9th-circuitBy Christopher M. Cascino and Gerald L. Maatman, Jr.

In Baker v. Microsoft Corp., No. 12-35946, 2015 U.S. App. LEXIS 4317 (9th Cir. Mar. 18, 2015), the U.S. Court of Appeals for the Ninth Circuit considered whether to adopt a rule creating a principle of comity between different federal district courts under which denial of class certification in one district court would create a rebuttable presumption in other district courts that denial of class certification was the correct result.  While the Ninth Circuit did not decide the issue explicitly in this non-workplace class action, employers nonetheless can use this proposed principle when attempting to defeat class or collective action certification bids in federal court where similar class or collective actions brought in other federal district courts have been denied certification.

Case Background

The plaintiffs brought a putative class action against Microsoft, claiming that Microsoft’s Xbox had a design defect.  Id. at 3-4.  Microsoft moved to dismiss the class allegations, and the district court granted that motion.  Id. at 3.

The district court found that a putative class action had been filed against Microsoft in another district court with claims similar to those in the Baker action.  Id.  The district court then decided to apply the principle of comity between federal district courts as adopted by the American Law Institute in 2010.  Id. at 10.  Under this principle of comity, “a prior denial of class certification on the same subject matter by a different district court judge [is] given a rebuttable presumption of correctness.”  Id.  Finding that the Baker plaintiffs had not overcome this rebuttable presumption of correctness, the district court dismissed the class allegations.  Id. Plaintiffs subsequently appealed.

Ninth Circuit’s Opinion

The Ninth Circuit did not decide whether the principle of comity should apply to class actions filed in different federal courts.  Rather, the Ninth Circuit found that the prior putative class action on which the district court relied used a legal standard that had been overruled by the Ninth Circuit.  Id. at *20-21.  It thus found that the district court’s decision was erroneous regardless of whether the comity principle were valid.  Id. at 21.

In a concurring opinion, Judge Carlos T. Bea persuasively argued that the Ninth Circuit should adopt the principle of comity rather than leaving the question for another day.  Id. at 22.  Judge Bea reasoned that “whether or not the class is certified is usually the most important ruling in such a case; once a class is certified, plaintiffs who brought claims of even dubious validity can extract an ‘in terrorem’ settlement from innocent defendants who fear the massive losses they face upon an adverse jury verdict.”  Id. at 31 (citing AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1752 (2011)).  He pointed out that “[i]n light of the minimal costs of filing a class complaint, an obvious strategy suggests itself: keep filing the class action complaint with different named plaintiffs until some judge, somewhere, grants the motion to certify.  So long as such a decision is reached while the plaintiffs who have not yet filed are numerous enough to justify class treatment, the plaintiffs will have a certified class that they can use to extract an in terrorem settlement.”  Id. at 32.

Balancing this concern against Smith v. Bayer Corp., 131 S.Ct. 2368 (2011), in which the Supreme Court held that individuals who are not before a district court cannot be bound by its judgment, Judge Bea asserted that there was a need to create a rule that would provide district courts “a way to clear their dockets of questionable successive class certification requests, while ensuring that putative class members who have unearthed new evidence or new law in favor of certification, or clear error in the earlier ruling, not be foreclosed by the failed efforts of their predecessors.”  Id. at 34.  He therefore proposed adopting a rule whereby there would be “a presumption of correctness to earlier denials of certification that can be rebutted by a showing of changed factual or legal circumstances, or earlier clear error.”  Id.  Judge Bea then applied this rule and held that the district court erred in dismissing the class claims in Baker because there had been a change in the law after the case the district court in Baker relied upon was decided.  Id. at 36.

Implications For Employers

While not a workplace class action, this ruling provides employers with a potential argument to combat successive class or collective actions.  Even though the principle of comity between different federal district courts has not yet been adopted – or rejected – by the federal circuits, it has been adopted by the American Law Institute and endorsed by Judge Bea of the Ninth Circuit.  In addition, Judge Bea’s excellent analysis of why comity should be adopted should prove helpful for employers crafting their own arguments encouraging courts apply the principle.  With this argument now available, we expect the issue to be decided in one of the federal courts of appeal in the near future.  Stay tuned.

250px-US-CourtOfAppeals-10thCircuit-SealBy Gerald L. Maatman, Jr., and Alexis P. Robertson

On March 16, 2015, in EEOC v. Beverage Distributors Co., LLC, No. 14-1012 (10th Cir. 2014), the U.S. Court of Appeal for the Tenth Circuit held that the U.S. District Court for the District of Colorado erred by providing improper jury instructions on the direct-threat defense under the Americans With Disabilities Act (“ADA”). In rendering its decision, the Tenth Circuit clarified the direct-threat standard in a manner favorable to employers. The ruling is instructive for all employers involved in ADA litigation with the EEOC.

Case Background

A former employee of Beverage Distributors Corporation filed a charge of discrimination with the EEOC after he was unable to secure employment in a new position with the company. The employee was legally blind. After his original position with Beverage Distributors was eliminated, he was able to secure a new job with the company. However, his new employment was conditioned upon passing a physical examination. Although he passed the physical exam, the examining doctor stated that the employee would require workplace accommodations to mitigate the risks from his impaired vision. Beverage Distributors concluded that it could not reasonably accommodate his conditions and rescinded the job offer. The employee subsequently filed a charge of discrimination with the EEOC against Beverage Distributors. The EEOC then sued Beverage Distributors, on the employee’s behalf, under ADA.

At trial, amongst other things, Beverage Distributors asserted that the employee’s impaired vision created a significant risk of harm to him and others and no reasonable accommodation could reduce or eliminate that risk. The jury found that Beverage Distributors was liable for discrimination and that the employee’s condition did not pose a direct threat.  Beverage Distributors appealed to the Tenth Circuit, arguing that the direct-threat jury instruction constituted reversible error.

The Decision Of The Tenth Circuit

The Tenth Circuit ruled that the direct-threat jury instruction constituted reversible error because the district court inaccurately conveyed the direct-threat standard to the jury. Under the ADA, an employer may assert as an affirmative defense to a claim of discrimination, that it declined to hire an individual because the individual posed a “direct threat to the health or safety of themselves or others.” Id. a 4. “A direct threat involves a significant risk of substantial harm to the health or safety of the person or others that cannot be eliminated or reduced by reasonable accommodation.” Id.

The Tenth Circuit reasoned that direct-threat instruction, as delivered by the district court, did not accurately convey the direct-threat standard because it failed to communicate that proof of an actual threat was unnecessary.  The Tenth Circuit reasoned that Beverage Distributors should have avoided liability “if it had reasonably believed the job would entail a direct threat.” Id. at 6.  It should not have been required to prove that the employee posed an actual direct threat.  The jury instruction overstated Beverage Distributors’ burden. Further, the second portion of the jury instruction – which stated that the jury was to consider the reasonableness of Beverage Distributors’ belief regarding the existence of a direct threat – did not cure the error because the jury was never told why it was to consider the reasonableness of what Beverage Distributors thought. Therefore, the Tenth Circuit concluded that the error was not cured by the instruction regarding the reasonableness of the company’s subjective belief. The Tenth Circuit held that it had to reverse the jury’s verdict, because the jury could have been misled by the erroneous instruction.

Implications For Employers

This is a significant case in that it clarifies the direct-threat standard in a manner that is favorable for employers. As illustrated above, the key inquiry for the defense is the reasonableness of the employer’s belief regarding the direct-threat, and not whether there was in fact a direct threat posed. Employers and defense lawyers should take notice of this ruling and add it to their tool box when litigating cases under the ADA cases.

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

imagesBy Pam Devata, John Drury, and Robert Szyba

On March 13, 2015, the Solicitor General of the United States filed an amicus brief opposing the petition for writ of certiorari filed in Spokeo, Inc. v. Robins, No. 13-1339 (U.S.). The Spokeo petition poses a question with a significant impact on the future scope of consumer and workplace-related class actions: whether Congress can confer standing on a plaintiff who suffers no concrete harm, but who instead alleges only a statutory violation? To date, ten different amicus briefs have been filed urging the Supreme Court to grant review.

Case Background

In July 2010, Plaintiff Thomas Robins filed a purported class action under the Fair Credit Reporting Act (“FCRA”) against Spokeo, Inc., a search engine that compiles publicly available information on individuals into a searchable database. Robins alleged that the search results associated with his name included inaccurate information about him, in violation of the FCRA. Robins did not allege that he suffered actual damages, but only that he was entitled to statutory damages because the FCRA created a private right of action where inaccurate consumer information is reported. The district court dismissed Robins’ complaint, finding that a mere violation of the FCRA does not confer standing “where no injury in fact is properly pled.” 2011 WL 11562151, at *1. In February 2014, the U.S. Court of Appeals for the Ninth Circuit reversed, holding that the “violation of a statutory right is usually a sufficient injury in fact to confer standing” and that “a plaintiff can suffer a violation of the statutory right without suffering actual damages.”  742 F.3d 409, 413.

In May 2014, Spokeo filed its petition for writ of certiorari to the U.S. Supreme Court. Spokeo posed this question: “Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.”  Spokeo’s petition identified a circuit split. The Fifth and Sixth Circuits agree with the Ninth Circuit’s Spokeo decision and permit plaintiffs to maintain lawsuits without “injury-in-fact” and based solely on an alleged statutory violation. The Seventh Circuit also has signaled that it agrees with this position. In contrast, the Second, Third and Fourth Circuits have held that Congress cannot create standing by statute alone, and the mere deprivation of a statutory right is insufficient to confer standing.

The Solicitor General Opposes The Grant Of Certiorari

In October 2014, the Supreme Court invited the Solicitor General to file an amicus brief on behalf of the United States. The Supreme Court frequently follows the Solicitor General’s recommendation to grant or deny certiorari. In its opposition to certiorari, the Government essentially recommends that the Supreme Court avoid the broader question of Congressional power to create statutory standing and instead focus on the specifically alleged injury in Spokeo – the public dissemination of inaccurate personal information – and the specific statute at issue – the FCRA. The Government’s position is that a concrete harm exists where a defendant unlawfully disseminates inaccurate personal information. Although the Second, Third and Fourth Circuits have rejected the concept of “statutory standing,” they each did so under other federal statutes.

Implications for Employers

Given the Solicitor General’s recommendation, the Supreme Court may deny certiorari and maintain the uncertain status quo. As a consequence, in some circuits, plaintiffs will be allowed to maintain private causes of action for alleged violations of federal statutes — even where the plaintiffs themselves suffered no actual injury.

If certiorari is granted, the Supreme Court’s ultimate decision will have a significant impact on the future of consumer, workplace, and other class actions. Its impact may reach other federal statutes that authorize private rights of action or statutory damages, such as the Truth in Lending Act, the Fair Debt Collection Practices Act, the Employee Retirement Income Security Act, and the Americans With Disabilities Act. If Spokeo is reversed, plaintiffs would be required to plead and establish actual injury, and not just a violation of the underlying statute. Such a result would undoubtedly limit the number of viable class actions under the FCRA and other federal statutes.

The resolution of the Spokeo petition and appeal stands to dramatically affect employers, consumer reporting agencies, and other corporate defendants. Although the United States’ opposition makes a grant of certiorari less likely, it speaks volumes that ten separate amicus briefs have been filed on behalf of seventeen different companies, trade associations, and other organizations (including the National Association of Professional Background Screeners, Chamber of Commerce of the United States, eBay, Facebook, Google, Yahoo, and leading consumer reporting agencies). Their support for resolution of the Spokeo question — whether Congress can confer standing through statute alone — may tip the scales in favor of the grant of certiorari. For the time being, employers will have to wait and see whether the Supreme Court will ultimately entertain this important question.

chart-arrow-upBy Christopher M. Cascino and Gerald L. Maatman, Jr.

On March 10, 2015, the Administrative Office Of The U.S. Courts released its annual statistics, showing the number of cases filed by subject matter during the 12-month periods ending September 30, 2009 through September 30, 2014. These statistics confirm what we reported in our 11th Annual Workplace Class Action Litigation Report – FLSA collective action filings increased in 2014, and represented the largest category of employment-related class action filings. By the numbers, workplace litigation filings stayed fairly constant from October 1, 2013 through September 30, 2014, while wage & hour cases increased. By the close of that period, FLSA lawsuits totaled 8,160 (up significantly as compared to 7,500 during the prior twelve-month period). During this same 12-month period ending September 30, 2014, ERISA lawsuits totaled 7,191 (a decrease from 7,599 in the prior twelve-month period) and employment discrimination lawsuits totaled 11,937 (a decrease from 13,322 in the prior twelve-month period).

In sum, FLSA collective action litigation increased yet again in the twelve-month period from October 1, 2013 through September 30, 2014, and far outpaced other types of employment-related class action filings. These filings represented another year-after-year increase in wage & hour litigation filed in federal courts. Virtually all FLSA lawsuits are filed as collective actions, so these filings represent the most significant exposure to employers in terms of any workplace laws.

Implications For Employers

As 2015 unfolds, the question employers want to know is whether the crest of the wave is in sight for wage & hour litigation?

We follow court filings nationwide on a daily basis. If the first two months of the year is any indication of what 2015 will bring, we did not yet see the crest of the wave of FLSA collective actions.

southern district new yorkBy Gerald L. Maatman, Jr. and Gina R. Merrill

In 2010, three women filed a class action suit against Goldman Sachs accusing it of gender bias and a “corporate culture” that allegedly favored men over women in determining pay and promotions.  After protracted battles over whether Goldman could compel individual arbitration and then over the scope of discovery, the issue of class certification was finally presented to the Court.  This week, in Chen-Oster, et al. v. Goldman Sachs, Case No. 10 Civ. 6950 (S.D.N.Y. Mar. 10, 2015), Magistrate Judge James C. Francis of the U.S. District Court for the Southern District of New York issued a report and recommendation response to plaintiffs’ motion and recommended that class certification be denied in its entirety.

We previously blogged about this case here, here, and here. Given the importance of the class certification ruling, it is a “must read” for corporate counsel facing employment discrimination class action litigation.

Background

Plaintiffs are current and former female Associates and Vice Presidents in three divisions of Goldman Sachs who alleged claims of gender discrimination under both disparate impact and disparate treatment theories. Plaintiffs sought to certify a class for injunctive and declaratory relief pursuant to Rule 23(b)(2) and for monetary damages under Rule 23(b)(3), and in the alternative, Plaintiffs sought to certify a class for the sole purpose of establishing liability under Rule 23(c)(4). The primary employment practices under scrutiny were the employer’s 360-review process and an evaluation tool called “manager quartiling,” in which the manager of the business unit ranks each of his or her employees by placing them in one of five quartiles.

The Report and Recommendation

The most surprising aspect of Magistrate Judge Francis’s report – which recommends denying class certification altogether – is his statement that “ . . . I would recommend that the plaintiff class be certified pursuant to Rules 23(b)(2) and 23(c)(4) in order to obtain a final determination as to the allegedly discriminatory impact of the Goldman Sachs’ employee evaluation process.” Id. at 45.

So, why didn’t he?

The answer lies in the law of the case doctrine. The opening clause of that same statement reads, “But for the fact that the law of the case doctrine dissuades me from revisiting the appropriateness of injunctive relief ….” Id. In other words, Magistrate Judge Francis denied certification as to an injunctive relief class because he felt constrained by an earlier decision in the lawsuit. That decision, issued by Judge Leonard Sand, held that because the named plaintiffs were not current employees, the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes , 131 S. Ct. 2541 (2011), obligated a finding that injunctive relief was unavailable. See Chen-Oster v. Goldman, Sachs & Co., 877 F. Supp. 2d 113, 121 (S.D.N.Y. 2012). Three subsequent decisions in the Southern District of New York have declined to follow Judge Sand’s holding, but the ruling has not been overturned, and Magistrate Judge Francis stated that “I am not writing on a clean slate; Judge Sand’s determination is entitled to deference as law of the case.” Id. at 36.

With respect to the Rule 23(b)(3) monetary damages class, Magistrate Judge Francis found that even though the requirements of Rule 23(a) were met, Plaintiffs could not meet the predominance requirement because individualized issues overwhelmed common ones. Id. at 40-44. He therefore recommended denial of the class under that Rule.

Implications for Employers

Assuming Plaintiffs challenge the ruling and file Rule 72 objections and even if the District Court were to adopt the report of the Magistrate Judge, the decision would provide limited authority for other employers seeking to defend against injunctive relief classes because of the report’s heavy reliance on the law of the case doctrine. However, with respect to a monetary damages class, the report is a useful reminder that individual causation and damages issues are often the key to defeating class certification; its holding is a very strong rebuke to theories of the plaintiffs’ class action bar seeking to impose extensive monetary liability through Rule 23(b)(3).

00-money-bagBy Christopher M. Cascino and Gerald L. Maatman, Jr.

In Montgomery v. Kraft Foods Global, Inc., No. 1:12-CV-00149 (W.D. Mich. March 2, 2015), Judge Gordon J. Quist of the U.S. District Court For The Western District of Michigan cut the attorneys’ fee award of the plaintiff’s counsel from a requested $183,168.50 to $6,417 in a decertified class action in which the plaintiff recovered only individual damages. While not a workplace class action, this case provides employers with a tool to dramatically reduce their liability for attorneys’ fees when they defeat class or collective action certification. It also serves as a reminder of the importance of seeking to bifurcate class discovery from merits discovery, as this can eliminate exposure for the fee request of plaintiff’s counsel incurred in discovery if a class is not certified.

Case Background

Pamela Montgomery filed a putative class action complaint against Kraft Foods and Starbucks for alleged violations of the Michigan Consumer Protection Act.  Montgomery, 1:12-CV-00149, at 1.  Montgomery alleged that she purchased a Kraft single-serving coffee maker for the purpose of brewing Starbucks coffee. Id. She alleged that Kraft and Starbucks misled consumers like her by convincing them that Starbucks would continue to produce the single-serving component of the Kraft single-serving brewing system “for a reasonable amount of time into the future, although Defendants knew that their business relationship would soon be at an end.” Id. at 1-2.

After class discovery, the Court denied Montgomery’s motion for class certification. Id. at 2. As a result, the only remaining claim in the case was Montgomery’s individual claim that had a maximum recovery of $250 in statutory damages. Id. at 3. Because continued litigation would result in attorneys’ fees that would far exceed any potential recovery, the Court ordered Defendants to show cause as to why the Court should not order Defendants to submit an offer of judgment to Montgomery for $250 plus costs and reasonable attorneys’ fees. Id. The Defendants then submitted the proposed offer of judgment, which Montgomery accepted. Id.

Because attorneys’ fees and costs are awarded to successful plaintiffs in Michigan Consumer Protection Act litigation, Montgomery moved for an award of $174,786 in attorneys’ fees, plus costs, which she later supplemented with an additional request for $8,382.50 in fees for work performed after the offer of judgment was accepted. Id. at 8. After Defendants objected, Montgomery asked the Court to compel Defendants to produce their own billing records “to measure the legitimacy of Defendants’ objections,” and for a hearing on her fee request. Id. at 4.

The Court’s Opinion 

The Court began by addressing Montgomery’s request for discovery of Defendants’ billing records. The Court found that Defendants’ billing records would not be relevant to Defendants’ objections to the fee award because Defendants’ objections were based on the sufficiency and accuracy of the billing records of Montgomery’s counsel, Montgomery’s request for fees related to Montgomery’s failed attempt at class certification, and the proposed billing rate of $350 per hour for an attorney who was in his first year of practice. Id. at *6. The Court thus denied Montgomery’s request for Defendants’ billing records. Id.

The Court also denied Montgomery’s request for an evidentiary hearing. Id at 8. Applying Michigan law, the Court found that only a party opposing a fee award has the right to an evidentiary hearing, and that it could decide the reasonableness of the fee award based on the parties’ submissions alone. Id. at 7-8.

The Court also addressed Montgomery’s fee request.  It began by finding that Montgomery’s proposed $350 hourly rate was excessive, concluding that a $155 hourly rate was appropriate because it was the mean rate for first year attorneys in Michigan.  Id. at 11.

The Court then turned to the most significant part of its decision – Montgomery’s request for fees for 523.34 hours of work.  Id.  The Court first deducted all 330.83 hours Montgomery’s counsel billed for discovery.  Id. at 12.  While Plaintiff’s counsel claimed that this work was “exclusive of work related to Plaintiffs’ Request for Class Certification,” the Court found that this was “not true.” Id. The Court pointed out that the case, being worth only $250 if a class was not certified, was “largely, if not exclusively, driven by Montgomery’s request for class certification,” and that therefore discovery was, as a practical matter, solely about class certification. Id. The Court then went on to point out that if Montgomery’s counsel engaged in merits discovery, he would have done so in violation of the Court’s order limiting initial discovery to class certification issues, and thus could not recover any fees for discovery even if he engaged in discovery about Plaintiff’s individual claim. Id. at 12 n.7.

The Court went on to deduct hours Montgomery’s counsel spend on other tasks to reflect Montgomery’s lack of success on her class claims. The Court cut the time Montgomery’s counsel spent on pre-complaint research from 9.9 hours to 4 hours and the time spent on drafting the complaint from 38.1 hours to 10 hours.  Id. at 13.  The Court went on to remove all but one of the 59.8 hours Montgomery’s counsel spent on the case after the denial of class certification because after the denial of class certification “it should have been immediately apparent to Montgomery and [her counsel] that continuing the litigation on Montgomery’s individual claim made no sense.” Id. at 14.  Finally, the Court denied Montgomery’s request for fees for time spent litigating the fee petition, finding that a plaintiff’s counsel is not entitled to any fees incurred after a plaintiff accepts an offer of judgment. Id. at 14-15.

After cutting the hourly rate and hours purportedly spent litigating Montgomery’s claim, the Court awarded Montgomery’s counsel $6,417 instead of the requested  $183,168.50. Id. at 16.

Lessons For Employers

While not a workplace class action, employers who are sued in workplace class actions can use this case to support dramatic reductions in requested fee awards for plaintiff’s counsel in cases in which class or collective action certification is denied. Employers can rely on this case to show that the time spent litigating a plaintiff’s individual claims in purported workplace class actions pales in comparison to the time spent attempting to achieve class or collective action certification. It also reminds employers that they should also be sure to request to limit initial discovery in most workplace class actions to the class or collective action certification issue. Discovery is almost always the most expensive and time-consuming part of any workplace class action, and by securing a court order limiting initial discovery to class certification issues, employers can leave no doubt that class counsel should not receive any fees for time spent on discovery prior to the resolution of class certification in any case in which class certification is denied.

Second-Circuit-Court-of-Appeals-SealBy Gerald L. Maatman Jr. and Howard M. Wexler

On March 4, 2015, the U.S. Court of Appeals for the Second Circuit reversed a District Court’s decision to certify a class action against Nextel Communications, Inc. (“Nextel”) in Johnson, et al v. Nextel Communications, Inc., et. al., 2015 U.S. App. LEXIS 3470 (2d Cir. Mar. 4, 2015), which we previously blogged about here. In Johnson, the District Court certified a class action – pursuant to Rule 23(c)(4) – relative to the claims of 587 employees of Nextel who allege that Nextel, and the former plaintiffs’ law firm representing the employees, engaged in various illegal acts against them by entering into a Dispute Resolution Settlement Agreement (“DSRA”) to resolve their employment discrimination claims. The ruling provides yet another interesting spin on Comcast Corp. v. Behrend, 131 S. Ct. 1426 (2013).

Background To The Case

In or around 2000, a law firm representing 587 employees (current and former) entered into a DRSA with Nextel to resolve various discrimination claims. Id. at 2. As a result of the DSRA, the law firm received $5.5 million in attorneys’ fees as well as an additional $2 million to act as consultants to Nextel on its employment practices. Id. In total, the 587 employees received less than half of the amount that their law firm received as part of the DRSA. Id. As a result, the employees filed two state court actions in Colorado, which resulted in a $1.2 million class-wide settlement against the law firm, with 39 employees opting-out of the settlement. Id.

Plaintiffs in Johnson – the 587 individuals whose claims against Nextel were resolved pursuant to the DRSA – sought to certify a proposed liability class against Nextel only as well as a sub-class made up of the 39 employees who-opted out of the Colorado settlements against their law former law firm. Id. at *3. The District Court granted this motion.

The Second Circuit’s Decision

The Second Circuit reversed the District Court and held that class certification was inappropriate because under Rule 23(b)(3), class-wide issues would not predominate, and individualized issues would “overwhelm” the case. The Second Circuit reasoned that Rule 23(b)(3)’s predominance requirement is more demanding than the Rule 23(a) commonality requirement, and that individual issues must be considered in deciding whether class issues outweigh issues involving individualized proof. The Second Circuit so ruled based on its reading on Comcast Corp.

Against this backdrop, the Second Circuit held that the District Court incorrectly held that New York law should apply in deciding whether the DRSA was enforceable. Id. at 11. Rather, the Second Circuit held that majority of the alleged wrongdoing took place outside of New York, where the individual employees resided, and “where he or she were promised representation.” Id.  As such, the Second Circuit held that “the state with the most significant relationship to plaintiffs’ claims is each individual state in which a class member resides and where he or she was promised representation.” Id.

Once the Second Circuit established that the substantive law of each class member’s state will applied, “the case for finding predominance of common issues and the superiority of trying this case as a class action diminishes to the vanishing point.” Id. at 11. These individualized inquiries associated with looking at the substantive law of each class member’s state “…are not collateral issues that could be determined in individual hearings after common questions are resolved for the class – they go to the heart of defendants’ liability for each class members’ alleged injury” and therefore warranted the denial of class certification. Id. The Second Circuited noted that “the specter of having to apply different substantive laws does not necessarily warrant refusing to certify a class…where as here, the variations in state law present ‘insuperable obstacles’ to determining liability based on common proof, such variations defeat the predominance of common issues and the superiority of trying the case as a class action.” Id. at 13.

Implications For Employers

Workplace class actions are being reshaped before our very eyes, as courts across the country apply new Supreme Court precedent. The application of Comcast to class certification in a variety of contexts is still developing in the law. The decision in Johnson adds to the ever growing post-Comcast appellate court decisions on Rule 23 certification and is a must read for employers caught in the crosshairs of high stakes, “bet the company” class action litigation, whether employment-related or otherwise.

The U.S. Supreme Court recently heard oral arguments in EEOC v. Abercrombie & Fitch, No. 14-86, a case alleging that implementation of the retail store’s “Look Policy” caused religious discrimination. We have blogged about this case previously –  here, here, here, here, and here. To recap, this case was brought by the EEOC alleging that Abercrombie & Fitch failed to hire Samantha Elauf, a Muslim woman, as a sales associate because she wore a hijab.  Abercrombie & Fitch has a policy called the “Look Policy” that prohibits the wearing of any head coverings. Our blog editor, Gerald L. Maatman, Jr. (@g_maatman) discusses the oral arguments in the case and his take on what to expect from the case with Colin O’Keefe from LXBN TV (@LXBN) in the video below.

For more information on EEOC v. Abercrombie & Fitch, our readers can check out the following posts:

The EEOC Scores Summary Judgment Win In Religious Discrimination Case

Don’t “Look” Now – Tenth Circuit Delivers Blow To EEOC In Its Battle Over Abercrombie’s “Look Policy”

EEOC Litigation Over Religious Accommodation Issues

Compliance: Religious discrimination — It’s on the EEOC’s radar

Take Two? EEOC Moves For Reconsideration After Losing High-Profile Religious Discrimination Case Over Abercrombie’s “Look Policy”

To stay current with EEOC news, please subscribe to us at www.workplaceclassaction.com and www.eeoccountdown.com.

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Don’t forget to reserve your copy of the 2015 Annual EEOC Litigation Report today!

 

 

 

 

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EEOC CoverFor all our loyal blog readers – our Annual EEOC-Initiated Litigation Webinar is scheduled for Monday, March 23, 2015. Click here to register and attend.

Our readers have given us wide-ranging feedback since the launch of our annual EEOC litigation study, EEOC-Initiated Litigation: Case Law Developments In 2014 And Trends To Watch For In 2015. This publication is a definitive source of information that focuses exclusively on EEOC-related litigation (click here to order a copy). Our webinar will provide a comprehensive review of these workplace litigation trends and provide attendees with updates on 2014 rulings and trends developing thus far in 2015.

The book’s Co-Authors Gerald L. Maatman, Jr. and Christopher J. DeGroff, co-chairs of the firm’s Complex Discrimination Litigation practice group, will lead this interactive discussion.

Substantive trends to be discussed are:

  • The EEOC’s Systemic Initiative – Still Alive and Kicking – Increasing focus on bigger, more complex, and more media-driven cases was prevalent in 2014.
  • The Commission’s Priorities – ADA, Sex/Pregnancy, and hiring cases remain chart-toppers for the EEOC in FY 2014.
  • Location, Location, Location – The “where” is an important question for EEOC activity, and makes a difference in the types of cases brought and how aggressively they are pursued.
  • EEOC Challenges and What They Mean for Employers – How EEOC setbacks in 2014 may translate to evolving legal tactics in 2015.
  • Where We Go From Here – Our predictions for EEOC enforcement activity in 2015, both substantive and tactical.

The webinar will be held on Monday, March 23, 2015:

1:00 p.m. to 2:00 p.m. Eastern

12:00 p.m. to 1:00 p.m. Central

11:00 a.m. to 12:00 p.m. Mountain

10:00 a.m. to 11:00 a.m. Pacific

Speakers: Christopher J. DeGroff and Gerald L. Maatman, Jr. of Seyfarth Shaw

Registration: There is no cost to attend this program, please click here to register and attend.

00-money-bagBy Christopher M. Cascino and Jennifer A. Riley

In In Re Capital One Telephone Consumer Protection Act Litigation, Case No. 12-CV-10064, 2015 WL 605203 (N.D. Ill. Feb. 12, 2015), Judge James Holderman of the U.S. District Court for the Northern District of Illinois recently approved an unprecedented $75,455,099 settlement for 1,378,534 class members in a Telephone Consumer Protection Act (“TCPA”) class action and awarded plaintiffs’ counsel a whopping $15,668,265 in fees. As employers and business are increasingly aware, TCPA class actions are becoming ubiquitous because of the severe penalties imposed by the statute and the ability of plaintiffs’ attorneys to leverage those penalties to acquire large settlements and windfall fee awards.

Though not a traditional workplace class action, In Re Capital One Telephone Consumer Protection Act Litigation teaches many valuable lessons for companies and employers alike. Enterprising plaintiffs’ attorneys continue to take advantage of the onerous requirements, stiff penalties, and unclear language of the TCPA to bring suits and receive large fee awards. Until the FCC provides some clarity, companies should ensure that their practices fit comfortably within the confines of the limited circumstances where the use of autodialing and prerecording is unquestionably allowed under the TCPA and FCC regulations.

Case Background

In 1991, Congress enacted the TCPA. “The TCPA prohibits callers from using ‘any automatic telephone dialing system or an artificial or prerecorded voice’ to make any non-emergency call to a cell phone, unless they have the ‘prior express consent of the called party.’” Capital One Telephone Consumer Protection Act Litig. at *3 (quoting 47 U.S.C. § 227(b)(1)(A)(iii)).  It imposes stiff penalties for violations, providing for statutory damages of $500 per call or $1,500 per call for willful or knowing violations. Id. at *3-4.

During 2011 and 2012, plaintiffs filed a number of class and individual actions against Capital One alleging that it violated the TCPA by calling class members’ cell phones using an automated dialing system and/or by using prerecorded messages in its calls to class members to collect on credit card debit. Id. at *1-2. On December 10, 2012, those cases were consolidated before Judge Holderman in the Northern District of Illinois. Id. at *2.

Capital One argued that it obtained consent to call each class member because in every version of its standard cardholder agreement, Capital One provided that customers consented to receive calls through autodialing technology. Id. at *12.  Capital One argued that the TCPA itself allows autodialing and prerecording with “express consent,” and FCC regulations provide that “autodialed collection calls to ‘wireless numbers provided by the called party in connection with an existing debt are made with the ‘prior express consent’ of the called party,’ and are therefore permissible.” Id. (quoting 23 F.C.C.R. 559 ¶ 9).

Plaintiffs pointed to another part of the FCC regulation stating that “prior express consent is deemed to be granted only if the wireless number was provided by the consumer to the creditor, and that such number was provided during the transaction that resulted in the debt owed.” Id. at *12-13 (quoting 23 F.C.C.R. 559 ¶ 9). Plaintiffs argued that, under this part of the regulation, Capital One could only autodial or make prerecorded calls to class members if the class members actually provided their cell phone numbers to Capital One on their respective cardholder agreements. Id.

Case Settlement

Despite the fact that it had a strong argument that the class consented to receiving autodialed and prerecorded calls, Capital One agreed to settle the case for $75,455,099 because of the lack of clarity in the FCC regulation and the enormous potential liability if it lost on the merits. Id. at *6, *11. Of the $75,455,099 settlement, $22,636,530  – 30% of the settlement amount – was designated for class counsel’s fee award, with $5,093,000 designated for notice and administration costs and $47,700,569 – or $2.72 per class member/$34.60 per class member who filed a claim form – designated for the class. Id. at *6-7.

The Court approved the class action settlement amount, though it “cut” class counsel’s fee award from $22,636,530 to $15,668,265. Id. at *39. The Court calculated this award by finding that class counsel should receive 36% of the first $10 million recovered, $25% of the next $10 million recovered, $20% of the next $25 million recovered, and 15% of any amounts recovered thereafter. Id. The Court decided that this graduated recovery scheme was appropriate because class counsel should receive a premium on the first $10 million recovered due to the risks in pursuing this litigation while giving class counsel a gradually reduced incentive to seek additional damages to “account for cases where the marginal costs of increasing the class’s damages recovery are low.” Id. at *38. After the reduction in fees, class members who filed claims should receive $39.66 rather than the originally proposed $34.60. This reduced award still provided class counsel with an enormous windfall of 20.77% of a $75.5 million settlement.

Implications

Because of the size of the fee award given to plaintiffs’ counsel in this case and the ability to leverage the stiff penalties of the TCPA to force settlement, we expect plaintiffs’ lawyers to continue to search for every opportunity to file TCPA suits.  We also expect that plaintiffs’ lawyers will use every ambiguity in the law and FCC regulations and the aforementioned stiff penalties to compel other well-meaning companies to settle dubious TCPA claims and, as a result, receive large fee awards.  Because of this, employers who contact their customers via cell phone should be vigilant regarding their compliance with the TCPA. Companies seeking to collect debts should refrain from using automatic dialing and prerecorded messages without first obtaining an express written consent from each customer that identifies the cell phone number to which the company can place automatic-dialed calls.