The Ninth Circuit construed the District Court’s application of relevance to be a heightened “necessity” standard, and noted that the governing standard was “relevance,” not “necessity.”  Id.

The Ninth Circuit then found that the District Court erred when it held that pedigree information was irrelevant “at this stage” of the investigation.  Id.  Rejecting the District Court’s conclusion that the EEOC did not need pedigree information to make a preliminary determination as to whether use of the strength test resulted in systemic discrimination, the Ninth Circuit held that the EEOC’s need for the evidence—or lack thereof—did not factor into the relevance determination.  Id. at *6-7. While McLane had argued that the pedigree information was not relevant because the charge alleged only a “neutrally applied” strength test, which by definition cannot give rise to disparate treatment, systemic or otherwise, the Ninth Circuit rejected this approach, holding “[t]he very purpose of the EEOC’s investigation is to determine whether the test is being neutrally applied; the EEOC does not have to take McLane’s word for it on that score.”  Id. at *7.  Accordingly, the Ninth Circuit held that because the District Court based its ruling on an incorrect view of relevance, it necessarily abused its discretion when it held that the pedigree information was not relevant to the EEOC’s investigation.

The Ninth Circuit concluded by noting that on remand, McLane was free to renew its argument that the EEOC’s request for pedigree information was unduly burdensome.  Id. at *8. Further, explaining that it did not reach the issue in its original decision, the Ninth Circuit instructed that “[o]n remand, the district court should also resolve whether producing a second category of evidence — the reasons test takers were terminated — would be unduly burdensome to McLane.”  Id.  Accordingly, the Ninth Circuit vacated the District Court’s judgment and remanded for further proceedings.

Implications For Employers

As employers who are confronted with EEOC subpoenas may ultimately find themselves in a subpoena enforcement action, the McLane case is a must-follow in terms of what standard of review will be applied if those district court decisions are later reviewed.  The U.S. Supreme Court’s adoption of the more “hands off” abuse-of-discretion standard means that greater weight will be given to district court decisions.  Nonetheless, the Ninth Circuit’s ruling here illustrates that appellate courts may still be willing to overturn district court decisions to enforce or quash EEOC subpoenas depending on the circumstances.  The decision will also, no doubt, be cited by an emboldened EEOC as authority for its position that expansive pedigree information is relevant in a broad swath of cases.  Understanding these trends will provide useful guidance for employers when deciding if and how to challenge what often can be burdensome demands for information from the EEOC.

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

 

supreme courtSeyfarth Synopsis: As profiled in our recent publication of the 13th Annual Workplace Class Action Litigation Report, the U.S. Supreme Court’s rulings have a profound impact on employers and the tools they may utilize to defend high-stakes litigation. Rulings by the Supreme Court in 2016 were no exception.

Is The Supreme Court Pro-Worker Or Pro-Employer?

Over the past decade, the U.S. Supreme Court led by Chief Justice John Roberts increasingly has shaped the contours of complex litigation exposures through its rulings on class action and governmental enforcement litigation issues. Many of these decisions have elucidated the requirements for pursuing employment-related class actions. The decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), and the decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), are the two most significant examples. Those rulings are at the core of class certification issues under Rule 23. To that end, in 2016, federal and state courts cited Wal-Mart in 536 rulings in 2016; they cited Comcast in 216 cases.

Over the past several years, the Supreme Court has accepted more 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 and class action issues, and more cases accepted for review that are posed for rulings in 2017. The key class action decisions this past year in the Tyson Foods and Spokeo cases were arguably more pro-plaintiff and pro-class action than business-oriented or anti-class action.  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 and/or make proof requirements easier for plaintiffs.  Further, the Supreme Court 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 has 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 either pro-business or pro-worker on class actions.

Rulings In 2016

In terms of direct decisions by the Supreme Court impacting workplace class actions, this past year was no exception. In 2016, the Supreme Court decided seven cases five employment-related cases and two class action cases that will influence complex employment-related litigation in the coming years.

These rulings included two wage & hour cases, two statutory violation cases (under the Fair Credit Reporting Act (“FCRA”) and the Telephone Consumer Protection Act (“TCPA”)), two ERISA cases, and one EEOC case.  A rough scorecard of the decisions reflects three distinct plaintiff-side victories, defense-oriented rulings in three cases, and one toss-up.

Tyson Foods, Inc. v. Bouaphakeo, et al., 136 S. Ct. 1036 (2016)Tyson Foods involved review of a ruling where workers pursued class claims u14-1146_0pm1nder the FLSA and Iowa state law for unpaid work and overtime for time spent putting on and taking off hard hats, work boots, hair nets, aprons, gloves, and earplugs. The employer objected to class certification on a host of grounds, including that the variations in protective gear, the differences in the time to don and doff the gear, and the varying hours worked gave rise to individualized issues precluding class certification.  The workers proved their donning and doffing time and their hours over 40 hours per week based on expert testimony via a time and motion study that calculated average times donning and doffing. At trial the jury awarded $2.89 million to 3,344 class members, which the district court increased to $5.8 million with liquidated damages, and the Eight Circuit affirmed.  In a 6 to 2 decision, the Supreme Court answered the vexing “trial by formula” problem it touched upon in Wal-Mart, and determined that the representative evidence offered via statistics and expert testimony was appropriate in this case, and supported both class certification and the jury verdict for the class. The Supreme Court declined to craft a general rule governing the use of statistical evidence, or so-called representative evidence, in all types of class actions, although in general it elucidated when such evidence would be allowed in a class action and when class members can rely on statistical samples to establish their claims. For these reasons, more so than the other Supreme Court case in 2016, Tyson Foods was the Rule 23 workplace class action decision of the year.  The ruling opens a door that many thought the Supreme Court closed in Wal-Mart and Comcast, and provides plaintiffs’ counsel with a new theoretical approach for class certification. Most notably, the dissenters in Tyson Foods claimed that the Supreme Court had turned its back on Comcast by redefining and diluting the predominance standard for class certification under Rule 23(b)(3).

Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) – Widely considered the 13-1339dif_3m92other key class action ruling of the past Supreme Court term, Spokeo concerned whether people without an injury can still file class actions. The case involved whether a job applicant had the ability to bring a complaint against credit reporting firms under the FCRA, where the plaintiff alleged that a people search engine violated the FCRA when it reported he was wealthy and had a graduate degree; in reality, he was struggling to find work. The district court had dismissed the lawsuit because plaintiff lacked standing, and the Ninth Circuit reversed. In its 6 to 2 ruling, the Supreme Court held that the wrong analysis of standing had been undertaken, and it remanded the case for further findings. In so doing, the Supreme Court articulated that standing requires a showing of a “concrete injury” that is not necessarily synonymous with a tangible injury. Hence, certain types of intangible harms may be sufficient to satisfy standing requirements. The decision reflects that the Supreme Court’s class action jurisprudence has taken a more nuanced and measured approach toward constraints on the ability of representative parties to litigate class actions. By opening the door to more expanded standing principles, Spokeo is apt to subject employers to more litigation under statutes like the FCRA.

EEOC v. CRST Van Expedited, Inc., 136 S. Ct. 1642 (2016) – This case concerned the largest fee sanction award approximately $4.7 million ever issued against the EEOC. It arose from a systemic sexual harassment lawsuit that the agency lost for failing to meet pre-suit obligations relative to the claims of 67 female employees for whom the EEOC sued, but whose claims the Commission failed to investigate before filing suit. The dispute over legal fees arose when the employer subsequently secured a fee award for its expenditures in fighting the claims. The Eighth Circuit subsequently upended that award on the basis that the district court improperly ruled that it had to determine on an individual basis whether each of the 67 claims in question were frivolous or groundless (and as the employer’s victory on procedural grounds was not a victory on the merits). On further appeal to the Supreme Court, it unanimously held that a favorable outcome on the merits is not a prerequisite for an employer to recover fees against the EEOC. As a result, it remanded the case for an examination of the fee issue and resuscitated the employer’s quest to recover millions of dollars from the Commission. In so doing, it gave the EEOC a significant bench-slap over its arguments. While the decision dealt specifically with Title VII’s attorneys’ fee provision, it is likely that the attorneys’ fee provisions in many other statutes will be intercepted in a similar fashion.

Campbell-Ewald Co. v. Gomez, et al., 136 S. Ct. 663 (2016)Campbell-Ewald concerned whether a company can moot and defeat a class action brought under the TCPA by offering a settlement by way of a Rule 68 offer of judgment, and what happens to potential class actions when such proposals are accepted. In this case, defendant made the Rule 68 offer before plaintiff filed a motion for class certification, and it moved to dismiss the lawsuit as moot after plaintiff declined the offer. In a 6 to 3 ruling, the Supreme Court held that under basic contract principles, an unaccepted offer creates no lasting right or obligation, and plaintiff’s claims were not rendered moot. In so ruling, the Supreme Court eliminated a potential defense strategy that employers had used to eviscerate class actions with “pick off” offers to the named plaintiff.

Amgen, Inc. v. Harris, et al., 136 S. Ct. 758 (2016) – In this unanimous ruling, the Supreme Court reversed and remanded a breach of fiduciary duty claim under the ERISA on the grounds that ERISA fiduciaries that manage publically-traded employee stock investments in 401(k) plans need not overcome a presumption of prudence. In so ruling, the Supreme Court reaffirmed its ruling in Fifth Third Bank v. Dudenhoeffer, 134 S. Ct. 2459 (2014). The Supreme Court reversed on the basis that the Ninth Circuit imposed too low of a burden on plaintiffs when attempting to show that the ERISA fiduciaries should have done something to halt the decline in stock values.

Encino Motorcars, LLC v. Navarro, et al., 136 S. Ct. 2117 (2016) – This case involved interpretation of an exemption for service advisors at automobile dealerships who sued for unpaid overtime under the FLSA. The district court had dismissed the claim on the basis of an exemption for salesmen, partsmen, and mechanics under the FLSA, but the Ninth Circuit reversed on the basis of an interpretative regulation of the DOL in 2011 (that reversed the DOL’s position on the exemption without explanation). In a 6 to 2 ruling, the Supreme Court reversed the Ninth Circuit’s decision, holding that reliance on the DOL’s interpretative regulation lacked the force of law because it was arbitrary and capricious. The Supreme Court criticized the DOL’s position and instructed the Ninth Circuit to reinterpret the FLSA exemption without giving any deference to the DOL’s 2011 regulation.

Gobeille, et al. v. Liberty Mutual Insurance Co., 136 S. Ct. 936 (2016) – In this case, the Supreme Court held in a 6 to 2 ruling that a Vermont state law – that required the disclosure of payments relating to healthcare claims and information about healthcare services – was preempted by the ERISA to the extent the Vermont law applied to ERISA-governed plans. In so ruling, the Supreme Court articulated the contours of how the ERISA preempts state law attempts to regulate healthcare benefit issues.

The decisions in Spokeo, Campbell-Ewalt, and Tyson Foods are sure to shape and influence class action litigation in a profound manner relative to preemptive defense strategies and “pick-off” attempts, standing concepts, and statistical evidence for class certification and proof of class claims for damages. To the extent that extrinsic restrictions on class actions – i.e., limits on the ability of representative plaintiffs to litigate class actions, such as Article III standing concepts and the mootness doctrine – are relaxed or lessened (as in Spokeo and Campbell-Ewalt), class actions are easier to maintain and litigate. Further, Tyson Foods is certainly a setback for employers and reflects an approach to class certification that seems at odds with Wal-Mart and Comcast. To that end, one indication of their impact is the fact that after the Supreme Court’s rulings in these cases, lower federal and state courts cited Spokeo in 365 decisions, cited Campbell-Ewald in 185 decisions, and cited Tyson Foods in 104 decisions during the remainder of 2016.

Amgen, Navarro, Gobeille, and CRST Van Expedited are also apt to shape the future of workplace  litigation in the contexts of ERISA fiduciary duty claims, deference to DOL regulations in wage & hour litigation, ERISA preemption, and claims for breaches of statutory duty against the EEOC. While arguably defense-oriented rulings, they are not as significant for employers as Spokeo, Campbell-Ewalt, and Tyson Foods are for plaintiffs.

Rulings Expected In 2017

Equally important for the coming year, the Supreme Court accepted five additional cases for review in 2016 that are likely to be decided in 2017 that also will impact and shape class action litigation and government enforcement lawsuits faced by employers. Those cases include four employment lawsuits and one class action case. The Supreme Court undertook oral arguments on two of these cases in 2016; the other three will have oral arguments in 2017. The corporate defendants in each case have sought rulings seeking to limit the use of class actions or control government enforcement lawsuits.

NLRB v. SW General, No. 15-1251 – In this case, which was argued on November 7, 2016, the Supreme Court will determine whether an unfair labor practice charge was unauthorized due to the NLRB’s acting general counsel serving in violation of a federal statute in terms of NLRB procedure. The Supreme Court is apt to decide the scope of Presidential authority with executive agencies, the contours of federal labor law, and a blueprint for how future Administrations can exercise power over labor policies.

Microsoft v. Baker, et al., No. 15-457 – Although not an employment case, this case may well impact the ability of employers to defend class action litigation. It involves a consumer fraud class action where the district court denied class certification, which was reversed on appeal by the Ninth Circuit. The Supreme Court will determine the impact and implications in a class action when the named plaintiffs voluntarily dismiss their claims with prejudice while others in the class wish to proceed with the class litigation. This case is expected to be set for oral argument in 2017.

Czyzewski, et al, v. Jevic Holding, No. 15-649 –  Argued on December 7, 2016, this case involves the Worker Adjustment and Retraining Notification (“WARN”) Act and the interplay between worker rights under that statute and bankruptcy proceedings after a company allegedly violates the WARN Act. The Supreme Court likely will determine whether priority in distributing assets in bankruptcy may proceed in a manner that allegedly violates the priority scheme in the Bankruptcy Code. The case also may decide rules for priority in reorganizations and liquidations that impact employers and workers in economically challenged industries and organizations.

EEOC v. McLane Co., Inc., No. 15-1248 – In this case, the Supreme Court will examine whether a district court’s decision to quash or enforce a subpoena in an EEOC administrative enforcement proceeding should be reviewed de novo, or reviewed deferentially. The process of responding to or challenging an EEOC subpoena may become considerably more expensive if the Supreme Court sides with the Commission’s position, especially as the EEOC been exceedingly aggressive in pursuing systemic administrative investigations through liberal use of subpoenas for all sorts of employer data. This case is expected to be set for oral argument in 2017.

Advocate Health Care Network v. Stapleton, et al., No. 16-74 – In this case (a consolidation of three separate appeals), the Supreme Court will examine whether church-affiliated hospitals are exempt from the ERISA. The hospitals assert that their retirement plans are excluded from the ERISA’s coverage and that they should not face class actions over alleged breaches of fiduciary obligations and minimum funding requirements. This case is expected to be set for oral argument in 2017.

The Supreme Court is expected to issue decisions in these five cases in 2017.

Each decision may have significant implications for employers and for the defense of high-stakes workplace litigation.

The Key Decision Expected In 2017

On January 13, 2017, 3 cases were accepted for review that pose what may be the most important issue for employers presently before the Supreme Court on the legality of class action waivers in arbitration agreements. Those cases – NLRB v. Murphy Oil USA, Inc. (No. 16-307), Epic Systems Corp. v. Lewis (No. 16-285), and Ernst & Young, LLP v. Morris (No. 16-300) – will examine whether a class action waiver illegally interferes with the right of employees under the National Labor Relations Act to engage in concerted activity for their mutual aid or protection if the waiver precludes them from pursuing class or collective actions in any judicial forum.

Hanging in the balance is a litigation management tool that many employers have utilized with success to combat and minimize their exposure to class actions and collective actions.

Filling The Scalia Vacancy On The U.S. Supreme Court

Days out from the Presidential inauguration, the Supreme Court remains shorthanded after the death of Justice Antonin Scalia in February of 2016. The potential exists for 4-to-4 deadlocks on key issues. Given the timing of President Trump’s nomination for Justice Scalia’s successor, the Supreme Court is apt to be short one member until the late spring or potentially even longer given the politics and logistics of the confirmation process.

In terms of the impact of the successor to Justice Scalia, it is reasonable to assume that he or she will be conservative and cut more in the mold of the types of judges that President Trump described in his campaign in terms of the significance of the judicial process in general and the Supreme Court in particular. While the current ideological alignments on the Supreme Court are fragile, a “conservative” replacement of Justice Scalia would almost certainly preserve the current moderate-conservative approach to class action questions. That being said, Justice Scalia had an outsized influence on class action issues during his tenure on the Supreme Court. As illustrated by his opinions in Wal-Mart Stores, Inc. v. Dukes and Comcast Corp. v. Behrend, Justice Scalia advocated putting the spotlight on class action litigation, and the consistent thread of his opinions were to make class actions more difficult to certify and more challenging  to win. In sum, skeptics of class actions lost their strongest judicial ally, and his passing likely will weaken the intellectual championing of counter-points to a future rebound of class action jurisprudence at the Supreme Court.

For more in depth analysis of workplace class action trends, please click here to order Seyfarth’s 2017 Workplace Class Action Report eBook and here to download Chapter 1 on the 2017 Executive Summary/Key Trends.  Our annual webinar on the Report is now set for February 21, 2017, click here to register.

supremecourtBy Gerald L. Maatman, Jr., Pamela Q. Devata, Robert T. Szyba, and Ephraim J. Pierre

Seyfarth Synopsis: In deciding Spokeo v. Robins, the U.S. Supreme Court reaffirmed that plaintiffs seeking to establish that they have standing to sue must show “an invasion of a legally protected interest” that is particularized and concrete — that is, the injury “must actually exist.” Bare procedural violations are not enough.

Today, the U.S. Supreme Court issued its long awaited decision in Spokeo, Inc. v. Robins, No. 13-1339 (U.S. 2016), which we have been watching closely for its possible dramatic implications on the future of workplace class action litigation.

In a 6 to 2 opinion authored by Justice Samuel A. Alito, Jr., the Supreme Court held that the Ninth Circuit’s injury-in-fact analysis under Article III was incomplete. According to the Supreme Court, of the two required elements of injury in fact, the Ninth Circuit addressed only “particularization,” but not “concreteness,” which requires a plaintiff to allege a “real” and not “abstract” injury. Nevertheless, the Supreme Court took no position on the correctness of the Ninth Circuit’s ultimate conclusion: whether Robins adequately alleged an injury in fact.

Based on its conclusion, the Supreme Court vacated the Ninth Circuit’s ruling and remanded for further consideration consistent with the Opinion. Justice Thomas concurred, while Justice Ginsburg (joined by Justice Sotomayor) dissented.

Given the stakes and the subject matter, the ruling is a “must read” for corporate counsel and all employers.

The Case’s Background

This ruling is likely to have substantial impact on class action litigation overall, as we have discussed in our prior posts here, here, and here.

In Spokeo, the issues focused on the Fair Credit Reporting Act (“FCRA”), which requires that consumer reporting agencies (“CRAs”) follow reasonable procedures to assure maximum possible accuracy of its consumer reports (15 U.S.C. § 1681e(b)), issue specific notices to providers and users of information (1681e(d)), and post toll-free phone numbers to allow consumers to request their consumer reports (1681b(e)).

The purported CRA in this case was Spokeo, Inc. (“Spokeo”), which operates a “people search engine” — it aggregates publicly available information about individuals from phone books, social networks, marketing surveys, real estate listings, business websites, and other sources, which it organizes into comprehensive, easy-to-read profiles. Notably, Spokeo specifically states that it “does not verify or evaluate each piece of data, and makes no warranties or guarantees about any of the information offered . . .,” and warns that the information is not to be used for any purpose addressed by the FCRA, such as determining eligibility for credit, insurance, employment, etc.

In July 2010, Plaintiff Thomas Robins filed a putative class action alleging that Spokeo violated the FCRA because it presented inaccurate information about him. He alleged that Spokeo reported that he had a greater level of education and more professional experience than he in fact had, that he was financially better off than he actually was, and that he was married (he was not) with children (he did not have any). But beyond identifying the inaccuracies, he did not allege any actual damages. Instead, he argued that Spokeo’s alleged FCRA violation was “willful” and therefore he sought statutory damages of between $100 and $1,000 for himself, as well as for each member of the purported nationwide class.

The district court dismissed the case, finding that “where no injury in fact is properly pled” a plaintiff does not have standing to sue. In February 2014, the U.S. Court of Appeals for the Ninth Circuit reversed, holding that the “violation of a statutory right is usually a sufficient injury in fact to confer standing” and that “a plaintiff can suffer a violation of the statutory right without suffering actual damages.”

In its petition for certiorari, Spokeo posed the following question to the Supreme Court: “Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.” Spokeo highlighted a circuit split, as the Fifth, Sixth, and Seventh Circuits previously lined up with the Ninth Circuit’s approach, while the Second, Third, and Fourth Circuits generally disagreed and required an actual, concrete injury.

After being granted certiorari, Spokeo argued that the Ninth Circuit’s holding was inconsistent with the Supreme Court’s precedents, the Constitution’s text and history, and principles of separation of powers. More specifically, Spokeo argued that Robin’s bare allegations of FCRA violations, without any accompanying concrete or particularized harm, were insufficient to establish an injury in fact, and thus failed to establish Article III standing.

Robins responded that the Supreme Court’s precedent established that Congress may create private rights of action to vindicate violations of statutory rights that are redressable through statutory damages.

The U.S. Solicitor General also weighed in, appearing as an amicus in support of Robins, and argued that the Supreme Court should focus on the specific alleged injury — the public dissemination of inaccurate personal information — and, specifically, the FCRA. The Government argued that the FCRA confers a legal right to avoid the dissemination of inaccurate personal information, which is sufficient to confer standing under Article III.

The Supreme Court’s Decision

Writing for the majority on the Supreme Court, Justice Alito held that Ninth Circuit failed to consider both aspects of the injury-in-fact requirement under Article III when analyzing Robin’s alleged injury, therefore its Article III standing analysis was incomplete. Slip. Op. at *8. The Supreme Court determined that to establish injury in fact under Article III, a plaintiff must show that he or she suffered “an invasion of a legally protected interest” that is both “concrete and particularized.” Slip. Op. at *7. For an injury to be “particularized,” it “must affect the plaintiff in a personal and individual way.” Id. “Concreteness,” the Supreme Court found “is quite different from particularization.” Id. at *8. A concrete injury must “actually exist” and must be “real” and not “abstract.” Id.

The Supreme Court further stated that concreteness includes both easy to recognize tangible injuries as well as intangible injuries. Id. at 8-9. The Supreme Court instructed that when considering intangible injuries, “both history and the judgment of Congress play important roles.” Id. In particular, Congress may identify intangible harms which meet Article III’s minimum requirements. Id. Nevertheless, the Supreme Court cautioned that plaintiffs do not “automatically” meet the injury-in-fact requirement where the violation of a statutory right provides a private right of action. Id. Thus “Robins could not, for example, allege a bare procedural violation divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” Id. The Supreme Court also added that the “risk of real harm” may also satisfy the concreteness requirement, where harms “may be difficult to prove or measure.” Id.

Viewing the FCRA in light of these principles, the Supreme Court recognized that while Congress “plainly sought to curb the dissemination of false information by adopting procedures designed to decrease that risk . . .[,] Robins cannot satisfy the demands of Article III by alleging a bare procedural violation.” For example, the Supreme Court noted it would be “difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm.” Id. at * 11.

Justice Thomas concurred, reviewing the historical development of the law of standing and its application to public and private rights of action, finding the standing requirement a key component to separation of powers.

Justice Ginsburg, joined by Justice Sotomayor, largely agreed with the majority, but nevertheless dissented. She departed from the majority’s reasoning on the issue of concreteness, but based on the injury alleged, not on the fact that concrete harm wasn’t required. Id. at *3 (Ginsburg, J., dissenting). Under her analysis, Justice Ginsburg would have found that the nature of Robin’s injury was sufficiently concrete because of his allegation that the misinformation caused by Spokeo “could affect his fortune in the job market.” Id. at *3-5 (Ginsburg, J., dissenting).

Implications For Employers

Spokeo can be interpreted as a compromise – with some useful language and reasoning for employers to use in future cases. While the Supreme Court avoided a broader question of Congress’s ability to create private rights of action and other weighty separation of powers issues, it announced the proper analytic framework for assessing the injury-in-fact requirement under Article III. The Supreme Court provided some good news for employers, consumer reporting agencies, and other corporate defendants, as well as potential plaintiffs with respect to class action litigation under a variety of federal statutes, including the FCRA. In particular, the Supreme Court was clear that alleged injuries must be both particular and concrete, meaning that injuries must be “real” and not “abstract.” Thus, a mere procedural violation without any connection to concrete harm cannot satisfy the injury-in-fact requirement of Article III.

However, the Supreme Court may not have shut the door on lawsuits alleging intangible injuries based on violations of statutory rights. While the Supreme Court’s opinion today may discourage some consumer, workplace, and other types of class actions seeking millions in statutory damages, potential litigants will likely have to be more creative in how they frame alleged injuries tied to violations of statutory rights.

Spokeo also transcends the employment context, as the constitutional requirement of Article III applies in all civil litigation. Plaintiffs seeking to file lawsuits in other regulated areas, such as under ERISA, the Americans with Disabilities Act, as well as a host of other statutes are likewise affected by today’s decision. Without particularized, concrete injury, federal jurisdiction is beyond the reach of plaintiffs seeking statutory damages for technical violations.

thNB9IMGHGBy Julie G. Yap and Alison H. Hong 

In Arizona Ex Rel. Horne v. The Geo Group, No. 13-16081 (9th Cir. Mar. 14, 2016), the U.S. Court of Appeal for the Ninth Circuit vacated the district court’s summary judgment orders and reinstated a pattern or practice action brought by the Equal Employment Opportunity Commission and the Arizona Civil Rights Division against The Geo Group, Inc. (“Geo”).  Most significant is the Ninth Circuit’s ruling that the EEOC and the Division sufficiently conciliated its class claims in light of Mach Mining, LLC v. EEOC, 135 S. Ct. 1645 (2015).  Further, the Ninth Circuit held that Title VII’s 300-day limitations period starts to run from the date the first aggrieved employee files an agency charge and that, in an EEOC pattern or practice action, an aggrieved employee is not required to file a new agency charge for acts occurring after the reasonable cause determination if the claims are “like or reasonably related” to the initial charge.

In sum, the Ninth Circuit’s decision emphasized that the EEOC deserves “flexibility” and “discretion” to investigate and litigate claims with limited interference from the courts, and shows that Mach Mining, while helpful, is not a panacea for all overreaching agency conduct.

Background

On June 5, 2009, a female corrections officer, Alice Hancock, filed a charge of discrimination with the Arizona Civil Rights Division (“the Division”) against her employer The Geo Group, Inc. alleging gender-based discrimination and harassment as well as retaliation for reporting such conduct.  Id. at 7.  After agency investigations led to identification of other potential aggrieved employees, the Division issued a reasonable cause determination concluding Geo had violated Arizona state laws prohibiting discrimination, harassment, and retaliation against “Hancock and a class of female employees” at two correctional facilities operated and managed by Geo.  Id. at 8-9.  After conveying a settlement proposal to Geo and completing a conciliation session, the Division and the EEOC filed suit on behalf of Hancock and similarly situated employees at the two correctional facilities.  Id. at 10.  The District Court then granted Geo’s motions for partial summary judgment dismissing, in part, the claims of several employees who were not identified until after filing of the complaint on the basis that these individuals’ claims were not conciliated, and also, dismissing several employees who had not alleged acts within 300 days of the reasonable cause determination.  Id. at 11-12.

The Ninth Circuit’s Review And Decision

In reversing the District Court’s holding that the EEOC must identify and conciliate on behalf of each aggrieved employee prior to bringing a pattern or practice action, the Ninth Circuit began by analyzing the U.S. Supreme Court’s ruling in Mach Mining.  While recognizing that the EEOC’s pre-suit conciliation efforts are subject to judicial review, the Ninth Circuit emphasized the Supreme Court’s discussion on the “limited” and “relatively bare bones review” process, and further, reiterated that any analysis of good faith efforts would improperly extend such review.  Id. at 15-17.  The Ninth Circuit held that pre-suit conciliatory requirements are satisfied in an EEOC pattern or practice action if there have been attempts to conciliate “on behalf of an identified class of individuals.”  Id. at 18.  The Ninth Circuit refused to impose any additional requirements, such as identification of each aggrieved employee, on the grounds that the Supreme Court in Mach Mining did not require anything more.   Id. at 18-19.

The Ninth Circuit further reasoned that requiring conciliation on an individual basis would effectively bar recovery on behalf of those class members not yet identified at the time of filing suit, noting private litigants are able to do.  Id. at 19.  The Ninth Circuit recognized, however, that there may be limits where a class extends nationwide, but the investigation is based on less than a dozen employees.  Id. at 19 fn. 6.  Here, such limitation did not exist where there was investigation into multiple aggrieved employees in two facilities, the two facilities were identified in the reasonable cause determination and part of pre-suit conciliations efforts, and the pattern or practice action was limited in scope to the two facilities.  Id.  The Ninth Circuit additionally stated its holding is consistent with “the Supreme Court’s broad interpretation of the EEOC’s enforcement powers” and its prior acknowledgement of case law holding “the EEOC is not required to provide documentation of individual attempts to conciliate on behalf of each potential claimant in a [pattern or practice action].”  Id. at 19-20.

Next, the Ninth Circuit reversed the dismissal of employees who had not alleged acts within 300 days of the Division’s reasonable cause determination, holding that  the timeliness of other aggrieved employees’ claims in an EEOC pattern or practice action is calculated from 300 days prior to the first aggrieved employee’s charge, the same as for private litigants.  Id. at 24.  The Ninth Circuit further held that an aggrieved employee in an EEOC pattern or practice action who alleges unlawful conduct occurring after the reasonable cause determination is not required to file a new agency charge if the claim is “like or reasonably related” to the initial charge.  Id. at 27.  As such, the Ninth Circuit determined that the District Court’s per se exclusion of any discrimination or retaliation that occurred after the date of the reasonable cause determination was improper.  Id. at 28-29.

Implications For Employers

The Ninth Circuit’s ruling in The Geo Group, Inc. appears to be a win for the EEOC, but it is not without limits as the pattern or practice action against Geo dealt with a more limited class of alleged victims.  While the Ninth Circuit ruled that the EEOC does not need to conciliate on behalf of each aggrieved employee by name, it also noted there must be a sufficiently clear scope of the class of alleged victims, and further cautioned that any investigation must be related in scope to the actual litigation.  Time will show how far the EEOC tries to push the ruling in The Geo Group, Inc. as well as the Ninth Circuit’s interpretation of Mach Mining to broaden the scope of any future pattern or practice actions.

120px-US_DC_NorCal_svgBy Timothy F. Haley

A 2009 Department of Justice (“DOJ”) investigation of the employment and recruitment practices of a number of Silicon Valley technology companies resulted in DOJ lawsuits against seven companies, followed by consent decrees and numerous class actions brought by employees and former employees.  The plaintiffs claimed that their employers entered into agreements not to solicit one another’s employees and that these agreements unlawfully suppressed their compensation.  Several of the class actions were consolidated before Judge Lucy Koh in the U.S. District Court for the Northern District of California and resulted in a settlement totaling $435 million.  In Re High-Tech Employee Antitrust Litigation, No. 11-CV-02508, 2015 U.S. Dist. LEXIS 118051, at *12‑15 (N.D. Cal. Sept. 2, 2015) (“High-Tech”).  But more recently, Judge Koh dismissed a similar case brought against Microsoft on statute of limitations grounds.  Ryan v. Microsoft Corp., 14-CV-04634, 2015 U.S. Dist. LEXIS 158944, at *1‑2 (N.D. Cal. Nov. 23, 2015) (“Ryan”).  And now, less than 2 1/2 months later, a similar case brought against Oracle has met the same fate.  (We have previously blogged on the High-Tech litigation here, and on the Ryan case here.)  Garrison v. Oracle Corp., Case No. 14-CV-04592, 2016 U.S. Dist. LEXIS 13118, at *2‑3 (N.D. Cal. Feb. 2, 2016).

The Claims Against Oracle

Oracle was one of the technology companies that were the subject of the 2009 DOJ investigation.  However, the DOJ concluded its investigation of Oracle on October 29, 2014, without filing suit.  Id. at *7.  The underlying allegations in this case were very similar to those in the High-Tech and Ryan litigation – that Oracle entered into a number of secret gentlemen’s agreements with other technology companies not to solicit each other’s employees.  Id. at 7-13.  The claims asserted against Oracle were identical to the claims brought against Microsoft in Ryan – that Oracle violated:  (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 seqId., at *22-23.

The Statute Of Limitations Analysis

It was undisputed that a four-year statute of limitations applied to each of these claims, and the original complaint was filed on October 14, 2014.  Id. at *34.  The Court found that each of the three plaintiff’s claims accrued by 2009.  Thus, the applicable statutes of limitations expired in 2013, unless an exception to the default accrual rules or a tolling doctrine applied.  Id., at 45.

Plaintiffs raised the same five arguments for extending the statute of limitations that were raised by the plaintiffs and Ryan, and Judge Koh rejected them for the same reasons.  Statutory tolling during the pendency of the DOJ investigations did not apply because the DOJ never filed a complaint against Oracle.  Id. at *49-51. 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 *55-62. 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), and Plaintiffs failed to plead any affirmative acts of concealment.  Id. at *63-88.  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 *88‑92.  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 *92-96.

Dismissal With Prejudice

This was the Plaintiffs’ second chance to plead allegations sufficient to overcome the statute of limitations defense.  In dismissing Plaintiffs’ original complaint, Judge Koh warned that failure to cure the statute of limitations deficiencies would result in dismissal with prejudice.  Accordingly, the Court dismissed the complaint with prejudice.

Implications For Employers

As noted in our blog on the Ryan decision, Judge Koh, who reports say is being considered by the Obama administration to fill a vacancy on the Ninth Circuit, took a very favorable position for employers on the grounds necessary to plead a basis for extending the statute of limitations.  Judge Koh did not vary from that stance in this case.

 

9th-circuitBy Laura J. Maechtlen and Courtney K. Bohl

As our readers may recall, in November 2012, Judge G. Murray Snow of the U.S. District Court for the District of Arizona nixed a subpoena issued by the EEOC seeking employee pedigree information (name, address, telephone number and social security number), and information regarding the reasons for employee terminations. The court held that the EEOC did not need this information in order to determine whether the employer, McLane Company, Inc., allegedly violated Title VII. The EEOC appealed.

On October 27, 2015, the Ninth Circuit reversed and sustained the EEOC’s broad subpoena in EEOC v. McLane Company, Inc., Case No. 13-15126, 2015 U.S. App. LEXIS 187702 (9th Cir. Oct. 27, 2015). The Ninth Circuit held that employee pedigree information was relevant to the EEOC’s investigation and should be produced. Further, the Ninth Circuit held that information regarding termination reasons was also relevant to the investigation, and remanded the matter to the District Court to determine whether the production of this information would be unduly burdensome.

The Ninth Circuit’s opinion is a must read for employers, especially employers doing business in Ninth Circuit states (Alaska, Arizona, California, Idaho, Montana, Oregon and Washington). It gives the EEOC broad access to information during the course of an administrative investigation, even if such information is only tangentially related to the underlying charge. This decision will likely embolden the EEOC to demand direct contact information of employees, especially in systemic discrimination cases, thereby making the defense of such charges burdensome and expensive.

Background Facts

A McLane employee, Damiana Ochoa, filed a charge of discrimination against McLane. Ochoa alleged that when she tried to return to work after taking maternity leave, McLane informed her that she could not resume her position unless she passed a physical capability strength test. Id. at *2. Ochoa attempted the test three times. Id. Each time she failed, and, as a result, was terminated. Id.

The EEOC undertook an investigation into the charge, requesting certain information from McLane, including information on the strength test, and the employees who had been required to take the test. Id. at *4. McLane complied with most of the EEOC’s requests, but refused to disclose pedigree information of its employees and it’s the reasons it terminated employee test takers. Id. The EEOC filed a subpoena enforcement action against McLane seeking this information.

The District Court denied the EEOC’s request for this information and the EEOC appealed.

The Ninth Circuit’s Ruling

In considering whether the EEOC was entitled to employee pedigree information, the Ninth Circuit clarified that the EEOC is entitled to “virtually any material that might cast light on the allegations against the employer.” Id. at *9. Under this loose standard, the Ninth Circuit held that employee pedigree information was relevant to the EEOC’s investigation because such information could be used by the EEOC to speak with other employees who took the test and determine whether there was any truth to Ochoa’s allegations. Id. at *11-12.

The Ninth Circuit rejected all three of McLane’s arguments against the enforcement of the subpoena. Id. at *12-17. First, it rejected McLane’s argument that pedigree information was not relevant to the charge because Ochoa only alleged a disparate impact claim, not a disparate treatment claim. Id. at 12. The Ninth Circuit found such information was relevant, reasoning that Ochoa’s charge is framed “general enough” to support either theory. Id.

Second, it rejected McLane’s argument that pedigree information was not necessary to the EEOC’s investigation. The Ninth Circuit stressed that the governing standard was relevance, not necessity, and noted that the pedigree information was clearly relevant to Ochoa’s charge. Id. at +13.

Third, the Ninth Circuit rejected McLane’s argument that pedigree information was not relevant because the strength test was neutrally applied, which, McLane argued cannot, by definition, give rise to disparate treatment, systemic or otherwise. Id. at *15. The Ninth Circuit reasoned that even if the strength test applied to everyone, the test still could be applied in a discriminatory manner. Id. at *15-16. For example, McLane could fire the women who failed the test but not the men who failed. Id.

Finally, the Ninth Circuit turned to the issue of whether the EEOC was entitled to the reasons McLane terminated test takers. Id. at *17-18. Although it determined that this information relevant to the EEOC’s investigation, it noted that McLane did not have to produce this information if it would be unduly burdensome. Id. The Ninth Circuit thus remanded this issue to the District Court for further consideration.

Implication For Employers

The Ninth Circuit’s opinion broadens the scope of information the EEOC may receive when investigating a charge, requiring that a request only be somehow relevant to a charge — quite a loose standard. While employers should continue to object to EEOC requests on the bases of relevance and over breadth, employers should also “tee-up” their arguments that compliance with a request or subpoena is unduly burdensome.

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

9th-circuitBy Christopher M. Cascino and Gerald L. Maatman, Jr.

In Baker v. Microsoft Corp., No. 12-35946, 2015 U.S. App. LEXIS 4317 (9th Cir. Mar. 18, 2015), the U.S. Court of Appeals for the Ninth Circuit considered whether to adopt a rule creating a principle of comity between different federal district courts under which denial of class certification in one district court would create a rebuttable presumption in other district courts that denial of class certification was the correct result.  While the Ninth Circuit did not decide the issue explicitly in this non-workplace class action, employers nonetheless can use this proposed principle when attempting to defeat class or collective action certification bids in federal court where similar class or collective actions brought in other federal district courts have been denied certification.

Case Background

The plaintiffs brought a putative class action against Microsoft, claiming that Microsoft’s Xbox had a design defect.  Id. at 3-4.  Microsoft moved to dismiss the class allegations, and the district court granted that motion.  Id. at 3.

The district court found that a putative class action had been filed against Microsoft in another district court with claims similar to those in the Baker action.  Id.  The district court then decided to apply the principle of comity between federal district courts as adopted by the American Law Institute in 2010.  Id. at 10.  Under this principle of comity, “a prior denial of class certification on the same subject matter by a different district court judge [is] given a rebuttable presumption of correctness.”  Id.  Finding that the Baker plaintiffs had not overcome this rebuttable presumption of correctness, the district court dismissed the class allegations.  Id. Plaintiffs subsequently appealed.

Ninth Circuit’s Opinion

The Ninth Circuit did not decide whether the principle of comity should apply to class actions filed in different federal courts.  Rather, the Ninth Circuit found that the prior putative class action on which the district court relied used a legal standard that had been overruled by the Ninth Circuit.  Id. at *20-21.  It thus found that the district court’s decision was erroneous regardless of whether the comity principle were valid.  Id. at 21.

In a concurring opinion, Judge Carlos T. Bea persuasively argued that the Ninth Circuit should adopt the principle of comity rather than leaving the question for another day.  Id. at 22.  Judge Bea reasoned that “whether or not the class is certified is usually the most important ruling in such a case; once a class is certified, plaintiffs who brought claims of even dubious validity can extract an ‘in terrorem’ settlement from innocent defendants who fear the massive losses they face upon an adverse jury verdict.”  Id. at 31 (citing AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1752 (2011)).  He pointed out that “[i]n light of the minimal costs of filing a class complaint, an obvious strategy suggests itself: keep filing the class action complaint with different named plaintiffs until some judge, somewhere, grants the motion to certify.  So long as such a decision is reached while the plaintiffs who have not yet filed are numerous enough to justify class treatment, the plaintiffs will have a certified class that they can use to extract an in terrorem settlement.”  Id. at 32.

Balancing this concern against Smith v. Bayer Corp., 131 S.Ct. 2368 (2011), in which the Supreme Court held that individuals who are not before a district court cannot be bound by its judgment, Judge Bea asserted that there was a need to create a rule that would provide district courts “a way to clear their dockets of questionable successive class certification requests, while ensuring that putative class members who have unearthed new evidence or new law in favor of certification, or clear error in the earlier ruling, not be foreclosed by the failed efforts of their predecessors.”  Id. at 34.  He therefore proposed adopting a rule whereby there would be “a presumption of correctness to earlier denials of certification that can be rebutted by a showing of changed factual or legal circumstances, or earlier clear error.”  Id.  Judge Bea then applied this rule and held that the district court erred in dismissing the class claims in Baker because there had been a change in the law after the case the district court in Baker relied upon was decided.  Id. at 36.

Implications For Employers

While not a workplace class action, this ruling provides employers with a potential argument to combat successive class or collective actions.  Even though the principle of comity between different federal district courts has not yet been adopted – or rejected – by the federal circuits, it has been adopted by the American Law Institute and endorsed by Judge Bea of the Ninth Circuit.  In addition, Judge Bea’s excellent analysis of why comity should be adopted should prove helpful for employers crafting their own arguments encouraging courts apply the principle.  With this argument now available, we expect the issue to be decided in one of the federal courts of appeal in the near future.  Stay tuned.

By Eric M. Lloyd and Laura J. Maechtlen 

Late last week, plaintiffs in the U.S. District Court for the Northern District of California felt the ripple effects of the U.S. Supreme Court’s landmark decisions regarding same-sex marriage in United States v. Windsor and Hollingsworth v. Perry.

In Dragovich v. U.S. Dep’t of the Treasury, et al., No. C-10-01564 (N.D. Cal. Dec. 4, 2014), the Judge Claudia Wilken dismissed the class claims brought by plaintiffs seeking long-term care benefits for their same-sex domestic partners since any barriers precluding them from obtaining coverage also applied to heterosexual couples.

The ruling is important for all employers involved in workplace class action litigation.

Background To The Ruling

As of the date the Dragovich litigation started, same-sex spouses and registered domestic partners were ineligible to receive long-term care benefits under the California Public Employees’ Retirement System pursuant to the Health Insurance Portability and Accountability Act, 26 U.S.C. § 7702B(f) (“HIPAA”). The HIPAA, in turn, excluded such individuals from coverage under state-run benefits plans since it restricted benefits for spouses to heterosexual married couples pursuant to the Defense of Marriage Act, 1 U.S.C. § 7 (“DOMA”), and, omitted unmarried couples from eligibility for benefits. The plaintiffs, who are public employees of the State of California, thus sought long-term care benefits for their same-sex spouses and registered domestic partners. The Court certified the class in June 2011, and then granted summary judgment in the plaintiffs’ favor in May 2012. The defendants appealed the Court’s order granting summary judgment thereafter.

The Northern District of California’s recent rulings in Dragovich were prompted by developments that arose after the plaintiffs prevailed on summary judgment. In July 2013, the U.S. Supreme Court ruled that the DOMA’s restriction of the institution of marriage to heterosexual unions was unconstitutional in United States v. Windsor, 570 U.S. ___ (2013). On the same day as the Windsor decision, the Supreme Court also issued its ruling in Hollingsworth v. Perry, 570 U.S. ___ (2013), in which it declined to disturb the California Supreme Court’s ruling that the state’s ban on same-sex marriage was unconstitutional. Following the companion Windsor and Perry rulings, the Ninth Circuit vacated the Northern District of California’s grant of summary judgment in favor of the domestic partner plaintiffs and remanded the case for further consideration. The Ninth Circuit also dismissed the appeal as it applied to the plaintiffs involved in same-sex marriages, since the DOMA no longer operated to exclude same-sex spouses from eligibility for benefits.

The Court’s Ruling

On remand, the Judge Wilken granted the Federal and State defendants’ cross-motions for summary judgment as to the claims brought by plaintiffs involved in same-sex domestic partnerships. While the HIPAA still excluded domestic partners from eligibility for coverage under state-run plans, the Court held that the plaintiffs’ equal protection and substantive due process claims failed because the law impacted same-sex and heterosexual couples involved in a registered domestic partnership equally. Because same-sex couples in California could choose to marry following Perry, and, since the DOMA no longer restricted eligibility for benefits to heterosexual unions after Windsor, the barriers to benefits faced by all class members mirrored those faced by individuals involved in heterosexual domestic partnerships. The plaintiffs argued that couples involved in same-sex domestic partnerships faced barriers to marriage not faced by heterosexual couples, but the Court concluded that this argument was speculative and too individualized for resolution in a class action. The Court then denied the plaintiffs’ motion for class notice, since there was no on-going constitutional violation following Perry and Windsor.

In tandem with its summary judgment order, the Court denied the plaintiffs’ motion for additional remedies, which sought an order permitting class members to purchase benefits for the premiums they would have paid at the time they originally sought to enroll their same-sex partners. The Court held that providing the requested discounts would require complicated individualized inquiries which were not suitable for a class action, and, in any event that prospective relief was not available in the absence of an ongoing constitutional violation. The Court also denied the plaintiffs’ request for leave to file a supplemental complaint adding claims for alleged Title VII violations since such claims would necessarily be premised on multiple, complicated individualized inquiries.

Implications For Employers

Windsor and Perry were expected to unleash a cascade of rulings defining the rights of same-sex couples, as predicted in our prior blog postings hereDragovich is the latest indicator of the impact of these cases. The Court’s ruling that heterosexual and same-sex registered domestic partnerships in California are on equal footing is likely to impact employers down the line. Dragovich also provides employers seeking summary judgment of class claims with some nice language holding that speculative, individualized claims cannot be resolved in a class action.