Class Action Litigation

Seyfarth Synopsis: The impact of the #MeToo Movement was the fifth major class action development of 2018, as well as the newest trend in our 15th Annual Workplace Class Action Litigation Report (“WCAR”).  By way of its groundbreaking emergence on social media, the #MeToo Movement profoundly impacted the workplace and made its way into the class action arena.  Today, we conclude our exclusive video series by posting WCAR author Jerry Maatman’s analysis of this trend from Seyfarth Shaw’s “Top Trends In Workplace Class Action Litigation” book launch event held on January 30, 2019.  Click the link below to see and hear Jerry discuss the #MeToo Movement’s effect on complex litigation in 2018!

Seyfarth Synopsis: Of the five major class action developments in 2018, the decline in class action settlement numbers may have been most the striking shift.  In fact, when compared to the 2017 numbers, the value of the top class action settlements in 2018 decreased by over $1 billion.  In today’s blog, our readers can see and hear Workplace Class Action Report (“WCAR”) author Jerry Maatman outline what he called “a very significant marker of class action litigation in 2018.”  Click the link below to watch and hear Jerry’s presentation from Seyfarth Shaw’s “Top Trends In Workplace Class Action Litigation” book launch event!

Seyfarth Synopsis: Last week, we posted the first video in a series of clips from Seyfarth Shaw’s “Top Trends In Workplace Class Action Litigation” book launch event.  Specifically, this set of exclusive videos allows our readers to see and hear Workplace Class Action Litigation Report author Jerry Maatman’s perspective on each major class action trend from 2018.  Today’s clip focuses on class certification rulings, and identifies the areas of litigation in which the Plaintiffs’ bar experienced noticeable success in 2018.  Watch and hear Jerry’s analysis in the link below!

Seyfarth Synopsis:  On January 30, 2019, Seyfarth Shaw hosted “Top Trends In Workplace Class Action Litigation”, an event designed to officially launch the firm’s 15th Annual Workplace Class Action Litigation Report (“WCAR”).  The event’s special guest was Law360 Senior Employment Report Braden Campbell, and also featured an exclusive presentation by WCAR author Jerry Maatman.  Over the next week, we will be posting a series of video clips allowing our blog readers to see Jerry’s analysis of the five most influential class action developments in 2018.  Click the link below to watch Jerry discuss highlights from the U.S. Supreme Court in 2018!

Seyfarth Synopsis: Last week, we were honored to have Braden Campbell, Senior Employment Reporter for Law360, as our guest speaker for Seyfarth Shaw’s “Top Trends In Workplace Class Action Litigation” book launch event.  As the official book launch of our 15th Annual Workplace Class Action Litigation Report, over 1,000 attendees participated in the live event webcast and tuned in to see and listen to Braden’s in-depth analysis.  Specifically, Braden spoke to our viewers about the most influential Supreme Court decisions of 2018, and gave his prediction for the hottest class action topics of 2019.  Today’s post allows anyone who missed the event to see Braden’s entire presentation.  Watch it the link below!

By: Gerald L. Maatman, Jr.

Seyfarth Synopsis: In last week’s blog posting, we explained to our readers how the #MeToo Movement impacted the class action litigation space in 2018, and accordingly became the fifth trend of this year’s Workplace Class Action Report (“WCAR”).  Specifically, due to the emergence of this movement via social media, victims of sexual misconduct began coming forward and bringing allegations against numerous well-known figures and companies.  In today’s finale of the WCAR video series, author Jerry Maatman analyzes this movement in terms of its impact on complex workplace litigation, and discusses how employers should expect this trend to develop in 2019.  Watch the video in the link below!

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

Seyfarth Synopsis: The Illinois Supreme Court held in its first ever ruling concerning the state’s Biometric Information Privacy Act (“BIPA”) that a person need not have sustained actual damage beyond technical violations of BIPA in order to pursue claims for damages.  The Illinois Supreme Court’s ruling will likely greatly increase the potential exposure for companies in actions alleging violations of the Act, and makes strict compliance with the Act significantly important.

For businesses in Illinois (and potentially in states with similar statues), the ruling in Rosenbach v. Six Flags Entertainment Corp., No. 123186, 2019 Ill. Lexis 7 (Ill. Jan. 25, 2019), serves as a loud warning shot that they must immediately take steps to strictly comply with BIPA’s requirements, or risk facing costly class action litigation.  As determined by the Illinois Supreme Court, “[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.

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BIPA Background

Despite being barely over a decade old, BIPA litigation was rather stagnant for its first ten years, until a flurry of lawsuits were filed under this law in 2018.  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.  At the time BIPA was passed into law, the thought of an entity utilizing fingerprint or facial recognition for employee identification was typically reserved for high-net-worth entities or those with dire need for added levels of security.  In today’s workplace, businesses small and large across nearly every industry are using fingerprint or facial recognition for both employee and customer identification.

The BIPA outlines several requirements for the collection and use of biometric information by private entities. Private entities collecting a person’s biometric information musty (1) inform the person in writing that his or her biometric information is being collected; (2) explain the purpose and length of time for which the information will be used; and (3) receive written consent.

The BIPA also 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.”

Case Background

Since 2014, Defendants, operators of an amusement park in Illinois, have used a fingerprinting process when issuing repeat-entry passes to the park.  Id. at *2.  Plaintiff alleged that this system scans pass holders’ fingerprints; collects, records and stores biometric identifiers and information gleaned from the fingerprints; and then stores that data in order to quickly verify customer identities upon subsequent visits by having customers scan their fingerprints to enter the theme park.  She further alleged that in 2014, while the fingerprinting system was in operation, her 14-year-old son visited the amusement park on a school field trip, where his thumbprint was used to gain access as a season pass holder.

Plaintiff filed a three count complaint alleging Defendants violated the BIPA by: (1) collecting, capturing, storing, or obtaining biometric identifiers and biometric information from Plaintiff’s son and other members of the proposed class without informing them or their legally authorized representatives in writing that the information was being collected or stored; (2) not informing them in writing of the specific purposes for which Defendants were collecting the information or for how long they would keep and use it; and (3) not obtaining a written release executed by Plaintiff, her son, or members of the class before collecting the information.  Id. at *6.

Defendants moved to dismiss the complaint, arguing among many things, that plaintiff had suffered no actual or threatened injury and therefore lacked standing to sue.  Id. at *6-7.  The Circuit Court granted Defendants’ motion to dismiss Count III, but denied its motion as to Counts I and II.  Defendants thereafter sought interlocutory review of the Circuit Court’s ruling, which the Illinois Appellate Court granted.

On December 21, 2017, the Illinois Appellate Court for the Second District became the first to address the issue of whether a plaintiff can recover for technical violations of the BIPA, even if the complaint does not allege that the plaintiff suffered any harm, loss or injury.  It held that a plaintiff is not “aggrieved” within the meaning of the Act and may not pursue either damages or injunctive relief under the Act based solely on a defendant’s violation of the statute.  Additional injury or adverse effect must be alleged.  The injury or adverse effect need not be pecuniary, the Appellate Court held, but it must be more than a technical violation of the Act.  Plaintiff thereafter petitioned the Illinois Supreme Court for leave to appeal, which was granted.

The Illinois Supreme Court’s Decision

On January 25, 2019, in a highly anticipated ruling, the Illinois Supreme Court reversed the Illinois Appellate Court and remanded the case back to the Circuit Court for further proceedings.  After summarizing the BIPA, the Illinois Supreme Court began its analysis by zeroing in its statutory construction, noting that Defendants had read the Act as evincing an intention by the legislature to limit a plaintiff’s right to bring a cause of action to circumstances where he or she has sustained some actual damage, beyond violation of the rights conferred by the statute, as the result of the defendant’s conduct.  Id. at *13-14.  The Illinois Supreme Court rejected this argument as untenable, noting that when the General Assembly has wanted to impose such a requirement in other situations, it has made that intention clear.  Id.

Next, the Illinois Supreme Court held that a person who suffers actual damages as the result of the violation of his or her rights would meet this definition of course, but sustaining such damages is not necessary to qualify as “aggrieved.”  Id. at *16.  Rather, “[a] person is prejudiced or aggrieved, in the legal sense, when a legal right is invaded by the act complained of or his pecuniary interest is directly affected by the decree or judgment.”  Id.  Accordingly, based on this construction, the Illinois Supreme Court held that a when a private entity fails to comply with one of the BIPA’s Section 15’s requirements, that violation constitutes an invasion, impairment, or denial of the statutory rights of any person or customer whose biometric identifier or biometric information is subject to the breach.  Id. at *17-18.  Further, it opined that “[n]o additional consequences need be pleaded or proved. The violation, in itself, is sufficient to support the individual’s or customer’s statutory cause of action.”  Id. at *18.

Finally, the Illinois Supreme Court explained that the BIPA vests in individuals and customers the right to control their biometric information by requiring notice before collection and giving them the power to say no by withholding consent.  Id.  It explained that these procedural protections are particularly crucial in our digital world because technology now permits the wholesale collection and storage of an individual’s unique biometric identifiers — identifiers that cannot be changed if compromised or misused.  Id. at *18-19 (citations and quotation marks omitted).  The Illinois Supreme Court further opined that “[w]hen a private entity fails to adhere to the statutory procedures, as [D]efendants are alleged to have done here, the right of the individual to maintain [his or] her biometric privacy vanishes into thin air. The precise harm the Illinois legislature sought to prevent is then realized.  This is no mere ‘technicality.’  The injury is real and significant.”  Id. at *19 (citations and quotation marks omitted).

The Illinois Supreme Court concluded its opinion by holding that contrary to the Appellate Court’s view, an individual need not allege some actual injury or adverse effect beyond violation of his or her rights under the Act in order to qualify as an “aggrieved” person and be entitled to seek liquidated damages and injunctive relief pursuant to BIPA.  Id. at *22.  Therefore, it reversed the judgment of the Appellate Court and remanded to the Circuit Court for further proceedings.

What This Means For Businesses

The decision will make it significantly easier for individuals to assert causes of action and seek damages for mere non-compliance with the BIPA’s requirements – absent any allegations of harm or injury.  In that regard, the decision makes it of the utmost importance that companies take strict measures to comply with the BIPA’s requirements.  As stated by the Illinois Supreme Court, “[w]hatever expenses a business might incur to meet the law’s requirements are likely to be insignificant,” in light of the potential for the significant “liability for failure to comply with [the BIPA’s] requirements.”  Id. at *21.

By: Gerald L. Maatman, Jr.

Seyfarth Synopsis: Seemingly overnight, the #MeToo movement emerged as a worldwide social phenomenon with significant implications for the workplace and class action litigation. In this age of connectivity, societal movements have unprecedented speed and reach. Traditional means of spreading information and generating social change have been supplemented — if not outright replaced — by the near-instantaneous ability of an idea or cause to go viral on social media. Nowhere over the past year was this more evident than with the #MeToo movement, as the chorus of victims’ voices and the media spotlight exposed sexual misconduct in the workplace.

Against this backdrop, many predicted that allegations of on-the-job sexual harassment would increase. The EEOC’s release of data on workplace harassment data in October of 2018 confirmed that reality and the widespread impact of the #MeToo movement throughout the country.

At the same time, many states reviewed their laws in the past year in response to the #MeToo movement. Washington and California changed their laws in 2018 to bar employers from use of mandatory non-disclosure agreements for employees asserting sexual harassment and abuse claims. Several states also explored extending or ending statutes of limitations, spurred on by revelations of sexual abuse in the Catholic Church and in #MeToo reports. More than any other state, California has been in the forefront of introducing “#MeToo bills,” including banning mandatory arbitration clauses in contracts, which require workers to waive the right to take an employer to court in the event of a dispute.

The increasing number of sexual harassment claims in the corporate world as part of the #MeToo movement also has led to a number of high-profile employment-related claims. These types of settlements gained momentum in 2018, as plaintiffs’ lawyers secured a $215 million class action settlement for victims of sexual abuse from the University of Southern California, and a $500 million settlement for victims of sexual assaults from Michigan State University.

On the heels of those claims are a growing number of shareholder derivative and securities class actions. In 2017, 21st Century Fox reached a $90 million settlement with shareholders over losses related to two harassment scandals. Additional class actions were filed against other organizations in 2018. The derivative lawsuits are brought by plaintiff-shareholders purportedly acting on behalf of the company asserting claims for breaches of fiduciary duty and waste of corporate assets against board members and corporate executives. These complaints generally allege that these executives or board members had actual knowledge of or declined to act on sexual misconduct incidents and that, once aware of the incidents, they failed to take appropriate action or concealed the misconduct from shareholders and other stakeholders in the company. Derivative plaintiffs may also allege the misuse of corporate assets and legal resources for settlements and other payments to alleged harassers.

Implications For Employers:

These derivative actions raise significant issues concerning the legal duties of corporations and their boards to monitor potential sexual misconduct by senior executives and other employees. While a corporate board generally has no duty to monitor a corporate officer’s personal behavior, sexual misconduct by an executive in the workplace may trigger liability if the directors consciously allowed the unlawful conduct to occur or failed to establish a compliance system to facilitate employee reporting of sexual harassment and to ensure that the company appropriately investigates and addresses any such allegations. These types of claims are expected to increase in 2019, as the #MeToo movement continues to expand.

By: Gerald L. Maatman, Jr. 

Seyfarth Synopsis: Yesterday’s blog posting gave our readers an in-depth look at class action settlement developments in 2018, the fourth trend of this year’s Workplace Class Action Report (“WCAR”).  In terms of the top ten largest settlement among substantive areas of class action litigation, the monetary value of major case resolutions plummeted in 2018.  In fact, as compared to 2017, top settlement numbers declined by more than a billion dollars.  Today, author Jerry Maatman explains the factors influencing this dramatic change, as well as what employers can expect regarding class action settlements in 2019.  Watch Jerry’s analysis in the video below!

By: Gerald L. Maatman, Jr.

Seyfarth Synopsis: As measured by the top ten largest case resolutions in various workplace class action categories, overall settlement numbers decreased significantly in 2018 as compared to 2017. After settlement numbers were at an all-time high in 2017, those numbers fell dramatically over the past year. In sum, the ability of the plaintiffs’ bar to monetize their class action filings hit a significant wall.

This trend harkened back to the U.S. Supreme Court’s decision in Wal-Mart, Inc. v. Dukes 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. These barriers became more formidable in 2018 with the Supreme Court’s ruling in Epic Systems v. Lewis, which upheld the validity of class action waivers in mandatory workplace arbitration agreements.

The “Wal-Mart/Epic Systems” phenomenon is still being played out, as well as manifesting itself in settlement dynamics. It is expected that the force of this barrier will be felt more profoundly in 2019.

Considering all types of workplace class actions, settlement numbers in 2018 totaled $1.32 billion, which decreased significantly from 2017 when such settlements totaled $2.72 billion and in 2016 when such settlements totaled $1.75 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 2018, there was a significant downward trend for the value of settlement of ERISA and wage & hour class action settlements, as well as for government enforcement lawsuits. In addition, there were significant decreases across-the-board for resolutions of class actions involving employment discrimination claims and statutory workplace laws. By any measure, class action recoveries were down.

This phenomenon is shown by the following chart for 2018 settlement numbers:

By type of case, settlements values in ERISA class actions, wage & hour class actions, and government enforcement cases experienced the most significant decreases.

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 anti-trust laws and statutes such as the Fair Credit Reporting Act or the Worker Adjustment and Retraining Notification Act) totaled $411.15 million, which represented a slight decrease from $487.28 million in 2017 (but an increase from $114.7 million in 2016.)

The following chart tracks these figures:

The pattern for employment discrimination class action settlements likewise followed a slight downward trend in 2018. The top ten settlements totaled $216.09 million as compared to $293.5 million in 2017. The comparison of the settlement figures with previous settlement activity over the last decade is illustrated in the following chart:

In 2018, the value of the top ten largest employment discrimination class action settlements of $216.09 million was the fourth lowest figure since 2010, and largely aligned with 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.

This trend also held for wage & hour class action settlements. In 2018, the value of the top ten wage & hour settlements was $253.18 million. This was a significant decrease from 2017, when the value of the top ten settlements spiked at $574.49 million, which was the second highest annual total in wage & hour class actions ever. 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. Given the ruling in Epic Systems this past year, settlement numbers are apt to remain on a downward trajectory in 2019.

This trend is illustrated by the following chart:

Relatedly, the top ten settlements in government enforcement litigation experienced a downward arc, as they decreased nearly four-fold to $126.7 million. This compared to the figure of $485.2 million in 2017. That being said, these numbers were slightly above the three year trend from 2014 to 2016 when governmental enforcement litigation settlements trended under $100 million for three years running. This trend is illustrated by the following chart of settlements from 2010 to 2018:

ERISA class action settlements fell precipitously in 2018. The top ten settlements fell nearly three-fold to $313.4 million, which were down from $927 million in 2017 and $807.4 million in 2016. Further, given that ERISA class action settlements for the two-year period of 2016 and 2018 were a combined $1.73 billion, the figure for 2018 represents a clear reversal for the plaintiffs’ bar. This trend is illustrated by the following chart of settlements from 2010 to 2018:

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 such as Epic Systems, the Trump Administration’s labor and employment enforcement policies, case filing trends of the plaintiffs’ class action bar, and class certification rulings.