By James M. Hlawek, Shireen Wetmore, Gena Usenheimer, and Richard L. Alfred

Seyfarth Synopsis: Today the Supreme Court issued a 5-4 decision in the Lamps Plus, Inc. v. Varela class action arbitration case.  The holding and rationale are important to employers because the Court decisively ruled that class arbitration “fundamentally” changes the nature of the “traditional individualized arbitration” envisioned by the Federal Arbitration Act and, for that reason, requires an express agreement of the parties to be compelled. In so ruling, the Court rejected the basis of the Ninth Circuit’s contrary ruling, which had found the arbitration agreement at issue to be ambiguous and, applying California state contract law that contractual ambiguities should be construed against the drafter, held that the agreement allowed for class arbitration. Relying on its prior class action arbitration decisions, the Court found that such an approach is “flatly inconsistent with the ‘foundational FAA principle that arbitration is a matter of consent.’” How this part of today’s decision will impact Plaintiffs’ efforts to use state laws to invalidate arbitration agreements will undoubtedly be the subject of future litigation, but it is now clear that courts can no longer order class arbitration unless there is an arbitration agreement expressly authorizing it. 

What Did The Supreme Court Hold?

The Supreme Court held today that courts cannot order an arbitration to be conducted on a class-wide basis unless there is an arbitration agreement that expressly authorizes class arbitration. The Supreme Court previously held in its Stolt-Nielsen decision that a court may not compel class arbitration when an agreement is “silent” on the availability of such arbitration. Now the Supreme Court has gone a step further. Courts cannot compel arbitration when an arbitration agreement is ambiguous about the availability of class arbitration.

The parties — Lamps Plus and Varela, an employee of Lamps Plus — had an arbitration agreement that was ambiguous about the availability of class arbitration. Certain phrases, particularly the use of “I” and “my” throughout the agreement, seemed to contemplate purely individual arbitration. Other phrases, such as one stating that “arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings relating to my employment,” the employee argued, were broad enough to suggest class arbitration. The employee sued Lamps Plus on behalf of a class of employees whose personal information had allegedly been compromised.

The Ninth Circuit affirmed the district court’s order compelling not individual arbitration, as the company had sought, but class arbitration. In deciding whether to compel class arbitration, the Ninth Circuit relied on California state law principles in applying a doctrine know as contra proferentem, which means that ambiguous terms in a contract should be construed against the drafter. In applying this doctrine, the Ninth Circuit found that the ambiguous terms of the parties’ agreement should be interpreted against Lamps Plus — the drafter of the agreement — and in favor of the employee, who argued for class arbitration.

The Supreme Court reversed the Ninth Circuit’s decision with five justices joining in the opinion. Relying on its past decisions in Stolt-Nielsen, Concepcion, and Epic Systems, the Court made clear that class arbitration “fundamentally changes” the nature of “traditional individualized arbitration” envisioned by the Federal Arbitration Act in several ways, including making the process slower, more costly, and “more likely to generate procedural morass than final judgment.” Because arbitration under the Federal Arbitration Act is strictly a matter of the parties’ consent, the Court found that applying contra proferentem to allow class arbitration under an ambiguous agreement is “flatly inconsistent with the ‘foundational FAA principle that arbitration is a matter of consent.’”  The Court, therefore, found that the Ninth Circuit decision ordering class arbitration was improper and reversed.

No Decision On Who Should Decide Whether An Agreement Allows For Class Arbitration  

In a footnote, the Court stated that it was not deciding whether the availability of class arbitration is a “question of arbitrability” that is presumptively for courts (rather than arbitrators) to decide. The Court pointed out that the parties had agreed that a court should decide the issue, and therefore concluded that the question was not at issue. Thus, while every circuit court that has addressed the issue has found that the availability of class arbitration is a “question of arbitrability” for courts to decide in the absence of an express agreement to the contrary, the Supreme Court still has not decided the issue.

What Does The Lamps Plus Decision Mean For Employers?

The decision is an important victory for employers. Courts can no longer order class arbitration under the Federal Arbitration Act unless the employers’ arbitration agreement unambiguously authorizes class arbitration. Under the Lamps Plus decision, employers no longer face the risk that ambiguous phrases in their agreements will lead to class arbitration. Only express agreements can lead to class arbitration. While many employers have revised existing arbitration agreements or adopted new ones since Epic Systems that include express class arbitration waivers, those employers with older clauses using generic language to the effect that all employment disputes are subject to arbitration benefit from today’s opinion.

The decision did not, however, close the door on future litigation as far as the availability of class arbitration. Plaintiffs will likely continue attempts to use principles of state contract laws to invalidate arbitration agreements. Lamps Plus, however, should significantly narrow the successful use of such laws to the extent they “target arbitration either by name or by more subtle methods…” In this light, even general contract principles such as unconscionability cannot stand in the way of arbitration enforcement if they over-ride the “foundational FAA principle that arbitration is a matter of consent.”

Additionally, Justice Ginsburg argued in her dissenting opinion that Congress should act to “correct” the elevation of the FAA over “the rights of employees and consumers” to bring class actions. Congress could, therefore, someday pass legislation that would make class arbitration more widely available.

Thus, despite the fact that the Lamps Plus decision makes it less likely that employers will face class arbitration, we continue to urge employers to have their employment agreements reviewed by experienced counsel and revised consistently with this and prior Supreme Court opinions.

By Gerald L. Maatman, Jr. and Alex W. Karasik

Seyfarth Synopsis:  A federal district court in Arkansas recently denied an employer’s motion for summary judgment on two EEOC-initiated ADA claims – in EEOC v. Crain Automotive Holdings LLC, No. 4:17-CV-627, 2019 U.S. Dist. LEXIS 62513 (E.D. Ark. Apr. 11, 2019) –  for failure to provide a reasonable accommodation and discharge based on disability, following a supervisor’s comments to an employee that “it was not working out” and to take care of herself after the employee’s hospitalization.  Id. at *1. For employers and management personnel, this ruling illustrates how courts might find seemingly innocuous comments to be direct evidence of discrimination, thus raising the stakes in ADA litigation initiated by the EEOC.

Case Background

In EEOC v. Crain Automotive Holdings LLC, an employee of Crain who suffered from anxiety, depression, and panic attacks began experiencing chest pains and went to the emergency room, fearing she was having a heart attack.  Id.  After two days of treatment, she ultimately reported back to work.  Upon her return, she began experiencing a panic attack and left work, after she emailed her supervisor.  When she returned to work a few days later, she met with two supervisors and was terminated.  According to the employee, the supervisors told her that “it was not working out” due to her health problems and that she needed to take care of herself.  Id.

The EEOC brought a lawsuit on behalf of the employee alleging that Crain violated the Americans With Disabilities Act, as amended by the Americans with Disabilities Act Amendments Act of 2008 (“ADA”) because it (1) failed to provide a reasonable accommodation for the employee, and (2) that it discharged her because of her disabilities.

Crain moved for summary judgment on both of the EEOC’s claims, arguing that: (i) the employee was not disabled under the ADA; (ii) even if the employee was disabled, she could not have been fired because of her disability since Crain did not know about it; and (iii) the EEOC had no direct evidence of discrimination, and under the McDonnell-Douglas framework, the disability claim could not survive.

The Court’s Decision

The Court denied Crain’s motion for summary judgment on both of the EEOC’s claims. First, the Court rejected Crain’s argument that the employee was not disabled within meaning of the ADA, noting that she had been diagnosed with anxiety, depression, and panic attacks. Id. at *4-5. Crain supported its position by arguing that she had been able to perform other demanding activities, such as handling her parents’ estates, and further noted that she did not have constant panic attacks. The Court rejected Crain’s position, holding that a reasonable jury could find that the employee was disabled within the meaning of the ADA based on her testimony regarding the difficulty caused by her impairments. Id. at *6.

Crain further argued that even if the employee was disabled, she could not have been fired because of her disability since Crain did not know about it. Id. at *6-7. In response, the EEOC presented the following evidence: on Tuesday, the employee told her supervisor she had experienced chest pains the day before; on Wednesday, the employee told her supervisor she had anxiety, depression, and had suffered a panic attack; on Friday, the employee emailed her supervisor before leaving work, saying “I can’t do this” because she was “still hurting too bad,” and further, she emailed another supervisor explaining that she had had a heart catheterization, which was supported by a doctor’s note attached to that email. Id. at *7. The Court held that taking all these facts as true, a reasonable jury could infer that at the time the employee was fired the following week, Crain knew about her anxiety, depression, and panic attacks.

Finally, Crain argued that the EEOC had no direct evidence of discrimination, and under the McDonnell-Douglas framework, the disability claim could not survive. The Court noted that when the employee met with two supervisors in order to discuss why she had left work early the previous Friday, she was terminated. The employee testified that at this meeting, a supervisor told her that “due to [her] health, it wasn’t going to work out and [she] should take time for [her]self.” Id. at *8. The Court held that this comment was direct evidence of discrimination, as opposed to falling within the categories of “stray remarks in the workplace, statements by non-decision-makers, and statements by decisionmakers unrelated to the decisional process,” which would have precluded the comments from being considered direct evidence of discrimination. Id. at *9 (citation omitted). The Court further held there was no reason to suspect that the suggestion that the employee should take care of her health or take time for herself was made “with the intent of attempting to preserve and promote” her, as she was fired in the same conversation. Id. Accordingly, the Court denied Crain’s motion for summary judgment as to the discriminatory discharge claim.

Turning the EEOC’s failure to accommodate claim, the Court noted that the employee emailed a doctor’s note to a supervisor, and that the doctor’s note stated that she needed three weeks off work. The Court held that because Crain did not follow up whatsoever on the recommendation contained in the doctor’s letter before firing the employee, the EEOC generated a genuine dispute of fact on whether the employee requested an accommodation  Accordingly, the Court denied Crain’s motion for summary judgment as to the failure to accommodate claim.

Implications For Employers

This ruling serves as cautionary tale for employers regarding both the handling of employee health issues and comments made by supervisory personnel during terminations. In instances where employees present doctors’ notes, as was the case here, employers must be diligent to review those and properly provide any necessary accommodations.

Further, although the comments made during this employee’s termination – “it wasn’t going to work out” and “[she] should take time for [her]self” may seem innocent in nature – the Court here analyzed those comments in the context of the employee’s condition and recent attendance history, and found that such remarks constituted direct evidence of discrimination. Id. at *8-9.  Employers should thus be prudent to educate supervisors and other relevant personnel about carefully selecting their words during termination and disciplinary situations, especially in instances involving health issues.

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

By: Michael Jacobsen, Christopher DeGroff, and Gerald L. Maatman, Jr.

Seyfarth Synopsis:  On April 10, 2019, the EEOC released its comprehensive enforcement and litigation statistics for Fiscal Year 2018.  The release arrived a few months later than usual – likely due to the recent government shutdown – but still packed a punch in several respects, including to the back-drop on retaliation and sex discrimination charges in the midst of the #MeToo movement, the number of merits lawsuits filed, and significant monetary recoveries, as well as a reduced charge inventory.  It is a must-read for all employers.

On April 10, 2019, the EEOC released its comprehensive enforcement and litigation statistics for Fiscal Year 2018 (available here).  In addition to enforcement and litigation activity, the data breaks down charge statistics by allegation and state – showing which charges are being filed the most and where.  Although the dip in total charges filed certainly stands out, so does the prominence of retaliation and sex discrimination charges in the #MeToo era.  The statistics are somewhat of a “report card” on the Commission’s activities, and also illustrates the continued increase in the number of lawsuits filed by the EEOC overall, as well as the number of systemic lawsuits filed specifically, and touts the substantial monetary recoveries that the EEOC continues to reel in from employers.  The data also mark the EEOC’s accomplishments in reducing its charge inventory.

Charges Are Down Overall

In total, 76,418 charges were filed in FY 2018.  Not only is this down from 84,254 charges in FY 2017, but FY 2018 saw the third fewest charges filed for all fiscal years going back to FY 1997 according to the EEOC’s data, above only FY 2006 (with 75,768 charges) and FY 2005 (75,428).  Further putting FY 2018’s drop to 76,418 charges in perspective, the number of charges filed exceeded 80,000 every other year starting in FY 2007, by 8,000 to 19,000 in most of them.

Consistent with this overall decline, there was a decrease in almost every category of charges in FY 2018 from FY 2017, with the exceptions of some modest increases in Equal Pay Act and genetic information charges at the very bottom of the list.  The category that decreased the most was race, by 3,928 charges – or almost 14% – from FY 2017 to FY 2018.

While generally down, however, these numbers are still sizable.  And outreach to the agency was consistent with prior years, as well, with the EEOC reporting that it addressed 519,000 calls to its toll-free number and more than 200,000 inquiries to its field offices in FY 2018, roughly in the ballpark of 540,000 calls and 155,000 inquiries in FY 2017, respectively.

Texas And Florida Are Still Hot, With California Getting Warmer

Looking at the states where the most charges were filed, the hot spots largely remained the same in FY 2018 as in FY 2017.  In fact, 9 out of the top 10 states in FY 2017 also made the cut for FY 2018, except for Alabama knocking Tennessee out of the number 10 spot. As in FY 2017, Texas (with 7,482 charge receipts) and Florida (with 6,617 charge receipts) were the top two states for charges in FY 2018.

Texas and Florida should come as no surprise, given their relative populations according to the most recent census data (found here). But population is not everything.  For example, Georgia (at number 4) surpasses states with higher populations, and Illinois and Pennsylvania each have more filings than New York.  And, although one might expect California to be number one given that it is the most populous state, its strong state discrimination statute tends to claim charges that may otherwise have been filed with the federal agency.  Nevertheless, while the top 10 list on the whole was fairly static from the prior fiscal year, California was a notable exception, leaping from having the sixth most charges filed in FY 2017 to the third most charges filed in FY 2018.

Retaliation Charges Remain In First, With Sex Discrimination A Notable Second

In total, 39,469 retaliation charges were filed with the EEOC in FY 2018.  As has been the case for the past five years, this made retaliation the most frequently filed charge in FY 2018.  Also noteworthy, retaliation charges crept over the 50% marker in FY 2018, continuing a steady annual increase from 42.8% of the total charges filed in FY 2014.

Behind retaliation were sex, disability and race charges, each approximately 32% of the total charges filed with the EEOC.  (As the EEOC notes, the percentages total more than 100 because some charges allege multiple bases.)

Sex discrimination charges (which would include pregnancy discrimination, gender discrimination, and sexual harassment) were particularly notable in that they edged out disability and race charges by a tenth of a percent to claim the number-two spot, after being the fourth most frequently filed charge in FY 2017.  Breaking down the data for sex charges further, there were 7,609 sexual harassment charges filed with the EEOC in FY 2018, making for a sizable jump of 13.6% over the prior fiscal year.

No doubt, these trends in sexual discrimination and retaliation charges were fueled by the “significant impact of the #MeToo movement,” as noted by Acting Chair Victoria A. Lipnic.  Indeed, the EEOC’s commitment in this area has not wavered in light of the increased visibility of workplace sexual harassment resulting high-profile media coverage in 2018.  As reported previously, the 41 sexual harassment lawsuits filed by the EEOC in FY 2018 marked a 5-year high.  And the EEOC also reported a total recovery of $56.6 million for alleged victims of sexual harassment in FY 2018.

EEOC Keeping Its Foot On The Gas

Overall, the statistics show that the EEOC filed 199 merits lawsuits in FY 2018, up from 184 merits lawsuits filed in FY 2017.  While not as dramatic a spike from the year before – in which the EEOC more than doubled the number of merits lawsuits it filed compared to the prior fiscal year – the appreciable growth in FY 2018 on top of that jump should not be overlooked.  The EEOC reports that 117 of those lawsuits were on behalf of individuals, 45 were non-systemic suits with multiple victims, and another 37 were systemic claims.

The EEOC labels a case as “systemic” if it “has a broad impact on an industry, company or geographic area.”  As such, these cases pose heightened exposure.  In terms of percentages, systemic lawsuits accounted for about 18.5% of the total number of filings, which is consistent with prior years (16% of all merits lawsuits in FY 2017 and 20% in FY 2016).  Looking at the numbers, however, the 37 systemic lawsuits filed in FY 2018 was up from 30 that the EEOC filed in FY 2017, 18 in FY 2016 and 16 in FY 2015.  As with the number of merits lawsuits filed, the number of systemic lawsuits may not have risen quite as dramatically as it did in FY 2017.  Nevertheless, employers should pay attention as the number continues to rise in FY 2018 even in the wake FY 2017’s spike.  Clearly, the EEOC is not shying away from pursuing these “bet-the-company” cases.

The EEOC boasted substantial recoveries to boot.   Specifically, the EEOC secured more than half a billion dollars ($505 million) in total relief for alleged discrimination victims in FY 2018.  This marks a substantial increase from $484 million in FY 2017 and $482.1 million in FY 2016.

Bringing Down The Backlog

Another priority of the EEOC in recent years has been reducing the large backlog of pending charges, which had been a longstanding issue for the agency.  In FY 2018, the EEOC resolved 90,558 charges.  This was down from 99,109 charges resolved in FY 2017 and 97,443 charges in FY 2016.  Nevertheless, the EEOC still decreased its charge inventory by 19.5%, to 49,607 in FY 2018, following up on FY 2017, in which the EEOC decreased its charge inventory by 16.2% to 61,621.  Indeed, as Acting Chair Lipnic noted for FY 2018, the data reflected the “lowest inventory of private sector charges in a dozen years.”  The EEOC attributed its success in this area to new strategies for prioritizing charges and resolving them more efficiently, and with the assistance of enhanced technology.

Implications For Employers

Despite the dips in overall charges filed, the EEOC’s enforcement efforts remain robust, and the EEOC continues to get results, as demonstrated by its recovery statistics.  And, by reducing its backlog, the EEOC is freeing up its resources for further enforcement efforts.  As noted in our other reports, clearly the EEOC is aggressively pursuing its strategic goals under the current administration.  Employers should keep an eye on these statistics, especially with retaliation and sex discrimination issues firmly in the forefront.  And, by continuing to set the culture in their workplaces through leadership and accountability, along with sound human resources practices such as sharp written policies, comprehensive training and robust response protocols, employers can guard against these issues, which clearly are not going away.

By: Gerald L. Maatman, Jr., and Christina M. Janice

Seyfarth Synopsis: On March 29, 2019, in Ahad v. Board of Trustees of Southern Illinois University, et al., Case No. 15-CV-3308 (C.D. Ill. Mar. 29, 2019), Judge Sue E. Myerscough of the U.S. District Court for the Central District of Illinois decertified a collective action under the Equal Pay Act involving a group of female physicians.  Although Plaintiff alleged that she and a class of female physicians employed by Defendants were paid less than male counterparts for similar work under Defendants’ centralized Compensation Plan, the Court found that the individual physicians who opted-in to the collective action had specialized practices, job duties, and compensation that required too many individualized inquiries, and as a result, they could not maintain a collective action. The decision is an important read for all corporate counsel focused on equal pay compliance and litigation.

Background

In October 2015, a physician employed by Southern Illinois University and SIU Physicians & Surgeons, Inc. (“Defendants”) brought a class and collective action against Defendants alleging that she and other female faculty physicians working for Defendants were paid substantially lower compensation than male physicians for the same or similar work, in violation of the Equal Pay Act and Illinois Equal Pay Act, Title VII, and the Illinois Human Rights Act.  Central to the claims of Plaintiff and the three other physicians opting-in to the litigation (“Plaintiffs”) were contentions that all female faculty physicians were required to perform similar core duties, and that all were compensated based on the use of a centralized “Compensation Plan” administered by Defendants.  Initially, the Court conditionally certified Plaintiffs’ Equal Pay Act claim as a collective action under § 216(b) of the Fair Labor Standards Act, but later denied Plaintiffs’ Rule 23 motion for class certification under the Illinois Equal Pay Act, Title VII and the Illinois Human Rights Act, for failure to show commonality and typicality of claims.

Defendants subsequently moved to decertify the collective action under § 216(b), arguing that Plaintiffs were not similarly-situated, that individual inquiries predominated the litigation, and that Plaintiffs had not identified a common policy or practice responsible for the alleged unequal pay.

The Court’s Ruling

The Court agreed with each of the Defendants’ contentions, and ordered decertification of the collective action.  While Plaintiffs argued that the Court should view their positions with a high level of generality in that all members of the collective action performed core duties of administration, teaching, research and service, the Court agreed with Defendants’ argument that in decertification proceedings, it is proper to examine more closely the similarities and differences in job titles and duties, work locations, supervision, and compensation.

Applying this level of scrutiny, the Court found that the four Plaintiffs each worked in different medical disciplines, such as bariatric surgery, colon and rectal surgery, family practice and osteopathy.  Each Plaintiff also worked in one of several faculty positions in one of two different departments, each with its own duties, and each requiring different time commitments in the areas of administration, teaching, research, and service.  Furthermore, each department was supervised by a different department chair responsible for hiring and compensation decisions.

The Court also found that compensation decisions were based on a variety of rated factors particular to medical specialty, position, department, and whether the employee served as an assistant professor, associate professor, professor, or director.  Individual compensation decisions also were affected by productivity, including the ability to take on Medicare and Medicaid patients.

The Court concluded that under these circumstances, the individual inquiries required to sustain or defend claims of pay discrimination under the Equal Pay Act demonstrated that Plaintiffs were not similarly-situated, thereby warranting decertification.

Moreover, the Court opined that Plaintiffs failed to identify a common policy or practice responsible for the alleged unequal pay.  While Plaintiffs pointed to Defendants’ Compensation Plan as a gender neutral, “single” or “centralized” process for setting and adjusting compensation, the Court observed that department chairs were given discretion under the Compensation Plan to make compensation recommendations based on a variety of objective and individualized factors, such as salary survey data, funding sources, background and qualifications, and market factors.  Although Plaintiffs noted that the Dean of Southern Illinois University and CEO of Southern Illinois University Physicians & Surgeons, Inc. were responsible for the administration of the Compensation Plan, the Court concluded that Plaintiffs failed to establish that the discretion shown by these high-level individuals caused a disparate impact disfavoring women in pay.

Finally, the Court, following Wal-Mart v. Dukes, 564 U.S. 338 (2011), ruled Plaintiffs’ statistical evidence of disparate impact unhelpful, because it “does not and cannot show whether a common cause existed regardless of the statistically significant showing of pay disparities based on gender.” Id. at 25.

Implications For Employers

The decision in Ahad underscores the importance of tying employee compensation decisions to objective, measurable criteria, that are utilized and documented in the exercise of properly delegated managerial discretion.  To minimize the risk of unequal pay problems, employers are well served to review their position descriptions, hiring and compensation tools and training, and compensation decisions for both for disparate impact and for success in obtaining and retaining talent.

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

Seyfarth Synopsis:  Although the Illinois Supreme Court’s recent decision in Rosenbach v. Six Flags may have upped the ante for employers facing litigation under the Illinois Biometric Information Privacy Act (“BIPA”), a recent bill introduced in the Illinois Senate, SB2134, would remove plaintiffs’ right to bring private causes of action under Illinois Biometric Information Privacy Act (“BIPA”) and instead allow them to file a complaint with the Illinois Department of Labor (“IDOL”), and to be enforced by the DOL and the Illinois Attorney General.

If this proposed bill ultimately becomes signed legislation, it would be the death knell for private party BIPA class actions. As ten or more BIPA class actions are being filed in Illinois state and federal courts on a daily basis,  employers should closely follow developments involving this proposed legislation while concurrently pursuing BIPA compliance activities.

* * *

Background On The BIPA Law

As employers with operations in Illinois are likely well aware, the BIPA prohibits an entity from collecting, capturing, purchasing, or otherwise obtaining a person’s “biometric identifier” or “biometric information,” unless it satisfies certain notice, consent, and data retention requirements.  The statute creates a limited right of action for “person[s] aggrieved by a violation” of its terms.  A “person aggrieved” by a negligent violation of the BIPA may recover “liquidated damages of $1,000 or actual damages, whichever is greater.”  A “person aggrieved” by an intentional or reckless violation of the BIPA may recover “liquidated damages of $5,000 or actual damages, whichever is greater.”

In Rosenbach v. Six Flags Entertainment Corp., No. 123186, 2019 Ill. Lexis 7 (Ill. Jan. 25, 2019), the Illinois Supreme Court held in its first ever ruling concerning the BIPA that a person need not have sustained actual damage beyond technical violations of the BIPA in order to pursue claims for damages.  As the Illinois Supreme Court held, “[w]hatever expenses a business might incur to meet the law’s requirements are likely to be insignificant,” in light of the potential for “liability for failure to comply with [BIPA’s] requirements.”  Id. at *21.

Employers in Illinois have been confronted with an explosion of BIPA class action litigation over the last two years. No end appears in sight at this point.

Proposed Legislation

In February 2019, Illinois State Senators Jason A. Barickman and Bill Cunningham co-sponsored SB2134 to amend BIPA.  The proposed bill would delete language creating a private right of action and instead provide that any violation that results from the collection of biometric information by an employer – for employment, human resources, fraud prevention, or security purposes – is subject to the enforcement authority of the IDOL.  It further provides that an employee or former employee may file a complaint with the IDOL alleging a violation, within one year from the date of the violation, by submitting a signed, completed complaint form.  Finally, the proposed bill provides that any violation of the Act constitutes a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, and may be enforced by the Illinois Attorney General.

Implications For Employers

While the passing of SB2134 would certainly be welcome news to employers in terms of aiding to curb future class actions, it is unclear what impact the amendment  would have on pending litigation.  As such, SB2134 likely will not serve as a “get out of jail free card” for employers currently mired in BIPA class actions.  Further, given that it is only proposed legislation, employers should remain vigilant in ensuring compliance with the BIPA.  Given the potentially huge ramifications if the bill is sworn into law in regards to minimizing future class action exposure, employers should closely track this proposed legislation.

By: Mark Casciari

Seyfarth Synopsis:  On March 20, 2019, in Frank, et al. v. Gaos, No. 17-961, 2019 WL 1264582 (U.S. Mar. 20, 2019), the U.S. Supreme Court held that the Article III standing preconditions to federal court litigation, as described in Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016), will not be undermined. The ruling is important for any corporate counsel involved in defending class actions and in negotiating the resolution of such litigation.

We previously blogged on the supplemental briefing development before the Supreme Court in  Frank v. Gaos, No. 17-961,  and now we can report on the Supreme Court’s decision.  Commentators had expressed the view that the case would provide the Supreme Court with an opportunity to determine whether cy pres provisions in settlement are appropriate. The Supreme Court’s ruling did not go that far.

The Supreme Court’s Decision

In Frank v. Gaos, the Supreme Court has affirmed Spokeo by remanding the case to the U.S. Court of Appeals for the Ninth Circuit without considering whether a class settlement that provides cy pres payments but no money to absent class members is “fair, reasonable, and adequate” under Rule 23(e)(2).  The Supreme Court made its remand ruling in an unusual per curiam decision.  The Supreme Court reiterated, again, that a federal statutory violation alone does not equate to Article III standing.  It remanded because of “a wide variety of legal and factual issues not addressed in the merits briefing before us or at oral argument.” Id. at *3.  The Supreme Court opined that Article III standing turns on “whether any named plaintiff has alleged [statutory] violations that are sufficiently concrete and particularized to support standing.”  Id.

The stakes on remand are high, of course — a lack of standing means no day at all in federal court.

The Implications of the Supreme Court’s Decision

There are a number of lessons to be learned from the Frank v. Gaos decision:

  • Litigants should expect federal district courts to conduct an exacting analysis of Article III standing where the allegations in a complaint do not obviously allege concrete monetary damages. Since the existence, or not, of concrete injury may raise “a wide variety of legal and factual issues,” litigants should expect federal district courts to conduct early evidentiary hearings where the complaint allegations appear to raise only technical statutory violations.
  • Litigants also should expect more lawsuits to be commenced in state court if federal court Article III standing appears weak. Many states do not have constitutions with the same Article III standing precondition to litigation that appears in the U.S. Constitution.  Where a claim arises under only federal law, such as breach of fiduciary duty litigation under 29 U.S.C. § 1132(a)(3), defendants should pay much more attention to Spokeo.
  • Federal agency officials may be under more pressure to vindicate federal statutory rights where Spokeo issues appear in the complaints.
  • Lastly, the Supreme Court’s ruling sends a signal to the lower federal courts that Spokeo provides a very real way for the courts to opt out of federal court litigation. Declining jurisdiction may be preferable to messy litigation that often, these days, present strong partisan political controversies with no easy resolution.

It thus makes eminent sense for litigants to consider, again, what Spokeo held — a plaintiff seeking to invoke federal jurisdiction must show:  (1) an injury in fact (2) caused by the defendant’s conduct that is (3) redressable by a favorable federal court decision.

By Gerald L. Maatman, Jr. and Michael L. DeMarino

Seyfarth Synopsis: To take an immediate appeal from a federal district court’s order granting or denying class certification, a party must first seek permission from the applicable court of appeals “within 14 days after the order is entered.” Fed. Rule Civ. Pro. 23(f). In Nutraceutical Corp. v. Lambert, No. 17-1094, 2019 WL 920828, at *4 (U.S. Feb. 26, 2019), the U.S. Supreme Court addressed the question of whether a court of appeals may equitably toll that deadline when an opposing party objects that the appeal is untimely. Because Rule 23(f)s’ deadline was meant to be rigorously enforced, the Supreme Court concluded that Rule 23(f) is not subject to equitable tolling – even where  good cause for equitable tolling might otherwise exist. The Supreme Court’s ruling in Lambert is therefore a “must read” for all corporate counsel involved in workplace class action litigation.

Background To The Case

The facts in Nutraceutical Corp. v. Lambert, No. 17-1094, 2019 WL 920828, at *1 (U.S. Feb. 26, 2019), are straightforward. Troy Lambert sued Nutraceutical Corporation in federal court and was initially successful in obtaining class certification. Id. The District Court subsequently revisited its order and later decertified the class. Id. At that point, Lambert had 14 days under Rule 23(f) to ask the Ninth Circuit for permission to appeal the decertification order. Id.

Instead, Lambert filed a motion for reconsideration, and did so eight days after Rule 23(f)’s 14-day window, but within the timeframe ordered by the District Court. Id. The District Court ultimately denied Lambert’s motion for reconsideration, and within 14 days of that decision, Lambert petitioned the Ninth Circuit for permission to appeal the decertification order. Id. Nutraceutical argued that Lambert’s petition was untimely because more than four months had elapses since the District Court’s order decertifying the class, far more than the 14 days that Rule 23(f) allows. Id.

Nevertheless, the Ninth Circuit  deemed Lambert’s petition timely, reasoning that Rule 23(f) is non–jurisdictional and subject to equitable tolling. Under the circumstances, the Ninth Circuit concluded that Lambert acted diligently and tolling was warranted. On the merits, the Ninth Circuit reversed the District Court’s decertification order. Id.

Nutraceutical thereafter appealed and the U.S. Supreme Court granted certiorari.  Justice Sotomayor, writing for a unanimous Supreme Court, reversed and remanded on February 26, 2019. Id.

The SCOTUS Decision

The Supreme Court agreed with the Ninth Circuit that Rule 23(f)’s time limitation is non–jurisdictional because it is found in a procedural rule, not a statute. Id. at *2. Nevertheless, the Supreme Court found that Rule 23(f) is not subject to equitable tolling. Id. The Supreme Court reasoned that although a non–jurisdictional rule is subject to waiver and forfeiture, that does not mean the rule is not mandatory or that it is therefore subject to equitable tolling. Id.

“Whether a rule precludes equitable tolling,” explained the Supreme Court,  “turns not on its jurisdictional character but rather on whether the text of the rule leaves room for such flexibility.” Id. at *3. Because Rule 23(f) conditions an appeal on filing a petition within 14 days, and because Appellate Rule 26(b) expressly states that a court of appeals “may not extend the time to file . . . a petition for permission to appeal,” the Supreme Court concluded that there is “clear intent to compel rigorous enforcement of Rule 23(f )’s deadline, even where good cause for equitable tolling might otherwise exist.” Id. at *4.

As evidence that Rule 23(f) is amenable to tolling, Lambert argued that every court of appeals to consider the issue has accepted Rule 23(f) petitions filed within 14 days of the resolution of a motion for reconsideration that was itself filed within 14 days of the original order. Id. at *5. Although Lambert’s reconsideration motion was not filed within 14 days of the certification ruling, Lambert argued there was no reason to relax the 14 day limit in one situation but not the other. Id. The Supreme Court rejected this argument. It explained that a motion for reconsideration filed within the window to appeal “does not toll anything: it renders an otherwise final decision . . . not final for purposes of appeal.” Id. As a result, the Supreme Court declined to address the effect of a motion for reconsideration filed within the 14-day window or whether Lambert’s  motion would be timely if that had occurred. Id. at *5 fn. 7.

Lambert also argued that the District Court’s decision was itself an order granting or denying class action certification under Rule 23(f). Id. at *6. Because the Ninth Circuit did not rule on these grounds, the Supreme Court declined to address these arguments. Id. Instead, the Supreme Court left open the possibility for the Ninth Circuit to address these issues on remand.

At the end of the day, the Supreme Court explained that the “relevant Rules of Civil and Appellate Procedure clearly foreclose the flexible tolling approach on which the Court of Appeals relied to deem Lambert’s petition timely.” Id. Hence, the Supreme Court reversed and remanded.

Implication For Employers

The takeaway from Lambert is that a court of appeals cannot alter the time for a party to file a petition for permission to appeal under Rule 23(f) – even if good cause might otherwise exist. Employers who wish to appeal an order granting class certification must be sure to do so within the 14-day period allowed by Rule 23(f). Although many courts of appeal have held that a motion for reconsideration filed within fourteen days of the order granting or denying class certification can toll a Rule 23(f) deadline, the Supreme Court’s opinion is clear that this nomenclature is not correct. Instead of tolling the Rule 23(f) deadline, a motion for reconsideration simply renders a class certification decision not final for purposes of appeal. The Supreme Court’s reluctance to address the effect of a motion for reconsideration filed within the 14-day window should give employers some pause before relying exclusively on a motion for reconsideration. The safest course is to file a petition for permission to appeal within the 14-day time period under Rule 23(f).

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