Seyfarth Synopsis:  In yesterday’s blog, readers were given an extensive overview of the historically high numbers regarding class action settlements in 2017.  Today, author Jerry Maatman provides his own analysis of these class action settlement numbers in our video blog series.  Jerry highlights the most important markers of 2017, and previews the class action landscape employers may have to adjust to in 2018.  Watch in the link below!

Seyfarth Synopsis:  The monetary value of the top workplace class action settlements skyrocketed in 2017.  Though all-time highs in this category were reached in each of the past three years, this year’s Report found that 2017 saw decidedly higher settlements.  The top ten settlements in employment-related class actions totaled $2.72 billion in 2017, an increase of over $970 million from $1.75 billion in 2016.  In this blog, we give our readers an exclusive analysis of this important workplace trend.

As measured by the top ten largest case resolutions in various workplace class action categories, overall settlement numbers increased exponentially in 2017 as compared to 2016.

This continued the reversal of a trend that began with the U.S. Supreme Court’s decision in Wal-Mart in 2011. By tightening Rule 23 standards and raising the bar for class certification, Wal-Mart made it more difficult for plaintiffs to certify class actions, and to convert their class action filings into substantial settlements.

The settlement statistics for 2017 underscore how the plaintiffs’ bar has successfully “found a way” around the impediments to transforming their case filings into large settlements on a class-wide basis. This also reflects a process whereby there has been a maturing of case architecture considerations, as plaintiffs’ lawyers have “re-booted” their strategic approaches to take account of Wal-Mart, and crafted refined class certification theories with better chances of success.

That phenomenon is still being played out, as well as manifesting itself in settlement dynamics.

Considering all types of workplace class actions, settlement numbers in 2017 totaled $2.72 billion, which increased significantly from 2016 when such settlements totaled $1.75 billion.

The 2017 figure also eclipsed the settlement numbers of 2015, which were then at the all-time high of $2.48 billion.

The following graphic shows this trend:

In terms of the story behind the numbers, the breakouts by types of workplace class action settlements are instructive.

In 2017, there was a slight downward trend for the value of wage & hour class action settlements, and significant increases across-the-board for resolutions of class actions involving employment discrimination, statutory workplace laws, and ERISA class actions, as well as governmental enforcement litigation.

This phenomenon is shown by the following chart for 2017 settlement numbers:

By type of case, settlements values in employment discrimination class actions, private plaintiff statutory workplace class actions, and government enforcement cases experienced the most significant increases.

The top ten settlements in the private plaintiff statutory class action category (e.g., cases brought for breach of contract for employee benefits, and workplace antitrust laws and statutes such as the Fair Credit Reporting Act or the Worker Adjustment and Retraining Notification Act) totaled $487.28 million.

This figure increased from $114.7 million in 2016.

The following chart shows this nearly five-fold increase:

Most telling, however, the reversal of the “Wal-Mart effect” is shown by the pattern for employment discrimination class action settlements in 2017, as well as a comparison of the settlement figures with previous settlement activity over the last decade.

This trend is illustrated in the following chart:

In 2017, the value of the top ten largest employment discrimination class action settlements of $293.5 million was the second highest figure since 2010, and bucked the trend that started in 2011 (after Wal-Mart was decided) that showed decreases in settlement amounts over three years of that four-year period. On a comparative basis, the settlement figure for 2017 was the third highest over the past eight years.

This trend, however, did not hold for wage & hour class action settlements. In 2017, the value of the top ten wage & hour settlements was $525 million, a decrease of over $170 million from 2016. However, when analyzed over the past eight years, the figure of $525 million actually was the second highest annual total in that time period.

When coupled together, the two-year period of 2016 and 2017 saw over $1.2 billion in the top wage & hour settlements.

Further, this is most telling in examining the last four years, for 2016 represented almost a quadrupling (after two years of declining numbers in 2013 and 2014) in the value of the top wage & hour settlements as compared to 2014.

This trend is illustrated by the following chart:

These settlement numbers reflect that Wal-Mart has had far less of an impact in this substantive legal area, as FLSA settlements are not explicitly tied to the concepts on class certification addressed in Wal-Mart (and instead, are based on the standards under 29 U.S.C.§ 216(b)).

Relatedly, the top ten settlements in government enforcement litigation experienced a booming upward arc, as they increased nearly ten-fold from $52.3 million in 2016 to $485.25 million in 2017.

By comparison, the top ten settlements in 2016 represented a slight decrease even from 2015, when settlements hit one of their lowest points in the past eight years.

This trend is illustrated by the following chart of settlements from 2010 to 2017:

ERISA class action settlements also were up in 2017, as the top ten settlements totaled $927.8 million. This figure represented an increase from $807.4 million in 2016.

Further, ERISA settlements for the two-year period of 2016 and 2017 were a combined $1.73 billion.

While the 2016 aggregate settlement number was nearly six times greater than in 2013, it entailed a significant decrease from 2014 (when settlements were $1.31 billion).

This trend is illustrated by the following chart of settlements from 2010 to 2017:

Implications For Employers

Settlement trends in workplace class action litigation are impacted by many factors.

In the coming year, settlement activity is apt to be influenced by developing case law interpreting U.S. Supreme Court rulings, the impact of the Trump Administration’s labor and employment enforcement policies, case filing trends of the plaintiffs’ class action bar, and class certification rulings. Stay tuned!

Seyfarth Synopsis:  As our Annual Workplace Class Action Report discusses, 2017 was an exceptionally busy year in regards to workplace class action litigation.  In this video, author Jerry Maatman talks through the genesis of the Report.  Jerry provides insight into developments in 2017, as well as a brief overview of this year’s four top trends.  Finally, he looks forward and tells our readers what employers may expect to see in 2018.  Check it out below! 

Seyfarth Synopsis: At 878 pages, Seyfarth’s 14th Annual Workplace Class Action Litigation Report analyzes 1,408 rulings and is our biggest and most voluminous Report ever.

Click here to access the microsite featuring all the Report highlights. You can read about the four major trends of the past year, order your copy of the eBook, and download Chapters 1 and 2 on the 2018 Executive Summary and key class action settlements.

The Report was featured today in an exclusive article in the Wall Street Journal. Click here to read the coverage!

The Report is the sole compendium in the U.S. dedicated exclusively to workplace class action litigation, and has become the “go to” research and resource guide for businesses and their corporate counsel facing complex litigation. We were again honored this year with a review of our Report by Employment Practices Liability Consultant Magazine (“EPLiC”). Here is what EPLiC said: “The Report is a definitive ‘must-have’ for legal research and in-depth analysis of employment-related class action litigation.  Anyone who practices in this area, whether as an attorney, a business executive, a risk manager, an underwriter, a consultant, or a broker cannot afford to be without it. Importantly, the Report is the only publication of its kind in the United States. It is the sole compendium that analyzes workplace class actions from ‘A to Z.’”  Furthermore, EPLiC recognized our Report as the “state-of-the-art word” on workplace class action litigation. You can read more about the review here.

The 2018 Report analyzes rulings from all state and federal courts – including private plaintiff class actions and collective actions, and government enforcement actions –  in the substantive areas of Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, and the Class Action Fairness Act of 2005. It also features chapters on EEOC pattern or practice rulings, state law class certification decisions, and non-workplace class action rulings that impact employers. The Report also analyzes the leading class action settlements for 2017 for employment discrimination, wage & hour, ERISA class actions, and statutory workplace laws, as well as settlements of government enforcement actions, both with respect to monetary values and injunctive relief provisions.

We hope our loyal blog readers will enjoy it!

Executive Summary

The prosecution of workplace class action litigation by the plaintiffs’ bar has increased exponentially over the past decade. More often than not, class actions pose unique “bet-the-company” risks for employers. An adverse judgment in a class action has the potential to bankrupt a business and adverse publicity can eviscerate its market share. Likewise, the on-going defense of a class action can drain corporate resources long before the case even reaches a decision point.

Companies that do business in multiple states are also susceptible to “copy-cat” class actions, whereby plaintiffs’ lawyers create a domino effect of litigation filings that challenge corporate policies and practices in numerous jurisdictions at the same time. Hence, workplace class actions can adversely impact a corporation’s business operations, jeopardize or cut short the careers of senior management, and cost millions of dollars to defend. For these reasons, risks from workplace class actions are at the top of the list of challenges that keep business leaders up late at night.

Skilled plaintiffs’ class action lawyers and governmental enforcement litigators are not making this challenge any easier for companies. They are continuing to develop new theories and approaches to the successful prosecution of complex employment litigation. New rulings by federal and state courts have added to this patchwork quilt of compliance problems and risk management issues.

In turn, the events of the past year in the workplace class action world demonstrate that the array of litigation issues facing businesses are continuing to accelerate at a rapid pace while also undergoing significant change. Notwithstanding the transition to new leadership in the White House in 2017, governmental enforcement litigation pursued by the EEOC and the U.S. Department of Labor (“DOL”) continued to manifest an aggressive “push-the-envelope” agenda by agencies, with regulatory oversight of workplace issues continuing as a high priority.

The combination of these factors are challenging businesses to integrate their litigation and risk mitigation strategies to navigate these exposures. These challenges are especially acute for businesses in the context of complex workplace litigation.

Adding to this mosaic of challenges in 2018 is the continuing evolution in federal policies based on a new political party occupying the White House for part of 2017. Furthermore, while changes to government priorities started on Inauguration Day and are on-going, others are being carried out by new leadership at the agency level who were appointed in the fourth quarter of this past year. As expected, many changes represent stark reversals in policy that are sure to have a cascading impact on private class action litigation. While predictions about the future of workplace class action litigation may cover a wide array of potential outcomes, the one sure bet is that change is inevitable and corporate America will continue to face new litigation challenges.

Key Trends Of 2017

An overview of workplace class action litigation developments in 2017 reveals four key trends.

First, the monetary value of the top workplace class action settlements rose dramatically in 2017. These numbers increased over past years, even after they had reached all-time highs in 2014 to 2016. The plaintiffs’ employment class action bar and governmental enforcement litigators were exceedingly successful in monetizing their case filings into large class-wide settlements, and they did so at decidedly higher values than in previous years. The top ten settlements in various employment-related class action categories totaled $2.72 billion in 2017, an increase of over $970 million from $1.75 billion in 2016. Furthermore, settlements of employment discrimination class actions experienced over a three-fold increase in value; statutory workplace class actions saw nearly a five-fold increase; and government enforcement litigation registered nearly a ten-fold increase. Whether this is the beginning of a long-range trend or a short-term aberration remains to be seen as 2018 unfolds, but the determinative markers suggest this upward trend will rise further in 2018, at least insofar as private plaintiff class actions are concerned.

Second, while federal and state courts issued many favorable class certification rulings for the plaintiffs’ bar in 2017, evolving case law precedents and new defense approaches resulted in better outcomes for employers in opposing class certification requests. Plaintiffs’ lawyers continued to craft refined class certification theories to counter the more stringent Rule 23 certification requirements established in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011). As a result, in the areas of employment discrimination and ERISA class actions, the plaintiffs’ bar scored well in securing class certification rulings in federal courts in 2017 (over comparative figures for 2016). Class actions were certified in significant numbers in “magnet” jurisdictions that continued to issue decisions that encourage or, in effect, force the resolution of large numbers of claims through class-wide mechanisms. Yet, while the sheer volume of wage & hour certification decisions in 2017 increased as compared to last year, employers actually fared better in litigating those class certification motions in federal court than last year. Of the 257 wage & hour certification decisions in 2017, plaintiffs won 170 of 233 conditional certification rulings (approximately 73%), but lost 15 of 24 decertification rulings (approximately 63%). By way of comparison, there were 224 wage & hour certification decisions in 2016, where plaintiffs won 147 of 195 conditional certification rulings (approximately 76%) and lost 13 of 29 decertification rulings (approximately 45%). In sum, employers beat slightly more first stage conditional certification motions in 2017, and dramatically increased their odds – a jump of 18% – of fracturing cases with successful decertification motions.

Third, filings and settlements of government enforcement litigation in 2017 did not reflect a head-snapping pivot from the ideological pro-worker (or anti-big business) outlook of the Obama Administration to a pro-business, less regulation/litigation viewpoint of the Trump Administration. Instead, as compared to 2016, government enforcement litigation actually increased in 2017. As an example, the EEOC alone brought 184 lawsuits in 2017 as compared to 86 lawsuits in 2016. Further, the settlement value of the top ten settlements in government enforcement cases jumped dramatically – from $52.3 million in 2016 to $485.25 million in 2017. The explanations for this phenomenon are wide and varied, and include the time-lag between Obama-appointed enforcement personnel vacating their offices and Trump-appointed personnel taking charge of agency decision-making power; the number of lawsuits “in the pipeline” that were filed during the Obama Administration that came to conclusion in the past year; and the “hold-over” effect whereby Obama-appointed policy-makers remained in their positions long enough to continue their enforcement efforts before being replaced in the last half of 2017. This trend is critical to employers, as both the DOL and the EEOC have had a focus on “big impact” lawsuits against companies and “lead by example” in terms of areas that the private plaintiffs’ bar aims to pursue. As 2018 opens, it appears that the content and scope of enforcement litigation undertaken by the DOL and the EEOC in the Trump Administration will tilt away from the pro-employee/anti-big business mindset of the previous Administration. Trump appointees at the DOL and the EEOC are slowly but surely “peeling back” on positions previously advocated under the Obama Administration. As a result, it appears inevitable that the volume of government enforcement litigation and value of settlement numbers from those cases will decrease in 2018. The ultimate effect, however, may well prompt the private plaintiffs’ class action bar to “fill the void” and expand the volume of workplace litigation pursued against employers over the coming year as the DOL and the EEOC adjust their litigation enforcement activities.

Fourth and finally, class action litigation increasingly has been shaped and influenced by recent rulings of the U.S. Supreme Court. Over the past several years, the U.S. Supreme Court has accepted more cases for review – and issued more rulings 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 that were arguably more pro-business than decisions in past years. More cases also were accepted for review in 2017 that are positioned for rulings in 2018, including what may be the most high-stakes issue impacting employers since the Wal-Mart ruling in 2011 – the Epic Systems, Murphy Oil, and E & Y trilogy of cases on the legality of workplace arbitration agreements with class action waivers. The ruling expected in the Epic System, Murphy Oil, and E & Y cases in 2018 may well change the class action playing field in profound ways. Coupled with the appointment of Justice Neil Gorsuch in 2017 and potential additional appointments to the Supreme Court by President Trump in 2018 and beyond, litigation dynamics may well be re-shaped in ways that further change the playbook for prosecuting and defending class actions.

Implications For Employers

The one constant in workplace class action litigation is change. More than any other year in recent memory, 2017 was a year of great change in the landscape of Rule 23. As these issues play out in 2018, additional chapters in the class action playbook will be written.

The lesson to draw from 2017 is that the private plaintiffs’ bar and government enforcement attorneys at the state level are apt to be equally, if not more, aggressive in 2018 in bringing class action and collective action litigation against employers.

These novel challenges demand a shift of thinking in the way companies formulate their strategies. As class actions and collective actions are a pervasive aspect of litigation in Corporate America, defending and defeating this type of litigation is a top priority for corporate counsel. Identifying, addressing, and remediating class action vulnerabilities, therefore, deserves a place at the top of corporate counsel’s priorities list for 2018.

 

By: Gerald L. Maatman, Jr., Christopher J. DeGroff, Matthew J. Gagnon, and Kyla Miller

Seyfarth Synopsis: We are once again pleased to offer our loyal blog readers a breakdown of the five most intriguing developments in EEOC litigation in 2017, in addition to a pre-publication preview of our annual report on developments and trends in EEOC-initiated litigation. This year’s book, titled EEOC-Initiated Litigation: FY 2017, provides a comprehensive examination of the EEOC’s FY 2017 filings (from October 2016 through September 2017), and the major decisions handed down this year in pending EEOC litigation.

In our view, every employer should be monitoring EEOC activity – it is the surest way to avoid becoming the EEOC’s next target. That is why we conduct a thorough analysis of all EEOC activity every year to keep our readers up to date on current trends and, hopefully, provide a peek inside the EEOC’s decision-making process. Our annual report is targeted towards HR professionals, corporate counsel, and other corporate decision-makers. We hope that it proves useful as they attempt to steer clear of EEOC-initiated litigation in FY 2018.

This year, we have once again categorized our analysis of substantive developments in line with the EEOC’s strategic priorities. This year is the first year of the EEOC’s new Strategic Enforcement Plan, which covers Fiscal Year 2017 through 2021. The new SEP advances the same six strategic priorities as the previous strategic plan. It has been our experience that analyzing developments in EEOC litigation in light of the SEP priorities provides a better understanding of the EEOC’s focus and agenda.

The full publication will be offered for download as an eBook. To order a copy, please click here.

As always, we like to take a moment at the end of one year, and the beginning of the next, to look back at the most intriguing decisions and developments of the year.

Here is our list of the “top five” most intriguing developments of 2017.

A Year Of Transition: Litigation On Track Despite Changes On The Way

FY 2017 was a year of transition for the EEOC. It is still too early to tell how the changed political landscape will impact the future of EEOC litigation given the important positions that remain vacant for high-level agency personnel. But this did not stop the EEOC from charging full speed ahead. Total merits filings were up more than 100% over FY 2016. In fact, the EEOC filed more lawsuits in September than it did in all of FY 2016 combined. Although the 2017-2021 Strategic Enforcement Plan maintains its focus on the same six strategic enforcement priorities, it added two substantive areas as emerging issues, including complex employment relationships and “backlash discrimination” against Muslims, Sikhs, and other persons of Arab, Middle Eastern, or South Asian descent. Those are important issues to watch in FY 2018 and beyond. Our analysis of these issues can be found here.

A New Standard Of Review For EEOC Subpoena Enforcement Actions

In McLane Co. v. EEOC, the U.S. Supreme Court clarified the scope of review for appellate courts reviewing a lower court’s decision to enforce (or not) an EEOC administrative subpoena. In McLane, the Supreme Court held that such decisions are reviewable under the abuse-of-discretion standard, which is more akin to a hands-off type of review. The decision clarified that the District Courts should subject EEOC subpoenas to a searching, fact-intensive review, and that their judgment in this respect should be respected by the appellate courts. Although ostensibly a win for the EEOC, the decision makes it clear that the District Court cannot simply presume the relevance of information or documents the EEOC seeks with its administrative subpoenas. Instead, a District Court must give serious consideration to issues of relevancy and burden when deciding whether or not to enforce an EEOC subpoena. Our analysis of this trend can be found here.

Developments In Religious Discrimination Law: Accommodations May Be Required For Wide Swath Of Beliefs

In EEOC v. Consol Energy, Inc., the Fourth Circuit expanded the scope of religious accommodation requests employers must consider. In Consol, the EEOC alleged that the defendants refused to provide an employee with a religious accommodation by subjecting him to a biometric hand scanner to clock in and out of work. The employee believed a hand scanner was used to identify and collect personal information that would be used by the Christian Anti-Christ to identify followers with the “mark of the beast,” as described in the New Testament Book of Revelation. The Fourth Circuit affirmed the judgment of the District Court against the employer, finding that a religious accommodation was necessary. Our discussion of this development can be found here.

Sexual Harassment In The Workplace: Focus on “Manager”

Given all the recent news about sexual harassment in the workplace, and the fast developing #MeToo movement, we suspect that the EEOC is already preparing for an uptick in sexual harassment complaints in FY 2018. But recent decisions show that not all complaints alleging sexual harassment are a slam dunk for employees. In EEOC v. Autozone, Inc., the Sixth Circuit affirmed a U.S. District Court’s grant of an employer’s motion for summary judgment after finding that the harassing managerial employee was not a “supervisor” under Title VII. The employer was thus not liable for the employee’s actions. The Sixth Circuit held that just because someone is titled a “manager” does not necessarily mean that they are “supervisors” under Title VII. They must have the authority to take an employment action against the complaining employee. A further discussion on this development can be found here. We expect decisions in FY 2018 will dramatically reshape the landscape of harassment law, with the EEOC leading the way.

EEOC’s Penchant For Expanding Pattern Or Practice Cases

In FY 2017, the EEOC continued to try to expand its powers to prosecute large-scale pattern or practice cases. In EEOC v. Bass Pro Outdoor World, LLC, a District Court in Texas was willing to reign it in. In that case, the EEOC attempted to add claims on behalf of individuals who had not yet applied to work for Bass Pro at the time the EEOC tried to conciliate its claims against Bass Pro. Title VII requires the EEOC to attempt to resolve charges of discrimination against an employer through means of conciliation before it seeks redress in the courts. In this case, the District Court was unwilling to allow the EEOC to add claimants on behalf of whom it could not have conciliated prior to bringing its lawsuit. A closer look at this development can be found here.

Although we are almost a full year into the Trump Administration and Republican control of Congress, it is still unclear what those political developments will mean for the future of EEOC litigation. The enforcement priorities are the same as the past four years. But how the EEOC chooses to interpret those priorities will undoubtedly change as high-level positions are filled by the Trump Administration. This makes FY 2018 a year of uncertainty as we await those changes in EEOC leadership. We look forward to keeping our readers apprised of these changes as they occur!

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

The Workplace Class Action Team wanted to take the time to wish all of our loyal blog readers a very Happy New Year. We will be taking the next few days to reflect on the year and recharge. We look forward to bringing you more interesting and though provoking content on workplace class action issues as we enter into 2018 – including our start-of-the-year kick-off publication – Seyfarth Shaw’s Annual Workplace Class Action Litigation Report. We anticipate going to press on January 10th and launching the 2018 Report to our readers from our blog. Stay tuned!

 

By Gerald L. Maatman, Jr. and Thomas E. Ahlering

 Seyfarth Synopsis:  As the number of class action lawsuits alleging violations of the Illinois Biometric Information Privacy (“BIPA”) has exploded in the last six months, defendants have been eagerly awaiting guidance from an Illinois appellate court regarding what a Plaintiff must allege in order to have a viable right of action under the statute. In Rosenbach v. Six Flags, 2017 IL App (2d) 170317 (Ill. App. Ct., Dec. 21, 2017), the Illinois Appellate Court for the Second District issued the first such ruling in this area, holding that a Plaintiff must allege an actual injury to be “aggrieved” under the Act in order to seek statutory damages and injunctive relief. 

The decision represents a significant victory for employers because defendants in both federal and state courts – facing potentially catastrophic damages under the statute for implementation of biometric technology for various purposes, including timekeeping practices – have made similar arguments that plaintiffs alleging mere technical violations of the statute are not “persons aggrieved,” thereby entitling plaintiffs to statutory damages and injunctive relief.  The decision in Rosenbach provides clarity as to the viability of certain potential employer defenses in BIPA class actions, particularly at the motion to dismiss stage.  Most notably, the decision will almost certainly serve to shift the tide in favor of employers facing BIPA class actions.

***

The Illinois Appellate Court’s Decision

In Rosenbach, Plaintiff, as the mother of her minor son, brought a class action on behalf of herself and all others similarly-situated, alleging that Defendants Six Flags Entertainment Corp. (“Six Flags”) and Great America LLC (“Great America”) violated the BIPA when her son purchased a season pass for Great America theme park and defendants fingerprinted him using a biometric scanner without obtaining written consent or disclosing their plan for the collection, storage, use, or destruction of his biometric identifiers or information.  Rosenbach,  2017 IL App (2d) 170317, *1.  Defendants moved to dismiss on the grounds that Plaintiff was not a “person aggrieved by a violation” of the BIPA as required by the statute in order for a Plaintiff to have a right of action because Plaintiff alleged mere technical violations of the statute.  Id. (quoting 740 ILCS 14/20).

The trial court denied the motion to dismiss, but later certified two questions for appellate review relating to whether a person aggrieved by a violation of the BIPA must allege some actual harm, including: (1) whether an individual is an aggrieved person under section 20 of BIPA and may seek statutory damages authorized under the BIPA when the only injury he or she alleges is a violation that a defendant collected his or her biometric identifiers and/or biometric information without providing him or her the disclosures and obtaining written consent; and (2) whether an individual is an aggrieved person under section 20 of the BIPA and may seek injunctive relief authorized under the BIPA when the only injury he or she alleges is a violation that a defendant collected his or her biometric identifiers and/or biometric information without providing him or her the disclosures and obtaining written consent.  Id. *3.

The Illinois Appellate Court answered both questions in the negative and held that a Plaintiff must allege an actual injury to be “aggrieved” under the Act.  In so holding, the Illinois Appellate Court analyzed the plain language of the statute and consulted various definitions of “aggrieved,” including Black’s Law Dictionary, to find that “there must be actual injury, adverse effect, or harm in order for [a] person to be ‘aggrieved.’”  Id.

It further noted:

Likewise, if the Illinois legislature intended to allow for a private cause of action for every technical violation of the Act, it could have omitted the word “aggrieved” and stated that every violation was actionable. A determination that a technical violation of the statute is actionable would render the word “aggrieved” superfluous. Therefore, a plaintiff who alleges only a technical violation of the statute without alleging some injury or adverse effect is not an aggrieved person under section 20 of the Act.

Id. *4.

In sum, the primary holding of the case is that “[i]f a person alleges only a technical violation of the Act without alleging any injury or adverse effect, then he or she is not aggrieved and may not recover under any of the provisions in section 20.”  Id. *5.

Analysis And Implications For Employers

The Illinois Appellate Court’s decision constitutes a significant victory for employers facing BIPA class actions.

Most notably, the Illinois Appellate Court held that a Plaintiff cannot proceed on a claim for either statutory damages or injunctive relief for mere technical violations of the statute.  This holding is key for employers because class actions brought under the BIPA frequently consist of cookie cutter complaints which merely allege technical violations of the BIPA (i.e., failure to obtain written consent, failure to maintain a “publically available” biometric privacy plan, and failure to provide notice of biometric retention and destruction policies) and not an actual injury (i.e., identity theft).

While the decision represents a significant decision at this juncture in favor of employers, we anticipate that the Plaintiffs’ class action bar will continue to attempt craft creative arguments to circumvent this ruling and find a way to argue that an individual is an “aggrieved person” for purposes of the BIPA.

Accordingly, employers should remain vigilant and ensure that they are in compliance with the BIPA’s requirements to ensure that a mere “technical” violation of the statute does not result in something which could constitute an actual injury entitling an individual to pursue statutory damages and injunctive relief.

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

Seyfarth Synopsis: In a class action asserting claims for breach of contract, unjust enrichment, and statutory fraud in regards to the sale of general-use, pre-paid gift cards, the Seventh Circuit affirmed the final approval of a settlement agreement whereby the attorneys’ fees and costs totaled $1.95 million, while the class members would only receive approximately $1.8 million.

This ruling highlights the plaintiff attorney-driven culture of class action litigation, putting businesses and employers on notice as to who they are really defending against in these high-stakes lawsuits.

***

In Kaufman, et al. v. American Express Travel Related Services Co., Inc., No. 16-1691, 2017 U.S. App. LEXIS 24698 (7th Cir. Dec. 7, 2017), Plaintiffs alleged, among other claims, that American Express general-use, pre-paid gift cards were not “good all over the place” as the labeling had indicated.  Id. at *2.  Nearly ten years after the lawsuit was filed, the U.S. District Court for the Northern District of Illinois approved the parties’ settlement agreement, which provided that Plaintiffs’ attorneys would receive $1.95 million in attorneys’ fees and costs, while class members would receive approximately $1.8 million in damages.  After two intervernors (“Intervenors”) appealed the District Court’s final approval of the settlement agreement, the Seventh Circuit affirmed the approval of the settlement, holding the District Court did not abuse its discretion even though the “settlement [was] not without issues.”  Id. at *2.

With the class members’ attorneys earning more in the settlement than the class members themselves, this ruling is instructive for businesses in regards to litigation strategies in the class action landscape.

Case Background

In 2007, Plaintiffs filed a class action in the Circuit Court of Cook County, Illinois, against American Express.  The claims arose out of American Express’s sale of general-use, pre-paid gift cards, where a customer could buy a gift card by paying the amount to be loaded on the card (e.g., $25, $50, or $100) and a purchase fee of less than $5.  The packaging in which the gift cards came declared they were “good all over the place.”  Id. at *2.

In 2011, after the case was ultimately removed to the District Court, it granted preliminary approval of the settlement and certified the class for settlement purposes.  Id. at *8.  After multiple amended motions for approval and three rounds of notice to the class, the District Court granted final approval of the settlement in 2016.  Id. at *10.  In approving the settlement, the District Court awarded $1,000,000 in fees and $40,000 in expenses to Plaintiffs’ counsel, $250,000 in fees to additional class counsel, and $700,000 in fees to counsel for the Intervenors, while class members would receive approximately $1,800,000.  The District Court “found [the settlement] acceptable as any reduction in fees would not go to the benefit of the class. Any excess would go either to the cy pres or to Amex.”  Id. at *12.

Thereafter, on appeal to the Seventh Circuit, the Intervenors alleged that the District Court erred: (1) by not requiring the filing of briefs in support of the settlement prior to the deadline to object to the settlement; (2) in determining that American Express’s arbitration appeal posed a risk to the class’s success; (3) in approving the settlement given the breadth of the release; and (4) in not awarding most, if not all, of the attorneys’ fees to the Intervenors’ counsel.

The Seventh Circuit’s Decision

The Seventh Circuit affirmed the District Court’s approval of the settlement agreement, holding the District Court did not abuse its discretion.  First, the Seventh Circuit held that there is no requirement for the filing of briefs in support of a settlement agreement.  Id. at *15.

Second, the Seventh Circuit found that the District Court did not abuse its discretion in concluding that a pending appeal concerning an arbitration provision was a significant potential bar to the class’s success in this action.  Id. at *20.

Third, the Seventh Circuit held that the release language in the settlement agreement was not overly broad, as the Intervenors had argued, since there was no admissible evidence that additional purported claims existed, and further, that the total size of the class was unknown.  Id. at *22-23.

Fourth, noting that the District Court had dealt with the parties and their counsel for nearly seven years, the Seventh Circuit opined that the District Court was in the best position to determine which parties and attorneys had contributed to the settlement and in what proportions, and therefore it did not abuse its discretion.  Id. at *26.

Accordingly, while acknowledging that the District Court “did not approve a perfect settlement,” the Seventh Circuit held that the District Court did not abuse its discretion, and therefore it affirmed the District Court’s approval of the settlement.  Id. at *27.

Implications For Employers

Any class action settlement approval order where the plaintiffs’ attorneys walk away with more money than their clients is an eye-opener.  While some businesses that have encountered consumer or workplace class actions can point to instances where fighting plaintiffs’ counsel tooth and nail over the course of several years ultimately resulted in a favorable result, the Seventh Circuit’s ruling in Kaufman should serve as a cautionary tale for companies regarding the accumulation of enormous attorneys’ fees.  A major takeaway for businesses is that even in situations where the parties in a class action settle within the first few years of its filing, they must be cognizant of how the settlement approval process, including the potential interjection of objectors and intervenors, can quickly become expensive, and perhaps even worth more than the actual claims at issue.  As such, even though this settlement approval is more of an exception as opposed to the norm, businesses and their outside counsel must focus on efficiently managing the settlement process to minimize their exposure to attorneys’ fees and costs.

By Christopher M. Cascino and Gerald L. Maatman, Jr.

Seyfarth Synopsis: In Ellis v. Google, Inc., No. CGC-17-561299 (Cal Sup. Ct. Dec. 4, 2017), Judge Mary Wiss of the Superior Court of California granted a motion to dismiss a class action lawsuit brought by Google employees who claimed that all female Google employees are paid less than their counterparts.  Specifically, Judge Wiss found that the plaintiffs failed to plead sufficient facts to conclude that Google paid all female employees less than their male counterparts, even though the complaint alleged that a statistical analysis “found systematic compensation disparities against women pretty much across the entire workforce.”  Id.  at 4. This case represents a win for employers, who too often are forced to defend large class actions based on conclusory allegations.

Case Background

Three former female Google employees filed a putative class action in the Superior Court of California, alleging that Google “maintained throughout California a ‘centrally determined and uniformly applied policy and/or practice of paying its female employees less than male employees for substantially similar work.’”  Id. at 2.  To support this allegation, the plaintiffs also alleged that the U.S. Department of Labor found that, with respect to Google’s Mountain View office in 2015, “‘systematic compensation disparities against women pretty much across the entire workforce.’”  Id.  The plaintiffs asserted four causes of action against Google based on the alleged disparity, including a California Equal Pay Act claim, a California Labor Code claim, a Business and Professions Code claim, and a claim for declaratory judgment.  The plaintiffs purported to bring these claims on behalf of all female Google employees in California.

Decision

The Court observed that a class action complaint should be dismissed where, “assuming the truth of the factual allegations in the complaint, there is no reasonable possibility that the requirements for class certification will be satisfied.”  Id. at 3.  The Court then discussed the requirements for class certification under California law, including: “(a) an ascertainable and sufficiently numerous class; (b) a well-defined community of interest; and (c) substantial benefits from certification that render proceeding as a class superior to the alternatives.”  Id. at 4.  With respect to the second factor, the Court observed that it has three factors, including(a) predominant common questions of law or fact; (b) class representatives with claims or defenses typical of the class; and (c) class representatives who can adequately represent the class.”  Id.

The Court found that the plaintiffs did not allege sufficient facts to conclude that there was an ascertainable class.  Even though the plaintiffs defined the class as “all women employed by Google in California,” which on its face was ascertainable, the Court found the definition overbroad because the plaintiffs offered “no means  by which only those class members who have claims can be identified from those who should not be included in the class.”  Id.  Significantly, the Court found that the plaintiffs’ allegation that the U.S. Department of Labor “‘found systemic compensation disparities against women pretty much across the entire workforce’” at a Google office in 2015 was insufficient to support the conclusion that “Google implemented a uniform policy of paying all female employees less than male employees for substantially equal or similar work.”  Id.  The Court observed that the complaint did not “specify, for example, the specific job classifications it pertains to, or whether the comparison was made against men who perform substantially similar work under similar working conditions.”  Id.

The Court also concluded that the plaintiffs failed to allege that there were common questions of law and fact that predominated over individual issues because the plaintiffs’ class was “overbroad,” so liability could not be decided for all putative class members in one proceeding.  Id. at 5. The Court further opined that the plaintiffs’ conclusory allegation that they “performed ‘equal work’ as their male counterparts” was insufficient to allege that they, in fact, performed equal work, and dismissed their individual claims.  Id. at 6.

Implications For Employers

The Ellis case has been closely watched as it is a significant workplace class action in a worker-friendly jurisdiction. The ruling of December 4 is a win for employers insofar as companies, especially in California, can use the decision to try to stop class actions at the pleadings stage.  When moving to dismiss such complaints, employers should lay out what conclusions can be drawn from assuming specific factual allegations are true, as they may have far less significance than may appear at first glance.  Employers should also continue reminding courts that class actions are only appropriate when they can create common answers to common questions, which is often not the case in large, overbroad class actions, and that conclusory allegations are insufficient to state claims.

By Gerald L. Maatman, Jr.

Seyfarth Synopsis: Each year the American Tort Reform Association (“ATRA”) publishes its “Judicial Hellholes Report” that focuses on litigation problems in state court systems and challenges for corporate defendants in the fair and unbiased administration of justice. The ATRA’s 2017 Report was recently published; a copy is here, as well as an executive summary here.

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

The 2017 Hellholes

The ATRA identified 8 jurisdictions on its 2017 hellholes list – including, in order, (1) Florida (particularly in the Florida Supreme Court and trial courts in southern Florida), (2) California, (3) St. Louis, Missouri, (4) New York (especially in its treatment of asbestos litigation in New York City), (5) Philadelphia (especially in the Philadelphia Court of Common Pleas), (6) New Jersey, (7) Illinois (especially Cook and Madison counties), and (8) Louisiana. As corporate counsel are undoubtedly aware, these are “magnet” venues for Plaintiffs’ class action lawyers and less than optimal venues for corporate defendants to be sued.

The 2017 “Watch List”

The ATRA also included 7 jurisdictions on its “watch list,” including Baltimore, Maryland, Georgia (principally in the Georgia Supreme Court), Newport News, Virginia (especially in asbestos litigation), Oregon (particularly in the Oregon Supreme Court), Pennsylvania (in the Pennsylvania Supreme Court), the U.S. Court of Appeals for the Ninth Circuit, and West Virginia. Just a notch below the 8 hellholes, the “watch list” jurisdictions also present significant challenges for corporate defendants.

Implications For Employers

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