Class Action Litigation

Seyfarth Synopsis:  This year we were lucky enough to have Perry Cooper, Senior Legal Editor of Bloomberg BNA, as our special guest at Seyfarth Shaw’s “Top Trends In Workplace Class Action Litigation” event.  Perry provided our over 1,000 in-person and webcast attendees with an overview of major Supreme Court class action decisions, as well as led the discussion on other important topics for employers including arbitration, ascertainability, and the Fairness in Class Action Litigation Act.  Today’s post allows our blog readers to watch Perry’s entire presentation.  Check it out in the link below!

Seyfarth Synopsis:  Earlier this week, we hosted a webcast with over 1,000 participants on “Top Trends In Workplace Class Action Litigation Panel Discussion”.  The event was a tremendous success, and gave every employer in attendance the tips they need to approach the increasingly complicated class action landscape.  In today’s blog, readers are given the footage from the presentation of Seyfarth Shaw Partner Jerry Maatman at this event.  Watch in the link below! 

By Gerald L. Maatman, Jr. and Peter J. Wozniak

Seyfarth Synopsis:  In a TCPA class action where final settlement (including attorneys’ fees) had already received final approval, a federal district court in California denied class counsel’s request to enjoin a pending state court action brought by their former colleague to recoup a portion of the attorneys’ fees awarded as part of the settlement.

For employers negotiating class action settlements including attorneys’ fees, this ruling provides insight into the potential complications in dealing with fractured class counsel constituencies, and a reminder about the limits of federal courts’ willingness to enjoin parallel state court proceedings.

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In Dakota Medical, Inc. v. RehabCare Group, Inc. et al., No. 14-CV-2081, 2018 U.S. Dist. LEXIS 15972 (E.D. Cal. Jan. 30, 2018), the parties reached a settlement of a TCPA class action. The settlement included an award of $8,333.33 in attorneys’ fees to class counsel.  Id. at *3. Weeks after the settlement received final approval, class counsel moved the District Court to enjoin a state court lawsuit against them by their former colleague, attorney Scott Zimmerman.  Zimmerman’s state court suit sought payment from class counsel for his work on the Dakota Medical action, as well as for his work on a prior putative class action (against the same defendants) on which he also worked with class counsel.  Id. at *4-5.  In the District Court, class counsel sought to enjoin Zimmerman’s state court action under the All Writs Act (28 U.S.C. § 1651(a)) and the Anti-Injunction Act (28 U.S.C. § 2283).  Class counsel argued that an injunction from the district court was necessary “in aid of” the District Court’s jurisdiction in the now-settled class Dakota Medical action, and to avoid relitigation of issues already decided by the district court.  Id. at *5.  Judge Dale A. Drozd of the U.S. District Court for the Eastern District of California denied the motion to enjoin the pending state court action.

Employers can use this decision in to guide their settlement negotiations with class counsel constituencies and inform the sort of assurances that might be sought even when relatively small amounts of attorneys’ fees are at stake, and to bear in mind the occasional reticence of federal courts to interfere with parallel state court actions.

Case Background

The underlying litigation involved the alleged sending of a “huge number of junk faxes to various nursing homes and healthcare facilities.”  Id. at *3.  After “substantial litigation,” the parties settled their dispute.  The settlement agreement provided for class counsel to receive one-third of the $25,000 common fund.  Id.

Zimmerman acted as class counsel in the Dakota Medical action until he was dismissed by the named plaintiffs in March 2016.  Id. at *5 n.1.  He also previously worked with class counsel on another class action against the Dakota Medical defendants, where class certification was ultimately denied.  Id.  Shortly after judgment was entered in the Dakota Medical action, Zimmerman brought a state court action against the Dakota Medical class counsel under a quantum meruit theory, seeking to be paid for his work on both class actions.  Id.

Under the All Writs Act, class counsel moved the district court in Dakota Medical to enjoin Zimmerman’s state court suit against them, arguing that “two of the exceptions to the Anti-Injunction Act — the necessary in aid of jurisdiction exception and the relitigation exception — appl[ied] here, permitting [the district court] to enjoin the state court action.”  Id. at *7.  Class counsel argued that the “necessary in aid of jurisdiction” exception applied for four reasons: “(1) the state court action ‘threatens to frustrate proceedings and disrupt the orderly resolution’ of [the Dakota Medical action]; (2) the state court action ‘undermines the due process rights of [Dakota Medical] class members to receive notice of and object to attorneys’ fees’; (3) allowing the state court action to proceed undermines the procedures set forth in Rule 23 for the awarding of attorneys’ fees; and (4) the state court action unfairly penalizes named plaintiff and class representative Dakota Medical.”  Id. at *10. Class counsel argued that the “relitigation exception” applied because Zimmerman had a “full and fair” opportunity to litigate his entitlement to fees before the district court in Dakota Medical and that Zimmerman’s state court action was “an effort to relitigate [the Dakota Medical] court’s decision with respect to the award of attorneys’ fees.”  Id. at *18.

The Court’s Decision

The Court denied class counsel’s motion to enjoin Zimmerman’s state court lawsuit action on both grounds.

First, the Court addressed class counsel’s arguments regarding the “necessary in aid of jurisdiction” exception.  The Court explained that class counsel’s first argument fell short, because frustration “and even some disruption” of a federal action are insufficient.  Id. at *8-10..  The Court explained that Zimmerman’s state court action would not “damage the settlement of [the Dakota Medical] action in any way.”  Id. at *10.  The state court “would presumably award a money judgment in [Zimmerman’s] favor” against class counsel, but would not “invade the funds set aside for the class” or otherwise affect the Dakota Medical settlement.  Id.  The Court explained that class counsel’s second argument was insufficient because due process does not require class members to be informed as to how attorneys’ fees are divided among class counsel.  Id. at *13-14.  The court rejected class counsel’s third argument because Zimmerman’s state court action did not seek an award of attorneys’ fees under Rule 23, it sought quantum meruit damages against class counsel for “the value of the work performed.”  Id. at 14.  The Court summarily rejected class counsel’s fourth argument as being unsupported by any authority, and noted that class counsel’s concerns were “separate and apart” from the Dakota Medical suit itself.

Second, with regard to the “relitigation exception,” the Court noted that “class counsel fall far short of establishing the applicability of that exception . . . .”  Id. at *18.  First, the Court explained that class counsel failed to demonstrate that Zimmerman –a non-party in the Dakota Medical suit – was in privity with the parties.  Id. at *19.  According to the Court, some of “the parties to the settlement in this action” were actually adversarial to “Zimmerman’s interest in the outcome of the attorneys’ fees dispute.”  Id. at *20.  The Court also explained that there was no identity of claims between the suits.  As the Court noted, the Dakota Medical suit involved purported TCPA violations involving “junk faxes advertising seminars and workshops on Medicare and Medicaid billing and other issues to healthcare facilities.”  Id. at *22.  Zimmerman’s suit, however, “concerns what compensation, if any, should be paid to a former attorney of the named plaintiff for his work allegedly performed in connection with both [the Dakota Medical suit] and another lawsuit.”  Id.

Accordingly, the Court denied class counsel’s motion to enjoin Zimmerman’s state court lawsuit.

Implications For Employers

It is not uncommon for the makeup of class counsel constituencies to change over the course of a protracted litigation, or for disputes to arise among plaintiffs’ counsel regarding the appropriate payment of attorneys’ fees.

In Dakota Medical, final settlement was approved by the Court on September 21, 2017, but the ensuing motion practice regarding the injunction was not resolved for more than four additional months.  Thus, when negotiating class actions settlements, to help ensure expedient resolution of agreed-upon settlements, employers should consider whether and to what extent assurances regarding former class counsel can and should be secured.

Further, particularly in the Ninth Circuit, employers can use this decision to remind themselves of the reluctance of federal courts to interfere with state court actions, even those which from a pragmatic perspective may frustrate or disrupt a federal action.

Seyfarth Synopsis: On February 6, 2018, Seyfarth Shaw Partner Jerry Maatman and Bloomberg Law Senior Legal Editor Perry Cooper presented a timely event on “Top Trends In Workplace Class Action Litigation Panel Discussion.” The discussions focused on views of cutting edge issues relative to the workplace class action litigation landscape.  With over 1,000 people attending either in person at our Chicago office or via our live Webcast, Maatman and Cooper’s discussion was a “must see” for representatives of businesses across the country.

Following Seyfarth Shaw’s recent launch of its 2018 Workplace Class Action Litigation Report, Jerry Maatman distilled the 900-page publication into key trends and takeaways on the most important developments impacting employers from the past year in class action litigation, as well as future trends that businesses should keep on their radar.  Perry Cooper added further in-depth analysis relative to many of the key U.S. Supreme Court cases affecting employment law and class actions, which she has been tracking and writing about extensively on Bloomberg’s behalf.

The engaging discussion focused on four key trends that were identified in the 2018 Workplace Class Action Litigation Report, including: (1) the monetary value of the top workplace class action settlements rose dramatically in 2017; (2) 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; (3) 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/less litigation viewpoint of the Trump Administration; and (4) class action litigation increasingly has been shaped and influenced by recent rulings of the U.S. Supreme Court.

Maatman provided several noteworthy takeaways, including three highlights:

  • 2017 was “by far the largest cash-take for plaintiffs’ lawyers” ever in terms of workplace class actions settlements, as the top ten settlements in various employment-related class action categories totaled $2.72 billion in 2017, a “breathtaking and remarkable” increase of over $970 million from $1.75 billion in 2016.  Check out how Jerry explained the importance of this increase in settlements by clicking the video below!

  • In 2018, “as the government’s administration is getting settled in,” employers should anticipated seeing, “smaller governmental enforcement lawsuits brought on behalf of a smaller number of employees.”
  • Regarding the recent onslaught of workplace sexual harassment accusations and investigations in the context of the #MeToo campaign, “although headlines in the paper may be very difficult to stomach for some employers, and the piper must be paid in a certain respect, I’m not convinced it will be through successful prosecution of class action litigation insofar as sex harassment is concerned. That theory will run smack into the Rule 23 barriers created by Wal-Mart Stores, Inc. v. Dukes.”

Overall, Maatman and Cooper’s discussion left little doubt that 2018 will be an eventful year in terms of the workplace class action arena.  Employers should anticipate 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.  As such, businesses absolutely should stay tuned in regarding developments in this space.

Thank you to everyone who joined us either here in Chicago or via our live webcast.  For those interested in viewing a video of the presentation, stay tuned. We will be posting a complete video of the event this week.

Seyfarth Synopsis:  Earlier this week, our blog posting analyzed pivotal rulings by the U.S. Supreme Court in 2017, which was the penultimate trend of this year’s Workplace Class Action Report (WCAR).  In today’s finale of the WCAR video series, author Jerry Maatman provides his analysis on the Supreme Court jurisprudence for our readers.  In addition to outlining the highlights of 2017, Jerry discusses the importance of the Supreme Court itself, as well as what hot topics employers should monitor in 2018.  Watch our video in the link below!

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

Seyfarth Synopsis: In a nationwide consumer fraud class action involving false labeling claims under various state laws, a federal district court in Illinois granted the company’s motion to dismiss claims relative to a putative national class of plaintiffs, holding it did not have jurisdiction over the claims of the non-resident class of plaintiffs based on the recent U.S. Supreme Court opinion in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S.Ct. 1773 (2017). For businesses and employers facing nationwide class action lawsuits, this ruling is instructive in regards to strategies to fracture and minimize the class size, and limit potential liability.

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In DeBernardis v. NBTY, Inc., Case No. 17-CV-6125, 2018 U.S. Dist. LEXIS 7947 (N.D. Ill. Jan. 18, 2018), Plaintiff alleged that Defendants made false and misleading claims concerning the beneficial effects of a dietary supplement.  The four-count complaint alleged violations of state consumer fraud acts on behalf of a multi-state class, as well as a class of Illinois-based purchasers.  Defendants moved to dismiss on a variety of grounds, including their assertion that the Court did not have jurisdiction to hear the case involving the non-resident class of plaintiffs based on the recent U.S. Supreme Court opinion in Bristol-Myers Squibb.  Judge Harry D. Leinenweber of the U.S. District Court for the Northern District of Illinois granted Defendants’ motion to dismiss Counts I, III, and IV as to the putative national class of Plaintiffs.

Businesses and employers can use this ruling to attack and limit nationwide class actions involving the state law claims of non-resident plaintiffs, following the Bristol-Myers Squibb decision.

Case Background

Plaintiff brought a nationwide class action seeking monetary damages and injunctive relief against the distributor of a dietary supplements.  The four-count complaint alleged that Defendants made false and misleading claims concerning the beneficial effects of the product.  Id. at *1.  Count I alleged violations of state consumer fraud acts on behalf of a multi-state class; Count II alleged violation of the Illinois Consumer Fraud Act on behalf of Illinois purchasers; Count III alleged violations of express warranty on behalf of the nationwide class, and Count IV alleged unjust enrichment on behalf of the nationwide class.

Defendants moved to dismiss, arguing: (i) that as to Counts I, III, and IV, the Court did not have jurisdiction to hear the case involving non-resident classes of plaintiffs based on Bristol-Myers Squibb; (ii) that as to Count III, Plaintiff lacked Article III standing to claim injunctive relief; (iii) Plaintiff failed to allege that he gave pre-suit notice to Defendants of his breach of warranty claim; and (iv) Plaintiff’s claim for unjust enrichment failed for the national class for the same reason as his nationwide consumer fraud claim as alleged in Count I failed.  Id. at *2.

The District Court’s Decision

The Court granted the Defendants’ motion to dismiss Counts I, III, and IV relative to the allegations concerning the putative national class of Plaintiffs.  The Court explained that the main issue to be decided was the applicability of Bristol-Myers Squibb to the putative nationwide class action.  In analyzing Bristol-Myers Squibb, the Court explained how the U.S. Supreme Court pointed out that a variety of interests must be considered in determining whether personal jurisdiction is present, including those of the forum state, the defendant, and the plaintiff.  Id. at *3-4.  However, the primary concern is the burden on the defendant.  Id. at *4.  Further, the Court opined that in addition to the practical problems of litigating in the out-of-state forum, it must consider “the more abstract matter of submitting to the coercive power of a State that may have little legitimate interest in the claims in question.”  Id. (internal quotation marks and citation omitted).

In response to Defendants’ citation of Bristol-Myers Squibb, Plaintiff argued that his case was distinguishable since Bristol-Myers Squibb involved mass tort actions and not putative class actions, a point that was raised by U.S. Supreme Court Justice Sonia Sotomayor in her dissenting opinion in Bristol-Myers SquibbId.  Acknowledging that the applicability of Bristol-Myers Squibb to this case was a “close question,” the Court rejected Plaintiff’s argument and held that “it is more likely than not based on the Supreme Court’s comments about federalism that the courts will apply Bristol-Myers Squibb to outlaw nationwide class actions in a form, such as in this case, where there is no general jurisdiction over the Defendants.”  Id. at *5.  Further, the Court cautioned that the issue of forum shopping is just as present in multi-state class actions as it is in mass torts actions.  Id.  Accordingly, to the extent that Counts I, III and IV sought to recover on behalf of out-of-state Plaintiff classes, the Court granted Defendants’ motion to dismiss.

Implications For Employers

Although this case is outside of the workplace class action arena, its implications are highly relevant for employers facing nationwide workplace class action lawsuits that include state law claims.  As one of the early cases to interpret the U.S. Supreme Court’s Bristol-Myers Squibb decision from June 2017, the opinion in DeBernardis is instructive for businesses in terms of how they can argue that courts do not have jurisdiction to hear class actions involving state law claims of non-resident classes of plaintiffs.  The fracturing of nationwide class actions minimizes the impact of these bet-the-company cases for employers, and allows them to attack and defend against such claims in a more manageable fashion.

 

Seyfarth Synopsis:  The fourth and final key trend from our 14th Annual Workplace Class Action Litigation Report involves rulings by the U.S. Supreme Court.  Over the past few years, the country’s highest court has issued a number of rulings that impacted the prosecution and defense of class actions in significant ways.  Today, we provide readers with an outline of the most important workplace rulings issued by the Supreme Court in 2017, as well as which upcoming decisions employers should watch for in 2018.  Read the full breakdown below!

Over the past decade, the U.S. Supreme Court led by Chief Justice John Roberts increasingly has shaped the contours of complex litigation exposures through its rulings on class action and governmental enforcement litigation issues. Many of these decisions have elucidated the requirements for pursuing employment-related class actions.

The 2011 decision in Wal-Mart Stores, Inc. v. Dukes and the 2013 decision in Comcast Corp. v. Behrend are the two most significant examples. Those rulings are at the core of class certification issues under Rule 23. To that end, federal and state courts cited Wal-Mart in 586 rulings in 2017; they cited Comcast in 238 cases in 2017.

The past year also saw a change in the composition of the Supreme Court in April of 2017, with Justice Neil Gorsuch assuming the seat of Antonin Scalia after his passing in 2016. Given the age of some of the other sitting Justices, President Trump may have the opportunity to fill additional seats on the Supreme Court in 2018 and beyond, and thereby influence a shift in the ideology of the Supreme Court toward a more conservative and strict constructionist jurisprudence. In turn, this is apt to change legal precedents that shape and define the playing field for workplace class action litigation.

Rulings In 2017

In terms of direct decisions by the Supreme Court impacting workplace class actions, this past year was no exception. In 2017, the Supreme Court decided seven cases – three employment-related cases and four class action cases – that will influence complex employment-related litigation in the coming years. The three “game-changers” in 2017 can be seen in the following graphic:

The employment-related rulings included one case brought under the Worker Adjustment and Retraining Notification Act, one ERISA case, and one EEOC case. A rough scorecard of the decisions reflects two distinct plaintiff/worker-side victories, and defense-oriented rulings in five cases.

  • EEOC v. McLane Co., 137 S. Ct. 1159 (2017) – Decided on February 21, 2017, the case involved the applicable standard of appellate review of district court decisions to quash or enforce EEOC subpoenas. The Supreme Court held that the standard must be based on an abuse of discretion, and contrary lower court decisions – which called for de novo review – were rejected. The EEOC has broad statutory authority to issue subpoenas in the course of investigating charges of employment discrimination, and it may seek enforcement of its subpoenas in federal court when employers refuse to comply with them. In that event, the applicable test favors enforcement of the subpoena. The Supreme Court determined that if the charge is proper and the material requested is relevant, the subpoena should be enforced unless the employer can establish that the subpoena is too indefinite, has been issued for an illegitimate purpose, or is unduly burdensome. In sum, the Supreme Court underscored the breadth of the agency’s authority to subpoena information from employers in the course of investigating discrimination charges.
  • Expressions Hair Design, et al. v. Schneiderman, 137 S. Ct. 1144 (2017) – Decided on March 29, 2017, this case involved a class action by a group of New York merchants, arguing that a New York statute that prohibits merchants from charging a surcharge to customers who use credit cards violated the First Amendment because it regulates what they say about their prices. The lower courts had dismissed the suit out of hand, concluding that price regulations regulated conduct alone and thus are immune from scrutiny under the First Amendment. The Supreme Court held that because the statute goes beyond the pure regulation of price sufficiently into the realm of regulating speech, it is subject to scrutiny under the First Amendment. As a result, the case was remanded for further consideration of the validity of the statute under the First Amendment. The ruling is a narrow one, but ensures the continuation of class action litigation over the New York statute.
  • Advocate Health Care Network, et al. v. Stapleton, 137 S. Ct. 1652 (2017) – Decided on June 5, 2017, this ruling determined that pension plans that otherwise meet the definition of a church plan definition under the ERISA can qualify for the exemption without being established by a church. The decision is the culmination of a wave of ERISA class actions brought by employees of religiously affiliated non-profit hospitals who asserted that the employers improperly claimed that their pension plans were ERISA-exempt “church plans.”
  • Microsoft Corp. v. Baker, et al., 137 S. Ct. 1702 (2017) – Decided on June 12, 2017, this ruling determined that the voluntary dismissal of individual claims by class representatives after denial of class certification deprives appellate courts of jurisdiction over review of the underlying class certification decision. The case involved consideration of a strategy for appealing denials of class certification whereby plaintiffs responded to a denial of class certification with a voluntary agreement to dismiss their claims. With that dismissal in hand, they would claim they have a final order that they can appeal, planning to revive their claims if the appeal reversed the certification order. The Supreme Court unanimously rejected this practice. It held that plaintiffs in putative class actions cannot transform a tentative interlocutory order into a final judgment simply by dismissing their claims with prejudice – subject, no less, to the right to revive those claims if the denial of class certification was reversed on appeal. The ruling should help corporate defendants in defeating piece-meal attacks on favorable class certification orders.
  • Bristol-Myers Squibb Co., et al. v. Superior Court Of California, 137 S. Ct. 1773 (2017) – Decided on June 19, 2017, this opinion established limitations on personal jurisdiction over non-resident plaintiffs in “mass actions,” a litigation strategy often utilized by plaintiffs’ class action lawyers to sue corporations in plaintiff-friendly jurisdictions that have little to no connection with the dispute. The Supreme Court determined that the requisite connection between the corporate defendant and the litigation forum must be based on more than a combination of the company’s connections with the state and the similarity of the claims of the resident plaintiffs and the non-resident claimants. The ruling reversed a lower court decision that hundreds of plaintiffs who sued a corporation in California state court over alleged injuries associated with a corporation’s product could not sue in that state because they were not residents. In effect, it reversed a decision of the California Supreme Court and directed the dismissal of 592 non-California claims from 33 other states. The ruling has significant implications for the location and scope of class action litigation. As a result, the ruling supports the view that plaintiffs cannot simply “forum shop” in large class actions, and instead must sue where the corporate defendant has significant contacts for purposes of general jurisdiction or limit the class definition to residents of the state where the lawsuit is filed. It should provide some measure of protection to corporations that often are hauled into plaintiff-friendly jurisdictions across the country to which they have nor the plaintiffs suing them had any connection.
  • CalPERS, et al. v. ANZ Securities, Inc., 137 S. Ct. 2042 (2017) – Decided on June 26, 2017, this decision involved a relatively technical question regarding the right to opt-out of a class action – when plaintiffs file a class action, are members of the class entitled to opt-out and represent themselves, and how statutes of limitations work in that situation. Federal securities laws include two different kinds of filing deadlines for claims about misrepresentations in connection with the issuance of securities, including a one-year deadline running from the discovery of the untrue statement and an outside three-year deadline running from the date on which the statement was made. The Supreme Court held that tolling under American Pipe applies only to the one-year deadline, not the three-year deadline. Applying that rule, it barred the action brought in this case by CalPERS, which had opted-out of a large class action brought against Lehman Brothers; the original action was brought in a timely manner, but CalPERS did not opt-out of that action until more than three years after the challenged statements. The ruling closes off a tactic of successive class claims by barring the traditional power of lower federal courts to modify statutory time limits in the name of equity despite any practical obstacles this creates in class actions.
  • Czyzewski, et al. v. Jevic Holding Co., 137 S. Ct. 973 (2017) – Decided on March 22, 2017, this case involved the Worker Adjustment and Retraining Notification (“WARN”) Act and the interplay between worker rights under that statute and the rights of creditors in bankruptcy proceedings after a company allegedly violates the WARN Act. In considering whether priority in distributing assets in bankruptcy may proceed in a manner that allegedly violates the priority scheme in the Bankruptcy Code, the Supreme Court held that such a distribution is improper and priority rules may not be evaded in Chapter 11 structured dismissals. The Supreme Court’s ruling protects workers with WARN claims and bars priority deviations in bankruptcies implemented through non-consensual structured dismissals.

The decisions in Advocate Health Care Network, Baker, Bristol-Myers, CalPERS, Expressions Hair Designs, Jevic, and McLane Co. are sure to shape and influence workplace class action litigation and government enforcement litigation in a profound manner. Theses rulings will impact standing concepts and jurisdictional challenges, liability under the WARN and the ERISA, appeals of class certification decisions, challenges to EEOC administrative subpoenas, and rules on American Pipe tolling and application of statute of limitations in class actions. To the extent that extrinsic restrictions on class actions – i.e., limits on the ability of representative plaintiffs to appeal certification orders (as in Baker), and jurisdictional restrictions on bringing cases in “plaintiff-friendly” jurisdictions (as in Bristol-Myers) – were tightened, class actions will become harder to maintain and litigate. On the other hand, McLane Co. is certainly a setback for employers and strengthens the EEOC’s ability to conduct wide-ranging administrative investigations through its subpoena power.

Rulings Expected In 2018

Equally important for the coming year, the Supreme Court accepted five additional cases for review in 2017 – that will be decided in 2018 – that also will impact and shape class action litigation and government enforcement lawsuits faced by employers.

Those cases include three employment lawsuits and two class action cases. The Supreme Court undertook oral arguments on two of these cases in 2017; the other three will have oral arguments in 2018.

The corporate defendants in each case have sought rulings seeking to limit the use of class actions or raise substantive defenses to class actions or employment-related claims. Further complicating several of these cases, government agencies have either taken opposing stances with each other or reversed positions they held in pervious Supreme Court terms or in the lower court proceedings in these cases.

  • Epic Systems Corp. v. Lewis, NLRB v. Murphy Oil USA & Ernst & Young LLP v. Morris, 16-285, 16-300 & 16-307 – Argued on October 2, 2017, these three consolidated appeals in employment cases deal with the interpretation of workplace arbitration agreements between employers and employees and whether class action waivers within such agreements – which require workers to arbitrate any claims on an individual basis (and waive the ability to bring or participate in a class action or collective action) – violate employees’ rights under the National Labor Relations Act to engage in “concerted activities” in pursuit. The Supreme Court’s ultimate decision is likely to have far-reaching implications for litigation of class actions and collective actions. The issue started when the NLRB under the Obama Administration began challenging employers’ use of arbitration agreements with class action waivers. During briefing of the issue before the Supreme Court, The Department of Justice under President Trump opposed the NLRB’s position, and has sided with employers and argued that the Federal Arbitration Act favors the validity and enforcement of arbitration agreements that include class waivers.
  • Cyan, Inc., et al. v. Beaver County Employees Retirement Fund, 15-1439 – Argued on November 28, 2017, this class action case poses the issue of whether federal law bars state courts from hearing certain securities class actions. The case turns on interpretation of the Private Securities Litigation Reform Act of 1995 – which imposes tougher standards on securities class actions brought in federal courts – and if it mandates that state courts can no longer hear class actions based on the Securities Act of 1933. The ultimate ruling by the Supreme Court will impact what many view as a “cottage industry” of state court-based class action filings in states such as California where class action lawyers target public companies with securities claims over drops in stock process.
  • Encino Motors, LLC v. Navarro, et al., 16-1362 – In this case, the Supreme Court will examine whether service advisors at car dealerships are exempt under 29 U.S.C. § 213(b)(10)(A) from the overtime pay provisions of the Fair Labor Standards Act. The future ruling in the case may have far-reaching implications on the legal tests for interpretation of statutory exemptions under the FLSA. A broader reading of the exemption potentially could reduce the number of workers allowed to assert wage & hour claims against their employers. The case is set for argument on January 17, 2018.
  • Janus, et al. v. AFSCME, 16-1466 – In this employment case, the Supreme Court will consider whether Abood v. Detroit Board of Education, 431 U.S. 209 (1977), should be overruled and public-sector “agency shop” arrangements invalidated under the First Amendment so as to prevent public-sector unions from collecting mandatory fees from non-members. In deciding the constitutionality of “fair share fees” being imposed on public-sector employees as a condition of employment, the Supreme Court’s future ruling likely will impact millions of workers in 22 states that do not have right-to-work laws. Since many workers are apt to cease paying union dues if the fair share fee payments requirement is abolished, the future ruling will have a significant impact on the ability of public-sector unions to conduct their business. The case is set for oral argument on February 26, 2018.
  • Resh, et al. v. China Agritech, Inc., 17-432 – In this class action case, the Supreme Court will examine whether the tolling rule for class actions established in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), tolls the statute of limitations to permit a previously absent class member to bring a subsequent class action outside the applicable limitations period. In American Pipe, the Supreme Court held that the filing of a class action tolls the running of the statute of limitations for all putative members of the class who make timely motions to intervene after the lawsuit is deemed inappropriate for class action status. In essence, a future ruling in this case will limit or expand the tolling rule in American Pipe to apply only to subsequent individual claims or if it is expanded broadly to successive class actions where plaintiffs were unnamed class members in failed class actions. The case has yet to be set for oral argument.

The Supreme Court is expected to issue decisions in these five cases in 2018.

Implications For Employers

Each decision outlined above may have significant implications for employers and for the defense of high-stakes class action litigation. Further, the decision in Epic Systems / E & Y / Murphy Oil may well end up being one of the most significant rulings for employers since Wal-Mart Stores, Inc. v. Dukes in 2011. Employers have to keep a close eye on this case, since the decision may shift the class action landscape in terms of the ability of employees to bring suit against a company. As always, we will closely monitor all Supreme Court case developments and report them to our readers. Stay tuned!

Seyfarth Synopsis:  Our latest blog gave readers a detailed breakdown of a busy year on the litigation front at the U.S. Equal Employment Opportunity Commission (“EEOC”) and Department of Labor (“DOL”).  Notably, our 2018 Workplace Class Action Report highlighted a doubling in EEOC-initiated lawsuits despite the incorporation of a pro-business Trump Administration.  In today’s blog, author Jerry Maatman explains this important trend, and provides his analysis on the direction of government-initiated litigation in 2018.  Watch the video in the link below!

Seyfarth Synopsis:  Despite the major ideological shift that occurred within American politics in 2017, government-initiated litigation continued to flourish if not increase even after with the election of the pro-business Trump Administration.  A clear example of this can be seen in the courtroom, as the U.S. Equal Employment Opportunity Commission (“EEOC”) filed more than the double the amount of merit lawsuits in 2017 than the Commission initiated in 2016.  Today, readers are given an overview of a busy year at the EEOC and Department of Labor (“DOL”), as well as what employers should expect in the future in terms of government enforcement litigation.  Check out this exclusive excerpt from the 2018 Workplace Class Action Report below!   

On the governmental enforcement front, the change-over from the Obama Administration to the Trump Administration had little to no impact on reducing the pace of litigation filings and settlements in 2017. Both the EEOC and the DOL intensified the focus of their administrative enforcement activities and litigation filings in 2017. At the same time, the number of lawsuits filed and the resulting recoveries by settlement – measured by aggregate litigation filings and the top 10 settlements in government enforcement litigation – constituted a ten-fold increase as compared to what the EEOC and DOL achieved in 2016.

To the extent the Trump Administration aims to change those dynamics, its agency appointees either were not nominated in time to influence their respective agencies or were not put into place until mid to late 2017. The result was a delay in charges to agency policies and priorities. In this respect, fundamental changes to patterns in government enforcement litigation are more akin to changing the direction of a large sea-going cargo tanker than a small motor boat. Change is inevitable, but it takes time. Thus, the impact of change on governmental litigation enforcement trends is not likely to be felt until well into 2018.

As a result, the EEOC’s lawsuit count increased geometrically in 2017. By continuing to follow through on the systemic enforcement and litigation strategy plan it announced in April of 2006 (that centers on the government bringing more systemic discrimination cases affecting large numbers of workers), the EEOC filed more cases as well as more systemic lawsuits. As 2017 demonstrated, the EEOC’s prosecution of pattern or practice lawsuits remained an agency-wide priority backed up by the numbers. Many of the high-level investigations started in the last three years mushroomed into the institution of EEOC pattern or practice lawsuits in 2017.

By comparison to previous years, 2017 was a big one for the EEOC in terms of the number of lawsuits filed. Total merits filings were up more than 100% as compared to 2016. In fact, the EEOC filed more lawsuits in the month of September of 2017 than it did in all of the months of 2016 combined. This can be seen in the following graph:This past year also marked the first year of the EEOC’s new Strategic Enforcement Plan (“SEP”), which is intended to guide enforcement activity for 2017 to 2021. Although the new SEP outlines the same six enforcement priorities as in prior years, few people familiar with how the agency pursues its objectives expect that the EEOC will continue to enforce those priorities in the same way under the Trump Administration. The six enforcement priorities include: (1) the elimination of systemic barriers in recruitment and hiring; (2) protection of immigrant, migrant, and other vulnerable workers; (3) addressing emerging and developing issues; (4) enforcing equal pay laws; (5) preserving access to the legal system; and (6) preventing harassment through systemic enforcement and targeted outreach.

Each of these priorities can be interpreted in multiple ways. For example, the EEOC has consistently focused on the protection of lesbians, gay men, bisexuals, and transgender people as one of the most important emerging and developing issues in the workplace. A breakdown of court decisions by state regarding sexual orientation under Title VII can be seen in the following map:

The EEOC’s efforts in this area have resulted in a body of case law in many jurisdictions over the past several years that now holds that discrimination against transgender individuals, or on the basis of sexual orientation, is a form of sex discrimination prohibited by Title VII. However, the Department of Justice under President Trump has recently disagreed with that interpretation. This may signal that this is one area that will shift in 2018 as high-level personnel changes are made within the EEOC.

The EEOC also focused in the past year on employers’ utilization of social media and the use of algorithms and information available on the internet to screen job applicants. Recent comments by the EEOC’s staff indicate that this may be one of the “barriers to recruitment and hiring” that the agency will focus on in 2018 and beyond. Along the same lines, the EEOC has shown an increased willingness to bring ADEA lawsuits against employers – especially in the hospitality industry – that it believes are discriminating against hiring applicants aged 40 and over.

The EEOC also recently issued new guidance impacting two of its enforcement priorities, including preserving access to the legal system (i.e., through increased enforcement of the anti-retaliation provisions of Title VII, the ADA, and the ADEA) and preventing harassment in the workplace. Among other things, the retaliation guidance expands the definition of “adverse action” to include one-off incidents and warnings, as well as anything that reasonably could be likely to deter protected activity. With respect to preventing harassment, the new guidance clarifies the EEOC’s thinking about what constitutes a hostile work environment and the defenses available to employers when that hostile work environment is the result of supervisors’ misconduct. Although important developments in their own right, the real impact of these new guidelines may not be clear until employers see how they are interpreted by the EEOC in active litigation situations. Like the priorities themselves, that will be impacted by whatever new policies and directives are put in place by the new Trump appointees.

It also appears that the EEOC is finally executing on its oft-stated intention to increase enforcement under the Equal Pay Act (“EPA”). The EEOC filed 11 EPA lawsuits in 2017. This is a significant increase over prior years (six EPA lawsuits were filed in 2016, five in 2015, and two in 2014). However, its enforcement efforts in this area may have suffered a setback when the changes the EEOC planned to make to the EEO-1 reporting requirements were put on hold in 2017. It was widely speculated that the new reporting requirements would have assisted the EEOC in bringing more claims under the EPA. Under the leadership of the new Administration, the Office of Management and Budget, pursuant to its authority under the Paperwork Reduction Act, stayed implementation of the EEOC’s new EEO-1 regulations this past year.

The Commission’s 2017 Performance Accountability Report announced that its systemic litigation program continues to be a focus for the EEOC. The EEOC labels a case “systemic” if it “has a broad impact on an industry, company, or geographic area.” Systemic trends from the last five years of EEOC systemic cases can be seen in the following graph:The EEOC’s FY 2017 report outlined the EEOC’s activity from October 2, 2016 to September 30, 2017. It showed the following:

  • The EEOC’s field offices resolved 329 systemic investigations and collected $38.4 million in remedies (compared to 273 systemic investigations and $20.5 million in 2016). The figures for 2017 constitute significant increases over the previous year, and are near record amounts for monetary relief for systemic cases.
  • The EEOC also issued cause determinations finding discrimination in 167 systemic investigations (compared to 113 in 2016). Consequently, not only did the EEOC resolve more systemic investigations compared to 2016, but also it made considerably more cause determinations that it converted into beefed-up recoveries for claimants compared to last year.
  • The EEOC secured approximately $484 million in total relief in 2017 in litigation, mediations, and pre-litigation investigations. This tracks closely to last year’s total relief figure of $482.1 million. It also includes $355.6 million obtained through mediation, conciliation, and settlement for victims of discrimination in private, state and local government, and federal workplaces. That number is marginally up from last year, which saw $347.9 million in such recoveries.
  • Litigation recoveries, on the other hand, have been steadily declining over the past few years, hitting only $42.4 million in 2017. This is markedly lower than 2016 and 2015, which saw the EEOC obtain $52.2 million and $65.3 million in litigation recoveries respectively.
  • The EEOC filed 184 merits lawsuits in 2017. This is more than double the 86 merits lawsuits that were filed in 2016. Of the lawsuits, 124 were on behalf of individuals, 30 were non-systemic suits with multiple victims, and the other 30 were systemic claims. The EEOC also filed 18 subpoena enforcement actions in 2017. Hence, the EEOC in the first year of the Trump Administration was far more active in filing lawsuits than in the final year of the Obama Administration.
  • In FY 2017, the EEOC resolved 99,109 charges, a marked increase over the past two years. As a result, the EEOC decreased its charge inventory by 16.2%, to 61,621 charges. This is the lowest level of charge inventory in 10 years and represents a significant reduction compared to FY 2016, when the EEOC only reduced its outstanding charges by 3.8%.

By comparison, the DOL’s enforcement recoveries dwarfed those of the EEOC in 2017, as the DOL undertook aggressive enforcement activities over the past year and scored increases in settlements both in court actions and in the administrative investigation process. Without a full leadership team in place at the DOL’s Wage & Hour Division (“WHD”), the enforcement program continued on the same track as it had been under the Obama Administration. In FY 2017, the WHD recovered more than $270 million in back pay wages for more than 240,000 workers, which represented a solid increase from the back wages recovered in the previous year. Given the Trump Administration’s focus on policy changes, employers can expect that many of these enforcement strategies will get a closer look as the new DOL leadership team falls into place in 2018.

Over the past several years, the WHD fundamentally changed the way in which it pursues its investigations. Suffice to say, the investigations have been more searching and extensive, and often result in higher monetary penalties for employers. According to the DOL, since early 2009, the WHD has closed 200,000 cases nationwide, resulting in more than $2.2 billion in back wages for over 2.24 million workers. In FY 2017, the WHD collected more than $270 million in back wages. For much of the year, the DOL kept up its aggressive enforcement program, particularly in the hotel, restaurant, and retail industries. Much of the WHD’s enforcement and other activities took place under the umbrella of “fissured industries” initiatives, which focus on industries with high usage of franchising, sub-contracting, and independent contractors. At the conclusion of those enforcement actions, the WHD continued to increase its use of civil money penalties, liquidated damages, and enhanced compliance agreements. As the Trump Administration reviews and considers the prior Administration’s enforcement policies, we expect that 2018 is apt to bring a stark change in enforcement priorities and strategies.

The new year brought a new Administration and high expectations by employers for change at the WHD. Political reality and the Senate calendar, however, combined to limit the WHD’s ability to implement that change. For most of 2017, only Secretary of Labor Alex Acosta and a single Assistant Secretary had been confirmed by the Senate. By year’s end, the DOL Solicitor and several Assistant Secretaries had been confirmed; the critical position of the WHD Administrator remained vacant, as well as another dozen or so senior positions at the DOL. With the senior leadership team in place at the DOL by 2018, the agency is likely to make significant headway on the Trump Administration’s policy objectives in the coming year.

Nevertheless, 2017 provided an opportunity for the new WHD to address some of its most pressing issues. The DOL was immediately tasked with defending the prior Administration’s revisions to the Part 541 overtime exemption regulations, which had been enjoined in federal court in advance of their effective date in late 2016. Those revisions, which would have doubled the existing salary level required for the white-collar exemptions, substantially increased the minimum level required for the highly-compensated-employee exemption, and automatically increased the salary level on a periodic basis. These were the first changes to Part 541 in more than 10 years. However, those changes were ruled invalid on the basis that the salary level established in the regulation exceeded the Department’s authority.

The Trump Administration managed to position itself well for future developments regarding the overtime regulations, defending the DOL’s authority to set a salary level generally (which some believed had been called into question by the order declaring the Obama overtime rule invalid), while electing not to defend the specific salary level established in the 2016 regulation. It is likely that DOL will propose yet another change to the regulations in 2018.

The DOL also took the first steps in rolling back the prior Administration’s view of what it means to be “employed” under the FLSA. In June of 2017, the DOL announced the withdrawal of the WHD Administrator’s Interpretation 2015-1 (“AI”), which contained the WHD’s analysis of the employee vs. independent contractor issue, and AI 2016-1, which contained the WHD’s analysis of the joint employment issue. Both AIs were regarded as having an incredibly broad interpretation of what it means to have an employment relationship. Although no replacement guidance has yet been issued, the withdrawal of the AIs is seen as a signal that the current Administration does not take such an expansive view of what it means to be “employed” under the FLSA.

Around the same time as its withdrawal of the AIs, the DOL also announced the return to the use of opinion letters. After decades of use, these regulatory tools had been abandoned by the Obama Administration. The DOL’s decision to restart its issuance of opinion letters allows employers and employees alike to seek formal guidance from the WHD on some of the most challenging wage & hour issues. No opinion letters have yet been issued, but it is clear that compliance assistance will once again be a valuable tool in the arsenal of the WHD, alongside its enforcement activities.

Not to be outdone, the National Labor Relations Board (“NLRB”) also undertook an ambitious agenda in 2017. It reconsidered well-settled NLRB principles on joint employer rules and representative elections, entertained the possibility of extending the protections of the National Labor Relations Act (“NLRA”) to college athletes, and litigated novel claims seeking to hold franchisors liable for the personnel decisions of franchisees. By the end of the year, however, the Trump Administration’s appointees began to roll-back NLRB precedents and positions that had been espoused during the Obama Administration, such as a reversal of the expansive view of joint employer liability, allowing more deference to employer workplace rules, eliminating protections for obscene, vulgar, and highly inappropriate activity under the NLRA.

Implications For Employers

Regarding the 2018 Fiscal Year, employers can expect to see a significant decrease in government-initiated litigation and overall government enforcement in the workplace. Additionally, the lawsuits that are filed will likely include smaller groups of people and more isolated issues. This will particularly be seen at the EEOC, which is awaiting Senate confirmation on two Trump-appointed Commissioners sure to alter the entity’s policy direction. Rather than expanding government’s role in business and attempting to set innovative legal precedent, we predict the DOL and EEOC will stick to simple enforcement of current regulations. As always, we will stay on top of this important issue and keep our readers informed as new revelations come to light!

Seyfarth Synopsis:  In our recent blog on the second workplace class action litigation trend of 2017, we provided our readers with a comprehensive analysis of class certification statistics.   As this year’s Report profiled, court decisions throughout the country resulted in a favorable landscape for employers in terms of defeating certification motions in the decertification process.  In today’s blog, author Jerry Maatman breaks down all aspects of the Report’s class certification findings, and tells employers what to watch for in 2018.  Check out Jerry’s analysis in the link below!