Class Action Litigation

Happy Holiday season to our loyal readers of the Workplace Class Action Blog!

Our elves are busy at work this holiday season in wrapping up our start-of-the-year kick-off publication – Seyfarth Shaw’s Annual Workplace Class Action Litigation Report.

We anticipate going to press in early January, and launching the 2018 Report to our readers from our Blog.

This will be our Fourteenth Annual Report, and the biggest yet with analysis of over 1,350 class certification rulings from federal and state courts in 2017.  The Report will be available for download as an E-Book too.

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.’”  You can read more about the review here.  Furthermore, EPLiC recognized our Report as the “state-of-the-art word” on workplace class action litigation.

The 2018 Report will analyze 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, and ERISA class actions, as well as settlements of government enforcement actions, both with respect to monetary values and injunctive relief provisions.

Information on downloading your copy of the 2018 Report will be available on our blog in early January. Happy Holidays!

Seyfarth Synopsis: A somewhat bizarre event – even by this year’s standard of unusual current events – hit the news stream earlier this week, as two “Acting Directors” showed up to work on Monday morning at the U.S. Government’s Consumer Financial Protection Bureau, also known as the CFPB. In today’s vlog, Partner Jerry Maatman of Seyfarth Shaw, LLP gives our readers an explanation of the situation at the CFPB, discusses the agency’s significance for employers, and forecasts potential class action implications based on these developments.

Summary

The Consumer Financial Protection Bureau (“CFPB”) has been a controversial government agency since its authorization under the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2011. Formed out of a post-2008 recession by then-Harvard Law Professor and current U.S. Senator Elizabeth Warren, the CFPB is designed – per its legislative history – to “protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law.” As of January 2017, this consumer-friendly agency had secured nearly $12 billion to 29 million consumers.

On Monday, November 27th, both Leandra English and Mick Mulvaney sent out emails to CFPB staff members claiming to be the Acting Director of the agency. This conflict stemmed from Richard Cordray, longtime Director of the CFPB, relinquishing his duties effective November 24 at midnight. Upon his departure, Cordray named English as the Deputy Director, on the assumption that she would assume leadership as Acting Director (and Cordray would block the White House from interfering). However, at the same time, President Trump used his federal appointment power under the Federal Vacancies Reform Act (FVRA) to name Mick Mulvaney as Acting Director. English subsequently filed a lawsuit seeking an injunction against President Trump and Acting Director Mulvaney in the U.S. District Court for the District of Columbia, but Judge Timothy Kelly ruled in favor of Trump and Mulvaney.

This week’s leadership debacle was not the only time the CFPB has been in the news recently. Last month, the U.S. Senate voted to repeal the CFPB’s Arbitration Rule by a narrow 51-50 vote. The existence of this broad rule effectively barred financial institutions from including a class action ban in their arbitration agreements with consumers. Similar to the agency itself, the Arbitration Rule was a strictly partisan issue. The Republican Party claimed that the rule allowed trial lawyers to “line their pockets” off unnecessary customer class actions and hurt American business. On the other side, Democrats argued that the repeal of this rule and ensuing limitations to the CFPB placed too much power in the hands of big business and hurt consumers.

As the vlog outlines, potential class action implications of this controversial agency are yet to be seen. Assuming that Acting Director Mulvaney remains in control at the CFPB, it is safe to say the agency he once called a joke “in a sick, sad way” is headed for a limitation in institutional reach and power. More importantly, though, the upcoming U.S. Supreme Court decisions regarding class action waivers in NLRB v. Murphy Oil USA, Inc. (No. 16-307), Epic Systems Corp. v. Lewis (No. 16-285), and Ernst & Young LLP v. Morris (No. 16-300) will have a profound impact on future class action litigation. One takeaway from this situation that cannot be debated, though, is Jerry’s final thought of the vlog. “We are living in interesting times these days.”

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

Seyfarth Synopsis:  As biometric technology has become more advanced and affordable, more companies and employers have begun implementing procedures and systems that rely on biometric data.  Given the serious repercussions of compromised biometric data, a number of states have proposed or passed laws regulating the collection and storage of biometric data, including Illinois through the passage of the Illinois Biometric Privacy Act (“BIPA”) – the only biometric statute which provides a private cause of action.

Plaintiffs’ class action attorneys have taken notice, as the number of class action lawsuits alleging violations of the BIPA in Illinois has surged in recent months.  As more and more employers are utilizing biometric technology for various purposes, including timekeeping, employers are at a significant risk of becoming a target of class action litigation under the BIPA if it fails to comply with the requirements of the statute.  Cases brought pursuant to the BIPA are akin to other “gotcha” statutory class actions – highly popular with the plaintiffs’ bar due to the inclusion of statutory damages and a provision for attorneys’ fees.

The theories underlying BIPA class actions, and the defenses thereto, remain largely untested.  However, the Second Circuit became the first U.S. Court of Appeals to wade into the rising tide of litigation under the BIPA in Santana v. Take Two Interactive Software, 2017 U.S. App. LEXIS 23446 (2d Cir. Nov. 21, 2017), by affirming the district court’s dismissal of the case based upon a lack of Article III standing under the principles announced by the Supreme Court in Spokeo v. Robins, 136 S. Ct. 1540 (2016), but vacating the district court’s finding that plaintiffs were not “aggrieved by” a violation the BIPA (e.g., failed to state a cause of action under the statute due to a failure to plead actual damages).

The decision sheds light on the viability of certain potential employer defenses in BIPA class actions, particularly at the motion to dismiss stage.

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Requirements Of The BIPA

Notice And Consent

 The BIPA prohibits companies from collecting employees’ biometric information until the company notifies the employee in writing that the information is being collected. Specifically, the written notice must inform the individual of the “specific purpose and length of term for which a biometric identifier or biometric information is being collected, stored and used.” 740 ILCS § 14/15(b).  Likewise, a company must obtain a written release from the individual enabling it to collect and store the information.  In the employment context, “written release” is defined as a “a release executed by an employee as a condition of employment.”  740 ILCS § 14/10.

Written Policy

The BIPA also requires companies to develop a written policy establishing a retention schedule and guidelines for permanently destroying biometric information when the initial purpose for collecting them has been satisfied or within three years of the employee’s last interaction with the employer, whichever occurs first.  740 ILCS § 14/15(a).  The policy must be made available to the public.  Id.

Disclosure To Third-Parties

In addition, a company may not disclose biometric information to a third party unless: it obtains consent for disclosure from the individual; the disclosure completes a financial transaction requested by the individual; the disclosure is required by law; or the disclosure is required by a valid warrant or subpoena.  740 ILCS § 14/15(d).

Standard Of Care

Also, the BIPA requires that a company use “the reasonable standard of care” within its industry for storing, transmitting and protecting biometric information and act “in a manner that is the same as or more protective than the manner in which the [company] stores, transmits and protects other confidential and sensitive information.”  Id. § 14/15(e).

Case Background

In Santana, Plaintiffs alleged that Defendant violated the BIPA based on the use of a feature in the NBA 2K15 and NBA 2K16 video games, which contain a feature called “MyPlayer” which allows gamers to create a personalized basketball player that has a realistic 3-D rendition of the gamer’s face.  The 3-D mapping process used cameras to capture a scan of the gamer’s facial geometry to disseminate a realistic rendition of the gamer’s face which requires gamers to hold their faces within 6 to 12 inches of the camera and slowly turn their heads during the scanning process.  Id. *2-3.  To use the feature, gamers must also first agree to terms and conditions acknowledging that the face scan will be visible and may be recorded during gameplay and requires gamers to “agree and consent to such uses.”  Id.

Plaintiffs alleged that Defendant: (1) collected their biometric data without their informed consent; (2) disseminated their biometric data to others during game play without their informed consent; (3) failed to inform them in writing of the specific purpose and length of term for which their biometric data would be stored; (4) failed to make publicly available a retention schedule and guidelines for permanently destroying plaintiffs’ biometric data; and (5) failed to store, transmit, or protect from disclosure plaintiffs’ biometric data by using a reasonable standard of care or in a manner that is at least as protective as the manner in which it stores, transmits, and protects other confidential and sensitive information.  Id. *4.

Defendant moved to dismiss Plaintiffs’ claims for lack of Article III standing and for failure to state a cause of action under the statute (i.e., lack of “statutory standing”).  The district court granted the motion on both grounds and dismissed the action with prejudice, and Plaintiffs appealed.

The Second Circuit’s Decision

In its ruling of November 21, 2017, the Second Circuit entered a summary order affirming the district court’s decision insofar as it held that plaintiffs lacked Article III standing, but vacating the decision in part insofar as it held that plaintiffs lacked a statutory cause of action as “aggrieved” parties.

In regards to Article III standing, the Second Circuit held that “none of the alleged procedural violations [] raise[d] a material risk of harm” to Plaintiffs arising out of the use, collection, or disclosure of an individual’s biometric data.  Id. *7.  In reaching this conclusion the Second Circuit noted that no reasonable person would believe that the feature of the game at issue was anything other than a facial scan and Plaintiffs did “not plausibly assert (beyond a mere conclusory allegation) that they would have withheld their consent had Take-Two included additional language in its consent disclaimer.  Id. *8.  Plaintiffs’ alleged violations of the BIPA’s notice provisions similarly failed to raise a material risk of harm because Plaintiffs did not allege that Defendant had not or will not destroy their biometric data within the period specified by the statute nor did Plaintiffs allege that Defendant lacked such protocols or that its policies were inadequate and “there is accordingly no material risk that [Defendant’s procedural violations have resulted in plaintiffs’ biometric data being used or disclosed without their consent.  Id. *9.  Finally, the Court was not persuaded by Plaintiffs attempts to “manufacture an injury” by alleging that they would be deterred from using biometric technology in the future because “Plaintiffs’ fear, without more, is insufficient to confer Article III injury-in-fact.  Id. *11.

Despite this ruling, the Second Circuit remanded to the district court with the instruction that the district court shall enter dismissal without prejudice finding that the district court did not have subject matter jurisdiction to ultimately find that plaintiff did not have “statutory standing,” e.g., that Plaintiffs had not alleged a cause of action under the statute – specifically, that Plaintiffs were not “aggrieved by” a violation of the statute because they did not allege “actual damages.”  The Second Circuit held:

Since the statutory standing arguments here are based on differing constructions of the term ‘aggrieved party’ as used in BIPA, the district court’s resolution of the issue was a judgment on the merits that could not be properly addressed absent subject matter jurisdiction.  The district court was therefore without power to dismiss the complaint with prejudice for failure to state a cause of action under the statute.

Id. at *13.

Implications For Employers

The Second Circuit’s ruling represents a victory for employers to the extent that it will make it more difficult for plaintiffs to plead and maintain Article III standing to survive a motion to dismiss in federal courts.  On the other hand, the Second Circuit opinion did not bring any clarity as to who a “person aggrieved” is for purposes of the statute and whether plaintiffs must plead actual damages in order to state a cause of action under the BIPA.

The practical import of this ruling is that the battleground for defenses based on subject-matter jurisdiction and standing grounds and a lack of statutory standing (e.g. failure to plead a cause of action because plaintiffs were not “aggrieved by” a violation of the statute) will likely shift back to the Illinois state courts, which (despite being similar in many respects) have different and independent standing principles from federal courts.

Courts remain split as whether plaintiffs alleging violations under the BIPA must allege actual damages in order to state a cause of action, with state courts generally finding that actual damages are not necessary to plead a cause of action under the statute.   Compare McCollough v. Smarte Carte, Inc., 2016 WL 4077108, at *4 (N.D. Ill. Aug. 1, 2016) (dismissing BIPA action for lack of actual damages) and Rottner v. Palm Beach Tan, Inc., 2015-CH-16695 (BIPA requires showing of actual damages) with Monroy v. Shutterfly, Inc., 2017 WL 4099846, at *9 (N.D. Ill. Sept. 15, 2017) (“[w]hile the matter is not free from doubt, the court declines to hold that a showing of actual damages is necessary in order to state a claim under the BIPA); Rosenbach v. Six Flags Entertainment Corporation et al., 16 CH 13 (Cir. Court, Lake County, IL, June 17, 2016) (finding sufficient statutory standing for the plaintiff to survive a motion to dismiss where the plaintiff had provided fingerprints to Six Flags as part of an annual pass program to the amusement park); Sekura v. Krishna Schaumberg Tan, Inc., 2017 WL 1181420 (Cir. Ct., Cook County, IL, Feb. 9, 2017) (denying motion to dismiss BIPA claim and noting that ”the term ‘aggrieved’ has been used consistently in numerous statutes to provide claims for the infringement of granted legal rights without the need to plead specific or actual damages” and “it is not this court’s role to determine whether BIPA was well intentioned or even well drafted, only to determine, in this case, whether it requires that plaintiffs plead actual damages to state claims thereunder.”)

In sum, while the Second Circuit’s opinion provides employers with strong support for arguments based on a lack of subject-matter jurisdiction and standing (particularly in federal courts), arguments by employers at the motion to dismiss stage that a plaintiff lacks statutory standing (e.g., whether the statute requires a plaintiff to plead actual damages to state a cause of action) will likely have to be resolved by Illinois state courts and any such arguments in federal court may result in remand to state court, or a dismissal without prejudice allowing plaintiffs to re-file in state court.

Seyfarth Synopsis: In early September of 2017, Judge Richard Posner announced his retirement from the U.S. Court of Appeals for the Seventh Circuit, a position he had held since his appointment by President Reagan in 1981.  Judge Posner served as Chief Judge of the Seventh Circuit from 1993-2000. Scholars and commentators agree that Judge Posner wrote some of the most influential legal decisions of the past 50 years.  In this video, Partner Jennifer Riley discusses the accomplished career of Justice Posner with esteemed class action litigator Jerry Maatman.  In particular, they highlight the class action legacy in Judge Posner’s opinions.

 

Summary

Prior to his retirement this Fall, Judge Posner was one of the most well-known U.S. Appellate Court justices in recent history.  He is held in high regard in the fields of law and economics, and is famous for his writings on topics such as contract law, civil rights, antitrust laws, workplace rights, and federal jurisprudence.  An author of over 40 books, Judge Posner was cited as often as any federal judge in the U.S.

In terms of class actions, Judge Posner wrote a number of famous opinions regarding the interpretation of Rule 23.  These decisions include cases such as Thorogood v. Sears, Roebuck & Co., In Re Walgreen Co. Stockholder Litigation, and Eubank, et al. v. Pella Corp.  Though the Seventh Circuit often has been regarded as a fairly conservative jurisdiction, its track record has been somewhat “certification friendly”  in terms of Rule 23 issues while Judge Posner was active.  His focus on protecting the participants in a class action and his exacting scrutiny over settlements are cemented in his legacy on the bench.  As Jerry emphasizes in the video, whether or not legal professionals agree with Judge Posner’s class action interpretations, they must certainly take account of his positions on Rule 23 issues.

Thank you to our Partners Jennifer Riley and Jerry Maatman for participating in yet another interesting vlog.  Readers of the blog know to stay tuned, as we will continue to produce content on the hottest legal issues!

Seyfarth Synopsis: On October 5, 2017, U.S. Attorney General Jeff Sessions issued an agency memorandum stating that the language contained in Title VII of the Civil Rights Act of 1964, “does not prohibit discrimination based on gender identity per se, including transgender status.” It represented a head-snapping pivot of the position of the U.S. Department of Justice. In this video, Jerry Maatman of Seyfarth Shaw, LLP gives blog readers an overview of the recent history regarding legal interpretation of Title VII. Jerry discusses potentially conflicting statutes and court rulings, as well as the ways in which this Department of Justice memorandum could affect businesses and those who litigate under Title VII.

Summary

Title VII of the Civil Rights Act of 1964 has been a prevalent federal statute since its passage over 50 years ago. Therefore, it is an especially important statute to understand for nearly every employer. During the Obama Administration, Attorney General Eric Holder stated in a 2014 memorandum that the Department of Justice does, in fact, apply the concept of sex discrimination in the workplace to transgender workers. However, Congress has rejected all attempts thus far to amend Title VII. To that end, the language of the law leaves legal interpretation open for debate.

The EEOC’s current view of Title VII is that it includes protections for transgender workers. In addition, 20 states and the District of Columbia include both sexual orientation and gender identity as protected categories under their discrimination statutes. The recent statement by the Department of Justice has renewed the widespread debate over the definition of sex discrimination, a dispute which we suspect will not end any time soon. Make sure to stay tuned to our blog and Twitter account for updates and insights on this important legal issue!

Seyfarth Synopsis: The plaintiffs’ bar has recently brought a flurry of class action lawsuits against businesses under the Illinois Biometric Information Privacy Act, commonly known as “BIPA.”  In this Vlog, Seyfarth Shaw Associate Alex Karasik sits down with esteemed class action litigator, Partner Jerry Maatman, to discuss this emerging legal trend, and to provide employers guidance on how to prevent and defend against BIPA class actions.

Background

Unique to the state of Illinois, the Biometric Information Privacy Act was the first of its kind enacted by a state legislature.  In light of the technological advancements of the past decade, the Illinois legislature enacted this law to protect the “biometric data” of individuals, including their fingerprints, retinal scans, and facial recognition.  Since BIPA’s passage in 2008, a number of states have followed suit and added “biometric data” to their privacy laws. 

Implications For Employers

Recently, there has been a major uptick in ligation across the country involving biometric technology, and there are no signs of this trend slowing down.  In terms of preventive measures, business should establish sound protocols for the handling and dissemination of biometrics.  This is important because, in this day and age, biometric data can be used to access sensitive personal information.  Businesses should thus be cognizant of the biometric data laws in the states where they operate and closely examine whether their own policies and procedures are compliant.

Businesses must also be prepared to defend against a potential lawsuit under a biometric privacy statute.  Following the U.S. Supreme Court’s decision in Spokeo, Inc. v. Robins 136 S. Ct. 1540 (2016), the concept of “standing” has become highly relevant in employment law.  As such, when confronted with a BIPA suit, businesses should focus on whether the plaintiffs suffered a traceable harm stemming from the actions taken on their biometric data.

 

 

By Gerald L. Maatman, Jr. and John S. Marrese

Seyfarth Synopsis:  In In Re Subway Footlong Sandwich Mktg. & Sales Practices Litig., No. 16-1652 (7th Cir. Aug. 25, 2017), the U.S. Court of Appeals for the Seventh Circuit overturned a district court’s approval of a class action settlement involving Subway sandwich purchasers who sued for alleged consumer fraud.  The Seventh Circuit called the settlement “worthless” in terms of alleged relief to the class. The decision illustrates that companies defending class action litigation cannot exit such lawsuits by simply “buying peace” by paying-off plaintiffs’ lawyers without providing any value to the class. In this respect, it is one of those unique rulings that is well worth a read by corporate counsel and business executive alike.

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In In Re Subway Footlong Sandwich Mktg. & Sales Practices Litig., No. 16-1652, 2017 U.S. App. LEXIS 16260 (7th Cir. Aug. 25, 2017), the U.S. Court of Appeals for the Seventh Circuit addressed the propriety of an injunctive relief settlement for a class of Subway “Footlong” sandwich purchasers.

A number of state-law consumer protection class actions were filed against Subway based on Subway’s alleged failure to ensure that its Footlong sandwiches were actually 12 inches long.  Id. at *3-5.  Limited discovery showed that the claims had little merit. Subway had always taken steps to ensure that its sandwiches were proper length, but bread length nonetheless varies due to natural and unpreventable variation in the bread-baking process.  Id. at *5.

Rather than pursue resolution on the merits, the parties reached a class-wide settlement for injunctive relief whereby Subway agreed to implement redundant and futile measures in an attempt to ensure Footlongs lived up to their name.  Id. at *7.  Plaintiffs’ attorneys received $520,000 in return for attorneys’ fees.  Id. at *8.  The district court approved of the settlement over objections by certain class members.  Id.

On appeal, the Seventh Circuit reversed, finding that the settlement was “worthless” to the class.  Id. at *14.

Case Background

In 2013, after an online photo went viral showing one customer’s Footlong Subway sandwich was in fact only 11 inches, a slew of plaintiffs’ attorneys filed putative class actions against Subway for damages and injunctive relief.  Id. at *3-4.   The class actions were consolidated in a multidistrict litigation in the U.S. District Court for the Eastern District of Wisconsin.  Id. at *4-5.

Limited discovery revealed that the claims had little merit as: (i) Subway had taken steps to ensure that its Footlongs were in fact 12 inches long; (ii) the minor variability in bread length revealed was due to natural and unpreventable variability in the baking process; and (iii) irrespective of bread length, customers received the same amount of meat, cheese, and other toppings on a sandwich.  Id. Such facts eliminated any hope of certification of a damages class under Rule 23(b)(3), so class counsel focused on certification of a Rule 23(b)(2) injunctive relief class instead.  Id. at *5-6.

The parties subsequently reached a settlement for injunctive relief whereby Subway agreed to implement measures aimed at ensuring Subway Footlongs were in fact 12 inches long, including: (i) requiring franchisees to use a measuring tool for sandwiches; (ii) requiring corporate quality-control inspectors to measure baked bread and check oven operation during regularly scheduled visits; and (iii) posting a notice on its website and in restaurants notifying customers of the variability in baked bread.  Id. at *7.

In return, the plaintiffs agreed to cap their requests for attorneys’ fees at $525,000 and incentive awards at $1,000.  Id. The district court preliminarily approved the settlement, and class counsel filed a motion seeking $520,000 in fees for class counsel and $500 incentive awards for each named plaintiff.  Id. at *8.

A professional objector who was also a member of the class objected to the settlement.  However, the district court overruled the objection, approved the settlement, and certified a class of persons nationwide who had purchased six-inch and Footlong Subway sandwiches between 2003 and 2015.  Id.

The objector appealed.

The Decision

On appeal, the U.S. Court of Appeals for the Seventh Circuit reversed the district court’s approval of the class action settlement.  Id. at *14.

The Seventh Circuit found that the settlement was “worthless” and that “[n]o class action settlement that yields zero benefits for the class should be approved[.]”  Id. at *11.  The Seventh Circuit explained that irrespective of the measures Subway promised to take under the settlement, “there’s still the same small chance that Subway will sell a class member a sandwich that is slightly shorter than advertised.”  Id. at *13 (emphasis in original).

Moreover, the Seventh Circuit found that class members’ right under the settlement to hold Subway in contempt for violating the injunction did not add any value.  Id. at *14.  “Contempt as a remedy to enforce a worthless settlement is itself worthless.  Zero plus zero equals zero.”  Id.

Finally, though not part of its holding, the Seventh Circuit expressed its disdain for the Footlong lawsuits by proclaiming that, because the consolidated class actions sought worthless relief, they “should have been dismissed out of hand.” Id. at *14 (internal quotations and citation omitted).

Implication For Employers

As shown by the Seventh Circuit’s decision, paying-off class action plaintiffs’ counsel can be a poor strategy for efficient resolution of class litigation.  If an employer wishes to realize the cost-savings of early settlement, it must ensure that settlement provides actual value to the class and fees to class counsel commensurate with that value.  Otherwise, expected cost-savings are squandered on opposing objectors (or the trial judge), with the possibility that the trial or an appellate court rejects the settlement and returns the litigation to where settlement talks began.

As an alternative approach, employers should consider efficient and realistic paths to summary judgment.  That approach can make good sense in the face of attorney-driven class litigation with no emotional appeal like the Subway case.  The Seventh Circuit’s emphatic command that meritless class actions should be “dismissed out of hand” should give employers and counsel more confidence in that regard.

By Gerald L. Maatman, Jr. and John S. Marrese

Seyfarth Synopsis:  In Love v. Wal-Mart Stores, Inc., No. 15-15260 (11th Cir. Aug. 3, 2017), the U.S. Court of Appeals for the Eleventh Circuit ruled that the deadline for putative class members to appeal the dismissal of class claims was triggered by the filing of a stipulation of dismissal by named plaintiffs and defendant.  The decision adds to the growing body of jurisprudence concerning the limits on the ability of absent class members to continue class litigation after named representatives abandon it.

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In Love v. Wal-Mart, No. 15-15260, 2017 U.S. App. LEXIS 14261 (11th Cir. Aug. 3, 2017), the Eleventh Circuit addressed the timeliness of putative class members’ appeal of the dismissal of class claims filed more than 30 days after the named class representatives and defendant filed a stipulation of dismissal.  Id. at *5.

Putative class members had moved to intervene in the district court not long after the stipulated dismissal was filed.  Id. at *4. On the same day their motion to intervene was denied, but 34 days after the filing of the stipulated dismissal, putative class members appealed the denial of the motion as well as the district court’s prior dismissal of the class claims.  Id. at *4.

The Eleventh Circuit held that the putative class members’ appeal was untimely pursuant to the 30-day deadline set forth in Rule 4 of the Federal Rules of Appellate Procedure (“FRAP”).  Id. at *9.  The Eleventh Circuit reasoned that a stipulated dismissal under Rule 41(a)(1)(A)(ii) is effective immediately upon filing, unless its effectiveness is conditioned on a subsequent occurrence. Id. at *6-7.  No such condition existed in the stipulated dismissal at hand and, as such, the putative class members’ appeal 34 days after the filing of the stipulated dismissal ran afoul of FRAP 4.

Case Background

After the U.S. Supreme Court reversed the certification of a nationwide gender discrimination class in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), some members of the putative class in that case filed new, regional class actions against Wal-Mart, including Love v. Wal-Mart Stores, Inc. Id. at *1-2.  Putative class members were able to do so because Wal-Mart Stores v. Dukes tolled the statute of limitations with respect to their filing claims with the EEOC, which is a prerequisite to filing a federal discrimination suit.  Id. at *3.  However, in the Eleventh Circuit, such tolling is limited to individual, not class, claims.  Id.

Accordingly, the district court in Love allowed the individual claims of named plaintiffs to proceed, but dismissed the class claims as untimely.  Id. The named plaintiffs subsequently settled their individual claims with Wal-Mart.  Id.

On October 16, 2015, the named plaintiffs and Wal-Mart filed a stipulation of voluntary dismissal under Rule 41(a)(1)(A)(ii).  Id. On October 23, 2015, the district court entered an order acknowledging the stipulated dismissal and dismissing pending motions as moot. Id.

On November 6, 2015, a group of putative class members moved to intervene in the district court solely to appeal the district court’s dismissal of the class claims.  Id. at *4.  On November 19, 2015, the district court denied the motion to intervene on the grounds that the stipulated dismissal stripped the district court of jurisdiction to hear the motion. Id.  That same day, 34 days after the filing of the stipulated dismissal, the putative class members appealed both the denial of their motion to intervene and the dismissal of the class claims.  Id.

The Decision

On appeal, the Eleventh Circuit ruled that it did not have jurisdiction over the putative class members’ appeal of the dismissal of the class claims because it was filed more than 30 days after the filing of the parties’ stipulated dismissal.  Id. 

In doing so, the Eleventh Circuit rejected the putative class members’ argument that only the named plaintiffs’ appeal deadline was triggered by the stipulated dismissal and that the putative class members’ deadline was not triggered until the district court’s subsequent order on October 23, 2015.  Id. at *4-6.  The Eleventh Circuit explained that “the plain language of Rule 41(a)(1)(A)(ii) requires that a stipulation filed pursuant to that subsection is self-executing and dismisses the case upon its becoming effective, i.e., upon filing unless it explicitly conditions its effectiveness on a subsequent occurrence.”  Id. at *6-7 (internal quotations and citations omitted).

Without any condition in the stipulation here, the Eleventh Circuit found that the stipulated dismissal was effective upon filing and triggered the putative class members’ 30-day deadline under FRAP 4 to appeal dismissal of the class claims.  Id. at *7.  The putative class members’ appeal, filed 34 days after the filing of the stipulated dismissal, was therefore untimely.  Id. at *8-9.

In turn, although the putative class members’ appeal of the denial of their motion to intervene was timely filed, such an appeal was moot as the putative members had intervened solely for the purpose of appealing the dismissal of the class claims.  Id. at *9.

Implication For Employers

This decision is a great victory for the employer. It also offers insight into how an employer can protect itself from continued class litigation after settling individually with named plaintiffs.

In particular, an employer should endeavor to file a stipulation of dismissal in short order because, in certain jurisdictions, the district court may find that the filing of such a stipulation precludes absent class members’ from intervening and pursing class litigation further.  Employers should also try to prevent the inclusion of conditions in stipulations of dismissal which delay the effectiveness of such stipulations.

Furthermore, given the application of FRAP 4 here, employers should anticipate receiving notices of appeal from absent class member-intervenors with, or soon after, the filing of their motion to intervene.

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

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

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

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

Case Background

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

U.S. Supreme Court Decision

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

Ninth Circuit’s Standing Analysis

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

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

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

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

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

Outlook

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

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

By Gerald L. Maatman, Jr. and Julie Yap

Seyfarth Synopsis: Seyfarth Shaw submitted comments to the Federal Advisory Committee on Civil Rules regarding needed reform to Rule 30(b)(6), the rule that governs depositions of organizations in federal litigation. Our workplace class action group proposed two important areas for consideration that would encourage cooperation between the parties, including discovery proportional to the litigation, and more transparency and efficiency in an area that too often creates significant costs and burdens.

Proposed Changes To Rule 30(b)(6)

As most employers are aware, Rule 30(b)(6) allows a party to take the deposition of an organization by requiring the designation of an officer, director, managing agent, or other person competent to testify on a potentially wide range of topics requested by the opposing party.  This process often results in the imposition of significant burdens on the organization where the requesting party makes disproportional and overbroad demands for information, seeks to impose sudden deadlines, or refuses to cooperate in negotiations that would appropriately narrow the types of information sought.  In the face of such obstacles and inefficiencies, Seyfarth advocated for the need of procedural reform in this process.

The Advisory Committee on Civil Rules (the “Committee”) for the Federal Courts, which is responsible for recommending amendments to the Federal Rules of Civil Procedure, is contemplating possible changes to Rule 30(b)(6).  In furtherance of this process, the Committee has created the Rule 30(b)(6) Subcommittee, which invited comment on the need for reform to the rule.

Seyfarth’s written submission is here. Seyfarth’s comments were prepared by the team of Alex Meier, Gina Merrill, Esther Slater McDonald, Ryan Swindall, and Julie Yap.

Seyfarth’s submission identified two major areas of reform to Rule 30(b)(6) that could provide much needed guidance and transparency.  First, Seyfarth proposed that Rule 30(b)(6) should be amended to include presumptive limits on the number of topics that can be covered in deposition, on the scope of those topics, and on the number of deposition hours.  These presumptive limits would not only create efficiencies on the resources required for an organization to be prepared for deposition, it would better ensure that the organization is prepared to respond to all topics identified by the requesting party.

Second, Seyfarth proposed that Rule 30(b)(6) should provide a clear framework for when depositions must be noticed and how a party may object to the notice.  While district courts have created or endorse avenues for a party to protect itself from problematic Rule 30(b)(6) notices, disparities in the preferred approach has created confusion with respect to the proper procedure and the applicable standard of review.  As such, Seyfarth endorsed a 30-day minimum notice requirement that would help organizations properly prepare their witnesses.  Seyfarth also recommended adoption of an objection process similar to that employed to respond to subpoenas that would create a uniform, transparent process for challenging notices.

Implications For Employers

Rule 30(b)(6) can often create significant burden and impose substantial costs on employers facing all types of federal litigation.  Potential amendments to this rule could help address the disproportional impact that this type of discovery has on employers.  Seyfarth is hopeful that the Committee will continue to look at reform and potential amendments to address these issues.

Stay tuned for more updates regarding potential amendments to Rule 30(b)(6) as we continue to monitor developments on this important issue.