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By: Gerald L. Maatman, Jr.

Seyfarth Synopsis: The first key trend from our 15th Annual Workplace Class Action Litigation Report involves rulings by the U.S. Supreme Court.  Over the past few years, the Supreme 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 2018, as well as which upcoming decisions employers should watch for in 2019.  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 under Rule 23 of the Federal Rules of Civil Procedure.

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.

This year saw another signal ruling in Epic Systems Corp. v. Lewis, which marks a gateway device to block prosecution of class actions in the judicial system and forces adjudication of claims on an individual, bi-lateral basis in arbitration.

To that end, federal and state courts cited Wal-Mart in 608 rulings in 2018; they cited Comcast in 235 cases in 2018; and despite its issuance in May of 2018, they cited Epic Systems in 119 decisions by year’s end.

The past year also saw a change in the composition of the Supreme Court in April of 2018, with Justice Neil Gorsuch assuming the seat of Antonin Scalia after his passing in 2016, and Justice Brett Kavanaugh taking the seat of Anthony Kennedy in October 2018, after Kennedy’s retirement and a bruising Senate confirmation battle.

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 2019 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 2018

In terms of decisions by the Supreme Court impacting workplace class actions, this past year was no exception. In 2018, the Supreme Court decided seven cases – four employment-related cases and three class action cases – that will influence complex employment-related litigation in the coming years.

The employment-related rulings included two wage & hour collective actions and two union cases, and in class actions that involved securities and human rights. A rough scorecard of the decisions reflects one distinct plaintiff/worker-side victory, and defense-oriented rulings in six cases.

Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018) – Decided on May 21, 2018, this employment case involved the interpretation of mandatory 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, bi-lateral 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. In a 5 to 4 ruling, the Supreme Court held that class action waivers in arbitration agreements are valid. The decision is likely to have far-reaching implications for litigation of class actions and collective actions.

Cyan, Inc., et al. v. Beaver County Employees Retirement Fund, 138 S. Ct. 1061 (2018) – Decided on March 20, 2018, this class action case posed the issue of whether federal law bars state courts from hearing certain securities class actions. The case turned on interpretation of the Private Securities Litigation Reform Act of 1995 (“SLUSA”) – which imposes tougher standards on securities class actions brought in federal courts – and whether it mandated that state courts can no longer hear class actions based on the Securities Act of 1933. In a 9 to 0 decision, the Supreme Court held that SLUSA did not strip state courts of jurisdiction over class actions alleging violations of securities laws and that defendants cannot remove such lawsuits from federal court to state court. In this regard, it did not spell the end of what many have viewed 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., 138 S. Ct. 1134 (2018) – Decided on April 2, 2018, in this wage & hour case the Supreme Court examined 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 (“FLSA”). The Supreme Court held 5 to 4 that service advisors are exempt under the FLSA. The ruling is apt to have far-reaching implications on the legal tests for interpretation of statutory exemptions under the FLSA, as the broader reading of the exemption potentially could reduce the number of workers allowed to assert wage & hour claims against their employers.

CNH Industrial N.V. v. Reese, et al., 138 S. Ct. 761 (2018) – Decided on February 20, 2018, in this employment case the Supreme Court held in a per curium opinion that collective bargaining agreements are to be interpreted according to ordinary principles of contract law, including the rule that a contract is not ambiguous unless it is subject to more than one reasonable interpretation. The case involved a collective bargaining agreement, which provided health care benefits under a group benefit plan to certain employees who retired under the pension plan. The agreement expired by its terms in May 2004. At that time, a class of CNH retirees and surviving spouses filed a lawsuit seeking a declaration that their health care benefits vested for life. In reversing lower court rulings that determined that the collective bargaining agreement was ambiguous and they therefore could rely on extrinsic evidence in interpreting the contract to favor the claims of the union members, the Supreme Court held that the “only reasonable interpretation of the 1998 agreement was that the health care benefits expired when the collective bargaining agreement expired in 2004.

Janus, et al. v. AFSCME, 138 S. Ct. 2448 (2018) – Decided on June 27, 2018, in this employment case the Supreme Court considered 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 ruling 5 to 4, the Supreme Court held that the application of a mandatory public sector union fee requirement is a violation of the First Amendment, thereby overruling Abood. This ruling had an immediate impact on millions of workers in 22 states that do not have right-to-work laws. Since many workers are apt to cease paying union dues with the abolishment of the fair share fee payments requirement, the decision will have a significant impact on the ability of public-sector unions to conduct their business.

China Agritech, Inc. v. Resh, et al., 138 S. Ct. 1800 (2018) – Decided on June 11, 2018, in this class action case the Supreme Court examined whether the tolling rule for class actions established in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), tolled the statute of limitations to permit a previously absent class member to bring a subsequent class action outside the applicable limitations period. American Pipe had 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. The Supreme Court interpreted American Pipe more narrowly, and held that it does not permit the maintenance of a follow-on class action past the expiration of the statute of limitations. In essence, the ruling limits the tolling rule in American Pipe to apply only to subsequent individual claims.

Jesner, et al. v. Arab Bank, PLC, 138 S. Ct. 1386 (2018) – Decided on April 24, 2018, this class action posed the issue of whether foreign-based corporations can be sued in U.S. courts for alleged violations of the Alien Tort Statute. The Supreme Court decided 5 to 4 that Plaintiffs may not do so. The end result will be to bring a halt to class actions brought to hold foreign-based corporations responsible in U.S. courts for alleged human rights violations committed overseas.

The decisions in Epic Systems, Beaver County, Navarro, Reese, Janus, China Agritech, and Jesner are sure to shape and influence workplace class action litigation in a profound manner.

These cases will impact rules on American Pipe tolling and application of statute of limitations in class actions; the ability of foreign-based claimants to prosecute class actions based on overseas labor and human rights abuses; the obligations of corporations to fund lifetime retiree benefits under collective bargaining agreements; the scope of exemptions in wage & hour litigation; union fee litigation and membership rights; securities fraud class action litigation in state courts; and defenses to workplace class actions based on class waivers in mandatory arbitration agreements.

In addition, Epic Systems may turn out to be one of the most important workplace class action decisions over the last several decades in terms of its ultimate impact on litigation dynamics.

Rulings Expected In 2019

Equally important for the coming year, the Supreme Court accepted five additional cases for review in 2018 – that will be decided in 2019 – that also will impact and shape class action litigation and government enforcement lawsuits faced by employers.

Those cases include two employment lawsuits and three class action cases.

The Supreme Court undertook oral arguments on four of these cases in 2018; the other case underwent oral argument in early 2019.

Frank, et al. v. Gaos, No. 17-961 – Argued on October 31, 2018, this case concerns whether and in what circumstances a cy pres award in a class action – that supplies no direct relief to class members – nonetheless comports with the Rule 23 requirement that a settlement binding class members must be fair, reasonable, and adequate. The ultimate ruling by the Supreme Court likely will determine the legality of cy pres awards, and if approved, create guidelines for the appropriateness of cy pres awards in class action settlements.

Home Depot U.S.A. v. Jackson, et al., No. 17-1471 – Argued on January 15, 2019, this case involves the Class Action Fairness Act and the circumstances under which Defendants may remove a class action to federal court where Defendants file a counter-claim. The ultimate decision likely will determine if the Supreme Court’s earlier ruling in Shamrock Oil & Gas Co. v. Sheets, 313 U.S. 100 (1941) – that a Plaintiff may not remove a counter-claim against it – extends to third-party Defendants bringing counter-claims.

Lamps Plus, Inc. v. Varela, et al., No. 17-988 – Argued on October 29, 2018, this case poses the issue of whether the Federal Arbitration Act (“FAA”) forecloses a broad interpretation of an arbitration agreement that allows prosecution of a class arbitration based solely on general language commonly used in arbitration agreements. Given the ruling in Epic Systems in 2018, the upcoming decision in this case will be of critical significance to employers involved in arbitration of workplace disputes.

New Prime Inc. v. Oliveria, et al., No. 17-340 – Argued on October 29, 2018, this case presents the issue of whether a court or an arbitrator must determine the applicability of § 1 of the FAA – which applies only to “contracts of employment” – to independent contractor agreements. The future decision in this case will be important to employers seeking to use class action waivers in workplace arbitration agreements used with independent contractors.

Mount Lemon Fire District v. Guido, No. 17-587 – Argued on October 1, 2018, this case raises the issue of whether the Age Discrimination in Employment Act (“ADEA”) applies to state and local governmental entities. A future decision will determine the coverage of the ADEA relative to the public sector employees.

The Supreme Court is expected to issue decisions in these five cases by the end of the 2018/2019 term in June of 2019.

Rulings in these cases will have significance for employers in complying with employment discrimination laws, structuring arbitration proceedings, and defending class action litigation.

Implications For Employers

Each decision outlined above may have significant implications for employers and for the defense of high-stakes class action litigation. As always, we will closely monitor all Supreme Court case developments and report them to our readers. Stay tuned!

By Gerald L. Maatman, Jr.

Seyfarth Synopsis: At 852 pages, Seyfarth’s 15th Annual Workplace Class Action Litigation Report analyzes 1,453 rulings and is our most comprehensive Report ever.

Click here to access the microsite featuring all the Report highlights. You can read about the five major trends of the past year, order your copy of the eBook, and download Chapters 1 and 2 on the 2019 Executive Summary and key class action settlements.

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

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

The 2019 Report analyzes rulings from all state and federal courts – including private plaintiff class actions and collective actions, and government enforcement actions –  in the substantive areas of Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, and the Class Action Fairness Act of 2005. It also features chapters on EEOC pattern or practice rulings, state law class certification decisions, and non-workplace class action rulings that impact employers. The Report also analyzes the leading class action settlements for 2018 for employment discrimination, wage & hour, ERISA class actions, and statutory workplace laws, as well as settlements of government enforcement actions, both with respect to monetary values and injunctive relief provisions.

We hope our loyal blog readers will enjoy it!

Executive Summary

The prosecution of workplace class action litigation by the plaintiffs’ bar has continued to escalate over the past decade. Class actions often pose unique “bet-the-company” risks for employers. As has become readily apparent in the #MeToo era, an adverse judgment in a class action has the potential to bankrupt a business and adverse publicity can eviscerate its market share. Likewise, the on-going defense of a class action can drain corporate resources long before the case even reaches a decision point. Companies that do business in multiple states are also susceptible to “copy-cat” class actions, whereby plaintiffs’ lawyers create a domino effect of litigation filings that challenge corporate policies and practices in numerous jurisdictions at the same time. Hence, workplace class actions can impair a corporation’s business operations, jeopardize or cut short the careers of senior management, and cost millions of dollars to defend. For these reasons, workplace class actions remain at the top of the list of challenges that keep business leaders up late at night with worries about compliance and litigation. Skilled plaintiffs’ class action lawyers and governmental enforcement litigators are not making this challenge any easier for companies. They are continuing to develop new theories and approaches to the successful prosecution of complex employment litigation and government-backed lawsuits.

New rulings by federal and state courts have added to this patchwork quilt of compliance problems and risk management issues. In turn, the events of the past year in the workplace class action world demonstrate that the array of litigation issues facing businesses are continuing to accelerate at a rapid pace while also undergoing significant change. Notwithstanding the transition to new leadership in the White House with the Trump Administration, governmental enforcement litigation pursued by the U.S. Equal Employment Commission (“EEOC”) and other federal agencies continued to manifest an aggressive agenda, with regulatory oversight of workplace issues continuing as a high priority. Conversely, litigation issues stemming from the U.S. Department of Labor (“DOL”) reflected a slight pull-back from previous efforts to push a pronounced pro-worker/anti-business agenda. The combination of these factors are challenging businesses to integrate their litigation and risk mitigation strategies to navigate these exposures. These challenges are especially acute for businesses in the context of complex workplace litigation. Adding to this mosaic of challenges in 2019 is the continuing evolution in federal policies emanating from the Trump White House, the recent appointments of new Supreme Court Justices, and mid-term elections placing the Senate in control of Republicans and the House in control of Democrats. Furthermore, while changes to government priorities started on the previous Inauguration Day and are on-going, others are being carried out by new leadership at the agency level who were appointed over this past year. As expected, many changes represent stark reversals in policy that are sure to have a cascading impact on private class action litigation.

While predictions about the future of workplace class action litigation may cover a wide array of potential outcomes, the one sure bet is that change is inevitable and corporate America will continue to face new litigation challenges.

Key Trends Of 2018

An overview of workplace class action litigation developments in 2018 reveals five key trends. First, class action litigation has been shaped and influenced to a large degree by recent rulings of the U.S. Supreme Court. Over the past several years, the U.S. Supreme Court has accepted more cases for review than in previous years – and as a result, has issued more rulings – that have impacted the prosecution and defense of class actions and government enforcement litigation. The past year continued that trend, with several key decisions on complex employment litigation and class action issues that were arguably more pro-business than decisions in past terms. Among those rulings, Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018) – which upheld the legality of class action waivers in mandatory arbitration agreements – is a transformative decision that is one of the most important workplace class action rulings in the last two decades. It is already having a profound impact on the prosecution and defense of workplace class action litigation, and in the long run, Epic Systems may well shift class action litigation dynamics in critical ways. Coupled with the appointments of Justices Neil Gorsuch and Brett Kavanaugh to the Supreme Court in 2018, litigation may well be reshaped in ways that change the playbook for prosecuting and defending class actions.

Second, the plaintiffs’ bar was successful in prosecuting class certification motions at the highest rates ever as compared to previous years in the areas of ERISA and wage & hour litigation, while suffering significant defeats in employment discrimination litigation. While evolving case law precedents and new defense approaches resulted in good outcomes for employers in opposing class certification requests, federal and state courts issued many favorable class certification rulings for the plaintiffs’ bar in 2018. Plaintiffs’ lawyers continued to craft refined class certification theories to counter the more stringent Rule 23 certification requirements established in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011). As a result, in the areas of wage & hour and ERISA class actions, the plaintiffs’ bar scored exceedingly well in securing class certification rulings in federal courts in 2018 (over comparative figures for 2017). Class actions were certified in significantly higher numbers in “magnet” jurisdictions that continued to issue decisions that encourage – or, in effect, force – the resolution of large numbers of claims through class-wide mechanisms. Furthermore, the sheer volume of wage & hour certification decisions in 2018 increased as compared to last year, and plaintiffs fared better in litigating those class certification motions in federal court than in the prior year. Of the 273 wage & hour certification decisions in 2018, plaintiffs won 196 of 248 conditional certification rulings (approximately 79%), and lost only 13 of 25 decertification rulings (approximately 52%). By comparison, there were 257 wage & hour certification decisions in 2017, where plaintiffs won 170 of 233 conditional certification rulings (approximately 73%) and lost 15 of 24 decertification rulings (approximately 63%). In sum, employers lost more first stage conditional certification motions in 2018, and saw a reduction of their odds – a decrease of 11% – of fracturing cases with successful decertification motions.

Third, filings and settlements of government enforcement litigation in 2018 did not reflect a head-snapping pivot from the ideological pro-worker outlook of the Obama Administration to a pro-business, less regulation/litigation viewpoint of the Trump Administration. Instead, as compared to 2016 (the last year of the Obama Administration), government enforcement litigation actually increased in 2018. As an example, the EEOC alone brought 199 lawsuits in 2018 as compared to 184 lawsuits in 2017 and 86 lawsuits in 2016. However, the settlement value of the top ten settlements in government enforcement cases decreased dramatically – from $485.25 million in 2017 to $126.7 million in 2018. The explanations for this phenomenon are varied, and include the time-lag between Obama-appointed enforcement personnel vacating their offices and Trump-appointed personnel taking charge of agency decision-making power; the number of lawsuits “in the pipeline” that were filed during the Obama Administration that came to conclusion in the past year; and the “hold-over” effect whereby Obama-appointed policy-makers remained in their positions long enough to continue their enforcement efforts before being replaced in the last half of 2018. This is especially true at the EEOC, where the Trump nominations for the Commission’s Chair, two Commissioners, and its general counsel were stalled in the Senate waiting for votes of approval (or rejection), and one of the two nominees withdrew at year-end due to the delay. These factors are critical to employers, as both the DOL and the EEOC have had a focus on “big impact” lawsuits against companies and “lead by example” in terms of areas that the private plaintiffs’ bar aims to pursue. As 2019 opens, it appears that the content and scope of enforcement litigation undertaken by the DOL and the EEOC in the Trump Administration will continue to tilt away from the pro-employee/anti-big business mindset of the previous Administration. Trump appointees at the EEOC and the DOL are slowly but surely “peeling back” on positions previously advocated under the Obama Administration. As a result, it appears inevitable that the volume of government enforcement litigation and value of settlement numbers from those cases will decrease in 2019.

Fourth, the monetary value of the top workplace class action settlements decreased dramatically in 2018. These settlement numbers had been increasing on an annual basis over the past decade, and reached all-time highs in 2017. While the plaintiffs’ employment class action bar and governmental enforcement litigators were exceedingly successful in monetizing their case filings into large class-wide settlements this past year, they did so at decidedly lower values in 2018 than in previous years. The top ten settlements in various employment-related class action categories totaled $1.32 billion in 2018, a decrease of over $1.4 billion from $2.72 billion in 2017 and a decrease of $430 million from $1.75 billion in 2016. Furthermore, settlements of wage & hour class actions experienced over a 50% decrease in value (from $525 million in 2017 down to $253 million in 2018); ERISA class actions saw nearly a three-fold decrease (from $927 million in 2017 down to $313.4 million in 2018); and government enforcement litigation registered nearly a fourfold decrease (from $485.2 million in 2017 down to $126.7 million in 2018). Whether this is the beginning of a long-range trend or a short-term aberration remains to be seen as 2019 unfolds.

Fifth, as it continues to gain momentum on a worldwide basis, the #MeToo movement is fueling employment litigation issues in general and workplace class action litigation in particular. On account of new reports and social media, it has raised the level of awareness of workplace rights and emboldened many to utilize the judicial system to vindicate those rights. Several large sex harassment class-based settlements were effectuated in 2018 that stemmed at least in part from #MeToo initiatives. Likewise, the EEOC’s enforcement litigation activity in 2018 focused on the filing of #MeToo lawsuits while riding the wave of social media attention to such workplace issues; in fact, fully 74% of the EEOC’s Title VII filings this past year targeted sex-based discrimination (compared to 2017, where sex based-discrimination claims accounted for 65% of Title VII filings). Of the EEOC’s 2018 sex discrimination lawsuit filings, 41 filings included claims of sexual harassment. The total number of sexual harassment filings increased notably as compared to 2017, where sexual harassment claims accounted for 33 filings. Employers can expect more of the same in the coming year.

Implications For Employers

The one constant in workplace class action litigation is change. More than any other year in recent memory, 2018 was a year of great change in the landscape of Rule 23. As these issues play out in 2019, additional chapters in the class action playbook will be written.

The lesson to draw from 2018 is that the private plaintiffs’ bar and government enforcement attorneys at the state level are apt to be equally, if not more, aggressive in 2019 in bringing class action and collective action litigation against employers.

These novel challenges demand a shift of thinking in the way companies formulate their strategies. As class actions and collective actions are a pervasive aspect of litigation in Corporate America, defending and defeating this type of litigation is a top priority for corporate counsel. Identifying, addressing, and remediating class action vulnerabilities, therefore, deserves a place at the top of corporate counsel’s priorities list for 2019.

Seyfarth Synopsis: 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 2019 Report to our readers from our Blog.

This will be our Fifteenth Annual Report, and the biggest yet with analysis of over 1,400 class certification rulings from federal and state courts in 2018.  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 are humbled and honored by the recent review of our 2018 Annual Workplace Class Action Litigation Report by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here. Here is what EPLiC said: “The Report is a must-have resource for legal research and in-depth analysis of employment-related class action litigation. Anyone who practices in this area, whether as a corporate counsel, a private attorney, a business execu­tive, a risk manager, an underwriter, a consul­tant, or a broker, cannot afford to be without it. Importantly, the Report is the only publica­tion of its kind in the United States. It is the sole compendium that analyzes workplace class actions from ‘A to Z.’” Furthermore, EPLiC recognized our Report as the “state-of-the-art word” on workplace class action litigation.

The 2019 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 2018 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 2019 Report will be available on our blog in early January. Happy Holidays!

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!

#16-3836 2017 WCAR Front Cover for WordOur 2017 Workplace Class Action Report is now available.

At 881 pages, our 13th Annual Report analyzes 1,331 rulings and is our biggest and best Report ever.

Click here to order your copy in eBook format. Click here to download Chapter 1 on the 2017 Executive Summary/Key Trends.

Our annual webinar on the Report is now set for February 21, 2017 and a link to register for the webinar is here.

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 ‘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, risk manager, underwriter, or broker cannot afford to be without it. Importantly, the Report is the only publication of its kind in the United States.”  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 2017 Report analyzes rulings from all state and federal courts – including private plaintiff class actions and collective actions, and government enforcement actions –  in the substantive areas of Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, and the Class Action Fairness Act of 2005. It also features chapters on EEOC pattern or practice rulings, state law class certification decisions, and non-workplace class action rulings that impact employers. The Report also analyzes the leading class action settlements for 2016 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.

We hope our loyal blog readers will enjoy it!

Executive Summary

Workplace class action litigation has increased geometrically over the past decade. More often than not, it poses unique “bet-the-company” risks for employers.  An adverse judgment in a class action has the potential to bankrupt a business or eviscerate its market share. Likewise, the on-going defense of a class action can drain corporate resources long before the case reaches a decision point. Companies that do business in multiple states are also susceptible to “copy-cat” class actions, whereby plaintiffs’ lawyers create a domino effect of litigation filings that challenge corporate policies and practices in numerous jurisdictions at the same time. Hence, workplace class actions can adversely impact a corporation’s business operations, jeopardize or end the careers of senior management, and cost millions of dollars to defend. For these reasons, workplace class action litigation risks are at the top of the list of problems that keep business leaders from sleeping at night.

Skilled plaintiffs’ class action lawyers and governmental enforcement litigators are not making this challenge any easier. They are continuing to develop new theories and approaches to the successful prosecution of complex employment litigation.  New rulings by federal and state courts add to this patchwork quilt of compliance problems and risk management issues. In turn, the events of the past year in the workplace class action world demonstrate that the array of litigation issues facing businesses are continuing to accelerate at a rapid pace while also undergoing significant change.  Governmental enforcement litigation pursued by the U.S. Equal Employment Commission (“EEOC”) and the U.S. Department of Labor (“DOL”) has also manifested an aggressive “push-the-envelope” agenda of two activist agencies, with regulatory oversight of workplace issues continuing as a high priority in the Obama Administration.  The combination of these factors are challenging businesses to integrate their litigation and risk mitigation strategies to navigate these exposures. These challenges are especially acute for businesses in the context of complex workplace litigation.

Adding to this mosaic of challenges in 2017 is the first change-over of the political party occupying the White House in eight years. One of the initial items both political parties will address is President Trump’s nominee to fill the vacant seat on the U.S. Supreme Court. The fragile alliances amongst the conservative and liberal factions will hang in the balance, as future workplace class action rulings will pivot at least in part on the new composition of the Supreme Court once the nominee is confirmed and takes the bench sometime in 2017. Furthermore, changes to government priorities will start on Inauguration Day, and some may well be stark reversals in policy that are sure to have a cascading impact on private class action litigation. While predictions about the future of workplace class action litigation may cover a wide array of potential outcomes, the one sure bet is that change is inevitable and corporate America will encounter new litigation challenges.

Key Trends Of 2016

An overview of workplace class action litigation developments in 2016 reveals six key trends.

First, class action dynamics increasingly have been shaped and influenced by recent rulings of the U.S. Supreme Court. Over the past several years, the Supreme Court has accepted more cases for review – and issued more rulings – than ever before that have impacted the prosecution and defense of class actions and government enforcement litigation. The past year continued that trend, with several key decisions on complex employment litigation and class action issues, and more cases accepted for review that are posed for rulings in 2017. The key class action decisions this past year – in the Tyson Foods and Spokeo cases – were arguably more pro-plaintiff and pro-class action than business-oriented or anti-class action.  While the Supreme Court led by Chief Justice John Roberts is often thought to be pro-business, the array of its key rulings impacting class action workplace issues is anything but one-dimensional. Some decisions may be viewed as hostile to the expansive use of Rule 23, while others are hospitable and strengthen the availability of class actions and/or make proof requirements easier for plaintiffs.  Further, the Supreme Court declined several opportunities to impose more restraints on class actions, and by often deciding cases on narrow grounds, it has left many gaps to be filled in by – and thereby has fueled disagreements arising amongst – lower federal courts. Suffice it to say, the range of rulings form a complex tapestry that precludes an overarching generalization that the Supreme Court is either pro-business or pro-worker on class actions.

Second, the monetary value of the top employment-related class action settlements declined significantly in 2016 after they reached all-time highs in 2014 and 2015. The plaintiffs’ employment class action bar and governmental enforcement litigators successfully translated their case filings into large class-wide settlements, but they did so at lower values than in the two previous years. The top ten settlements in various employment-related categories totaled $1.75 billion in 2016, which declined from $2.48 billion in 2015 and $1.87 billion in 2014. Whether this is the start of a trend or a short-term aberration remains to be seen as 2017 unfolds.

Third, federal and state courts issued more favorable class certification rulings for the plaintiffs’ bar in 2016 than in past years. Plaintiffs’ lawyers continued to craft refined and more successful class certification theories to counter the more stringent Rule 23 certification requirements established in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), and Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). In the areas of employment discrimination, wage & hour, and ERISA class actions, the plaintiffs’ bar scored exceedingly well in securing class certification rulings in 2016. In sum, class actions continue to be certified in significant numbers and certain “magnet” jurisdictions continue to issue decisions that encourage – or, in effect, force – the resolution of large numbers of claims through class action mechanisms.

Fourth, overall complex employment-related litigation filings increased in 2016 insofar as employment discrimination cases were concerned, but decreased in the areas of ERISA class actions, governmental enforcement litigation, and wage & hour collective actions and class actions. For the past decade, wage & hour class actions and collective actions have been the leading type of “high stakes” lawsuits being pursued by the plaintiffs’ bar. Each year the number of such case filings increased. However, for the first time in over a decade, case filing statistics for 2016 reflected that wage & hour litigation decreased over the past year. Additional factors set to coalesce in 2017 – including litigation over the new FLSA regulations and the direction of wage & hour enforcement under the Trump Administration – are apt to drive these exposures for Corporate America. To the extent that government enforcement of wage & hour laws is ratcheted down, the private plaintiffs’ bar likely will “fill the void” and again increase the number of wage & hour lawsuit filings.

Fifth, wage & hour certification decisions in 2016 increased geometrically as compared to last year. Of the 224 wage & hour certification decisions in 2016, there were 195 conditional certification rulings and 29 decertification rulings. In contrast, in 2015, there were 175 wage & hour certification decisions, including 153 conditional certification rulings and 22 decertification rulings. While plaintiffs’ lawyers won more conditional certification motions than compared to prior years, employers also won decertification motions at higher rates than as compared to 2015. At the same time, that led to a more rapid and robust development of case law on conditional certification and decertification issues in the wage & hour context.  It also reflects the simple truism that with more wage & hour litigation case filings over the last 36 months, there have been more conditional certification and decertification decisions in that space than in any other area of workplace class action litigation.

Sixth, and finally, government enforcement lawsuits brought by the DOL and EEOC continued the aggressive litigation programs of both agencies, but by sheer numbers of cases, their enforcement activities were arguably limited in their effectiveness, at least when measured by lawsuit filings and recoveries compared to previous years. Settlement numbers for government enforcement litigation in 2016 decreased substantially as compared to 2015, as did the litigation dockets of the DOL and the EEOC. This trend is critical to employers, as both agencies have a focus on “big impact” lawsuits against companies and “lead by example” in terms of areas that the private plaintiffs’ bar aims to pursue. The content and scope of enforcement litigation undertaken by the DOL and the EEOC in the Trump Administration remains to be seen; most believe there will be wholesale changes, which may well prompt the private plaintiffs’ class action bar to “fill the void” and expand the volume of litigation pursued against employers over the coming year.

Implications For Employers

The one constant in workplace class action litigation is change.  More than any other year in recent memory, 2016 was a year of great change in the landscape of Rule 23.  As these issues play out in 2017, additional chapters in the class action playbook will be written.

The lesson to draw from 2016 is that the private plaintiffs’ bar and government enforcement attorneys are apt to be equally, if not more, aggressive in 2017 in bringing class action and collective action litigation against employers.

These novel challenges demand a shift of thinking in the way companies formulate their strategies.  As class actions and collective actions are a pervasive aspect of litigation in Corporate America, defending and defeating this type of litigation is a top priority for corporate counsel.  Identifying, addressing, and remediating class action vulnerabilities, therefore, deserves a place at the top of corporate counsel’s priorities list for 2017.

santa1Happy 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 2017 Report to our readers from our Blog.

This will be our Thirteenth Annual Report, and the biggest yet with analysis of over 1,300 class certification rulings from federal and state courts in 2016.  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 ‘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, risk manager, underwriter, or broker cannot afford to be without it. Importantly, the Report is the only publication of its kind in the United States.”  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 2017 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 201 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 2017 Report will be available on our blog in early January. Happy Holidays!

#16-3130 2016 WCAR Tickit Icon R!By Gerald L. Maatman, Jr.

Our 2016 Workplace Class Action Report is now available. At 853 pages, it analyzes 1,314 rulings and is our biggest and best Report ever.

Click here to order your copy in eBook format. Click here to download Chapter 1 on the 2015 Executive Summary/Key Trends. Our annual webinar on the Report is now set for February 1, 2015, and a link to register for the webinar is here.

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 humbled and honored by the review of our Report by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here. EPLi said: “The Report is the singular, definitive source of information, research, and in-depth analysis on employment-related class action litigation. Practitioners and corporate counsel should not be without it on their desk, since the Report is the sole compendium of its kind in the United States.”

The 2016 Report analyzes rulings from all state and federal courts – including private plaintiff class actions and collective actions, and government enforcement actions –  in the substantive areas of Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, and the Class Action Fairness Act of 2005. It also features chapters on EEOC pattern or practice rulings, state law class certification decisions, and non-workplace class action rulings that impact employers. The Report also analyzes the leading class action settlements for 2015 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.

We hope our loyal blog readers will enjoy it!

Executive Summary

Workplace class action litigation often poses unique “bet-the-company” risks for employers. An adverse judgment in a class action has the potential to bankrupt a business. Likewise, the on-going defense of a class action can drain corporate resources long before the case reaches a decision point. Companies that do business in multiple states are also susceptible to “copy-cat” class actions, whereby plaintiffs’ lawyers create a domino effect of litigation filings that challenge corporate policies and practices. Hence, workplace class actions can adversely impact a corporation’s market share, jeopardize or end the careers of senior management, and cost millions of dollars in defense fees. For these reasons, workplace class action litigation risks are at the top of the list of problems that keep business leaders up at night.

Skilled plaintiffs’ class action lawyers and governmental enforcement litigators are not making that challenge any easier. They are continuing to develop new theories and approaches to prosecuting complex employment litigation. In turn, the events of the past year in the workplace class action world demonstrate that the array of litigation issues facing businesses are continuing to accelerate while also undergoing significant change. Governmental enforcement litigation pursued by the U.S. Equal Employment Commission (“EEOC”) and the U.S. Department of Labor (“DOL”) also manifests an aggressive “push-the-envelope” agenda of two activist agencies, with regulatory oversight of workplace issues continuing as a high priority. The combination of these factors are challenging businesses to integrate their litigation and risk mitigation strategies to navigate these exposures. These challenges are especially acute for businesses in the context of complex workplace litigation.

Key Trends Of 2015

An overview of workplace class action litigation developments in 2015 reveals five key trends.

First, class action dynamics increasingly have been shaped and influenced by recent rulings of the U.S. Supreme Court. Over the past several years, the Supreme Court has accepted supreme courtmore cases for review – and issued more rulings – than ever before that have impacted the prosecution and defense of class actions and government enforcement litigation. The past year continued that trend, with several key decisions on complex employment litigation issues, and more cases accepted for review that are posed for rulings in 2016. While the Supreme Court led by Chief Justice John Roberts is often thought to be pro-business, the array of its key rulings impacting class action workplace issues is anything but one-dimensional. Some decisions may be viewed as hostile to the expansive use of Rule 23, while others are hospitable and strengthen the availability of class actions. Further, the Supreme Court has declined several opportunities to impose more restraints on class actions, and by often deciding cases on narrow grounds, it has left many gaps to be filled in by – and thereby fueled disagreements arising amongst – lower federal courts. Suffice it to say, the range of rulings form a complex tapestry that precludes an overarching generalization that the Supreme Court is pro-business or pro-worker on class actions.

Second, the monetary value of employment-related class action settlements reached an all-time high in 2015. The plaintiffs’ employment class action bar and governmental enforcement litigators successfully translated their case filings into larger class-wide settlements at unprecedented levels. The top ten settlements in various employment-related categories totaled $2.48 billion over the past year as compared to $1.87 billion in 2014. As success in the class action litigation context often serves to encourage pursuit of more class actions by “copy-cat” litigants, 2016 is apt to see the filing of more class actions than in previous years.

#15-3099 2015 WCAR Infographics - Aggregate Settlement Amounts R

Third, federal and state courts issued more favorable class certification rulings for the plaintiffs’ bar in 2015 than in past years. In addition to converting their class certification rulings into class action settlements with higher values and pay-outs, plaintiffs’ lawyers continued to craft refined and more successful class certification theories to counter the more stringent Rule 23 certification requirements established in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), and Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). In the areas of employment discrimination, wage & hour, and ERISA class actions, the plaintiffs’ bar scored exceedingly well in securing class certification rulings in 2015. Statistically, the plaintiffs’ bar secured class certification at an astounding rate of 75% of cases in 2015. In sum, class actions continue to be certified in significant numbers and certain “magnet” jurisdictions continue to issue decisions that encourage – or, in effect, force – the resolution of large numbers of claims through class action mechanisms.

#15-3099 2015 WCAR Infographics - U.S. Circuit Courts of Appeal R7

Fourth, complex employment-related litigation filings are up from past years, but by far and away, wage & hour class actions and collective actions are the leading type of “high stakes” lawsuits being pursued by the plaintiffs’ bar. Case filing statistics for 2015 reflected that wage & hour litigation outpaced all other categories of lawsuits, and increased yet again over the past year, with no end in sight of the crest of the tidal wave of case filings. Additional factors set to coalesce in 2016 – including new FLSA regulations, the impact of digital technology, and increased scrutiny of independent contractor and joint employer relationships – are apt to drive these exposures even higher for Corporate America.

Fifth, government enforcement lawsuits brought by the DOL and EEOC continued the aggressive litigation programs of both agencies. Settlement numbers for government enforcement litigation in 2015 increased substantially over 2014, as did the litigation dockets of the DOL and the EEOC. This trend is critical to employers, as both agencies have a focus on “big impact” lawsuits against companies and “lead by example” in terms of areas that the private plaintiffs’ bar aims to pursue.

Implications For Employers

The one constant in workplace class action litigation is change. More than any other year in recent memory, 2015 was a year of great change in the landscape of Rule 23. As these issues play out in 2016, additional chapters in the class action playbook will be written.

The lesson to draw from 2015 is that the private plaintiffs’ bar and government enforcement attorneys are apt to be equally, if not more, aggressive in 2016 in bringing class action and collective action litigation against employers.

These novel challenges demand a shift of thinking in the way companies formulate their strategies. As class actions and collective actions are a pervasive aspect of litigation in Corporate America, defending and defeating this type of litigation is a top priority for corporate counsel. Identifying, addressing, and remediating class action vulnerabilities, therefore, deserves a place at the top of corporate counsel’s priorities list for 2016.

workshopBy Gerald L. Maatman, Jr.

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 the galley proofs of our start-of-the-year kick-off publication – Seyfarth Shaw’s Annual Workplace Class Action Litigation Report.

We anticipate going to press in the first week of January, and launching the 2016 Report to our readers from our Blog.

This will be our Twelfth Annual Report, and the biggest yet with analysis of over 1,250 class certification rulings from federal and state courts in 2015. As last year, 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 humbled and honored by the review of our Report by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here. EPLiC said: “The Report is the singular, definitive source of information, research, and in-depth analysis on employment-related class action litigation. Practitioners and corporate counsel should not be without it on their desk, since the Report is the sole compendium of its kind in the United States.”

The 2016 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 2015 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 2016 Report will be available on our blog in early January. Happy Holidays!

thanksgivingBy Gerald L. Maatman, Jr.

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

We are busy at work as the holiday season begins in finalizing our start-of-the-year kick-off publication – Seyfarth Shaw’s Annual Workplace Class Action Litigation Report.

We anticipate going to press in the first week of January, and launching the 2016 Report to our readers from our Blog.

This will be our Twelfth Annual Report, and the biggest yet with analysis of over 1,300 class certification rulings from federal and state courts in 2015. As in past years, 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 humbled and honored by the review of our Report by Employment Practices Liability Consultant Magazine (“EPLiC”) — the review is here — EPLiC said: “The Report is the singular, definitive source of information, research, and in-depth analysis on employment-related class action litigation. Practitioners and corporate counsel should not be without it on their desk, since the Report is the sole compendium of its kind in the United States.”

The 2016 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 2015 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 2016 Report will be available on our blog in early January. Happy Holidays!

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

In In Re Southwest Airlines Voucher Litigation, Case No. 13-3264 (7th Cir. Aug. 20, 2015), the U.S. Court of Appeals for the Seventh Circuit upheld a fee award to class counsel in a class action that resulted in a “coupon settlement” – a settlement in which the defendant agrees to issue coupons to the class members.  In upholding the fee award, the Seventh Circuit also discussed the propriety of a number of settlement provisions and practices that are frequently at issue in class action settlement negotiations.  While not a workplace class action, this decision should be of interest to any employers who are involved in class action litigation because it provides guidance about how courts in the Seventh Circuit and beyond will view certain class action settlement provisions and practices.

Case Background

Southwest Airlines issued vouchers to its “Business Select” passengers that could be redeemed for one free in-flight alcoholic beverage.  Some passengers saved their beverage vouchers so they could use them on later flights.  In August 2010, Southwest Airlines announced that these vouchers could only be used on the flight covered by the “Business Select” ticket.  The plaintiffs filed a class action against Southwest Airlines for breach of contract, unjust enrichment, and violations of state consumer fraud laws.

The district court dismissed the unjust enrichment and consumer fraud claims as being preempted by the Airline Deregulation Act.  The parties subsequently agreed to settle the remaining breach of contract claim on a class-wide basis.  Under the terms of the settlement, Southwest Airlines agreed to provide all class members with a  voucher that was good for one free in-flight alcoholic beverage and further agreed to pay class counsel $3 million in attorneys’ fees.  The parties also agreed on a “clear-sailing” clause that provided that Southwest Airlines would not object to the attorneys’ fee request up to the agreed-to amount, and further agreed to a “kicker” clause, which provided that, if the district court were to reduce the fee award, the reduction would benefit Southwest Airlines rather than the class.  The parties also agreed on limited injunctive relief that would constrain how Southwest could issue vouchers in the future.

Several class members objected to the class settlement, focusing primarily on the fee award.  They argued that the settlement was a “coupon settlement” within the meaning of the Class Action Fairness Act (“CAFA”), and that therefore the fee award needed to be a percentage of the value of the vouchers actually redeemed by class members.  As such, they contended that class counsel sought inflated fees to the detriment of the class. They further argued that the settlement agreement was unfair because it contained the “clear-sailing” and “kicker” clauses, which manifested the lack of a fair and adequate settlement.

The district court agreed that the CAFA applied, but held that attorneys’ fees nonetheless could be calculated using the lodestar method of determining attorneys’ fees.  Under this method, fees are calculated by multiplying the hours spent on litigation by a reasonable hourly rate and then adjusting the award based on various factors, such as whether the work was taken on a contingency basis and the quality of the result.  Using this method, the district court awarded $1,649,118 in attorneys’ fees.  The district court further held that the “clear-sailing” and “kicker” clauses did not render the settlement agreement unfair because the class was receiving what amounted to the full value of their claims.  Both class counsel and several class members appealed that decision.

The Seventh Circuit’s Decision

The Seventh Circuit agreed with the district court that the CAFA applied because, in the Seventh Circuit, a voucher is considered to be a coupon.  Southwest Airlines, at 7.  It then considered whether the district court correctly concluded that the lodestar method nonetheless could be applied to determine the fee award.  Disagreeing with the Ninth Circuit’s decision in In Re HP Inkjet Printer Litigation, 716 F.3d 1173 (9th Cir. 2013), the Seventh Circuit concluded that attorneys’ fees could be calculated using the lodestar method in coupon settlements, while simultaneously warning district courts to use the method only after “evaluat[ing] critically the claims of success of a class receiving coupons.”  Id. at 16-17.

The Seventh Circuit further considered whether the settlement agreement was fair and reasonable in light of Southwest Airlines’ agreement to pay $3 million in attorneys’ fees and in light of the “clear-sailing” and “kicker” clauses.  Addressing the objecting class members’ argument that the fact Southwest Airlines was willing to pay $3 million in attorneys’ fees showed that there was additional money class counsel could have recovered on behalf of the class, the Seventh Circuit held that this argument, while potentially powerful in other cases, was of “little force” here because “the class members [would] receive essentially everything they could have hoped for.  As the district court put it, ‘the class members are getting back exactly what they had before, an unexpired drink voucher.’”  Id. at 18-20.

The Seventh Circuit also addressed the “clear-sailing” and “kicker” clauses.  It pointed out that, while it had “deep skepticism about such clauses, which seem to benefit only class counsel and can be signs of a sell-out,” it would not adopt a rule finding that such clauses per se bar settlement approval.  Id. at 21.  On the record before it, the Seventh Circuit concluded that the settlement agreement was fair and reasonable despite these clauses because the class members got everything they could have hoped for in the settlement.  Id.

Finally, the Seventh Circuit addressed class counsel’s argument that he should receive $3 million in fees because Southwest Airlines agreed to provide that amount.  It held that judicial deference to the provisions of class action settlements is not appropriate, and that the district court did not abuse its discretion in awarding class counsel $1.6 million in fees.  Id. at 22.

Implications For Employers

Employers who are involved in class action litigation should use this case for guidance on how courts in the Seventh Circuit and beyond will react to proposed class action settlement agreements.  Employers should be aware that including “clear-sailing” or “kicker” clauses in such agreements will cause district courts – and any appellate court on appeal if objectors attack the settlement – to more closely examine the fairness of the proposed settlement because such clauses may only benefit class counsel.  In the right circumstances, employers may also be able to use this case to argue that they are providing full relief to a class even when they are not providing monetary relief if they can plausibly argue that they are providing something else that remedies a past wrong.  Finally, employers who agree to provide nearly full relief to the class to settle a class action can use this case to overrule objections to the terms of a class action settlement.