On June 21, 2018, XpertHR featured Gerald (Jerry) L. Maatman, Jr. of Seyfarth Shaw LLP as a special guest commentator on its popular podcast series for human resources professionals. In this episode, Jerry provides a comprehensive overview of the Supreme Court’s landmark ruling in Lewis v. Epic Systems Corp., and the decision’s implications for employers.

In a closely contested 5-4 decision authored by Justice Neil Gorsuch, the Supreme Court held that employers may require employees to sign class action waivers as a condition of employment, and such contacts are unenforceable under the Federal Arbitration Act. In practice, this means that employees who have signed such agreements are obligated to arbitrate workplace disputes individually, rather than as a class or collective action. It is believed that this ruling may affect an estimated 25 million employment contracts, a number that will only continue to rise.

On XpertHR’s podcast, which is hosted by Legal Editor David Weisenfeld, Jerry answers a myriad of key questions about the impact of this decision for employers. David and Jerry touch on important aspects of the ruling such as Justice Ginsburg’s harsh dissent, potential workarounds by the Plaintiff’s bar, the practicality of arbitration agreements for employers, and more. To listen to the full episode, click HERE.

Implications For Employers

The Epic Systems ruling has the potential to immediately influence workplace relations. In fact, the impact of this case is already being seen in courtrooms around the country, with employers incorporating this stance into their arguments against putative employment class actions. Furthermore, as Jerry states in the podcast, the Supreme Court has issued a “mosaic of arbitration decisions” over the past few years that may expand the scope of this ruling beyond just wage & hour cases.

However, though the reading of this decision is pro-business, it may present new complications for employers. For example, the Plaintiff’s bar may adopt the strategy of filing hundreds of individual arbitration claims, a tactic Jerry describes as “death by 1,000 cuts.” Justice Ginsburg’s vociferous dissent can also be interpreted as a plea for Congressional action, though it is difficult to determine the likelihood and proximity of legislative action.

For a full explanation of this case’s impact on employers and HR personnel, make sure to listen to XpertHR’s podcast!

By Christopher M. Cascino and Gerald L. Maatman, Jr.

Seyfarth Synopsis: At the start of this week, the U.S. Supreme Court issued its long-awaited decision in China Agritech, Inc. v. Resh, No. 17-432 (U.S. June 11, 2018), which has important implications for employers because it will limit their exposure to successive class actions.  Specifically, the Supreme Court held that, while the individual claims of putative class members are tolled during pending class actions, their class claims are not. 

Case Background

The China Agritech case was the third putative shareholder class action brought against China Agritech alleging fraud and misleading business practices.  The first such action was brought by Theodore Dean on February 11, 2011. On May 3, 2012, the court in Dean denied class certification, and Theodore Dean then settled his individual claim.

On October 4, 2012, a new set of plaintiffs brought the second putative class action, the Smyth action, against China Agritech. The district court again denied class certification, after which the Smyth plaintiffs settled with China Agritech.

On June 30, 2014, Michael Resh filed a third putative class action against China Agritech. China Agritech argued that Resh’s class claims expired on February 3, 2013 under the applicable two-year statute of limitations.  Resh argued that his class claims were tolled during the Dean and Smyth actions under the principles of American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974), in which the Supreme Court held that the filing of a class action tolls the applicable statute of limitations for all putative class members.

The district court found that American Pipe tolling did not apply to class claims, and thus dismissed Resh’s class claims as untimely.  The Ninth Circuit reversed.  To resolve a circuit split, the Supreme Court granted certiorari.

The Supreme Court’s Decision

In an opinion by Justice Ginsburg, the Supreme Court began by considering the rationale behind its decision in American Pipe.  Specifically, the Supreme Court observed that the purpose of American Pipe tolling is to avoid putative class members filing motions to intervene or separate, individual suits to protect their claims in the event class certification was denied.  China Agritech, No. 14-432 at *5-6.  The Supreme Court further noted that the efficiency and economy purposes of Rule 23 would be undermined if putative class members needed to file motions to intervene and individual actions to preserve their individual claims while putative class actions were pending.  Id. at *6-*7.

The Supreme Court observed that Rule 23 favors early resolution of class certification questions, in that it Rule 23 states that class certification should be decided at “‘an early practicable time.’” Id. at *7 (quoting Fed. R. Civ. P. 23(c)).

The Supreme Court also considered the basis for allowing equitable tolling. Specifically, the Supreme Court pointed out that, to receive equitable tolling, plaintiffs must demonstrate that they have “been diligent in the pursuit of their claims.” China Agritech, No. 14-432 at *9. The Supreme Court found that “[a] would-be class representative who commences suit after expiration of the limitation period . . . can hardly qualify as diligent in asserting claims and pursuing relief.” Id.

Finally, the Supreme Court found that the problem with allowing American Pipe tolling to apply to class claims is that “the time for filing successive class suits . . . could be limitless.” Id. at *10. It held that “[e]ndless tolling of a statute of limitations is not a result envisioned by American Pipe.” Id. at *11. Accordingly, the Supreme Court held that “[t]ime to file a class action falls outside the bounds of American Pipe.” Id. at *15.

Implications For Employers

While China Agritech is not an employment case, it nonetheless represents an important win for employers because it limits the ability of employees to bring successive class actions on the same claims. If the Supreme Court had ruled that American Pipe tolling applied to class claims, employers who won on class certification in one case could then face successive putative class actions asserting the same claims for an indefinite period of time. Since the Supreme Court ruled that American Pipe tolling does not apply to class claims, employers can now have the certainty of knowing the date on which particular class claims expire.

By Gerald L. Maatman, Jr.

Seyfarth Synopsis: On April 30, 2018, the U.S. Supreme Court granted a writ of certiorari in Lamps Plus Inc. v. Varela, No. 17-988. This matter, which involves the interpretation of workplace arbitration agreements, has the potential to significantly impact class action litigation. In today’s video, Partner Jerry Maatman of Seyfarth Shaw explains the legal framework of this case, as well as its importance for employers.

Lamps Plus Inc. v. Varela began as a putative class action filed in 2016 after a phishing incident at Lamps Plus. Specifically, Plaintiff Frank Varela’s tax information was compromised when an unknown individual posed as a company executive and gained access to confidential employee data. However, Lamps Plus argued that the company’s arbitration agreement signed by Varela mandated that his claims be handled through arbitration on an individual basis, thereby precluding his class action. Both the U.S. District Court for the Central District of California and the U.S. Court of Appeals for the 9th Circuit agreed with Varela’s argument that the arbitration agreement allowed for class arbitration.

The major question in this case regards the circumstances in which class arbitration can be compelled under the Federal Arbitration Act (“FAA”). Though the Supreme Court agreed to review this question in the near future, it answered nearly the same question in 2010 in a case entitled Stolt-Nielsen S.A. v. AnimalFeeds International Corp., in which it held that class arbitration is authorized only when all parties specifically agree to it. Within the next 6-12 months, we can expect the Supreme Court to again a decision on this important class action topic.

Implications For Employers

Employers and human resources personnel who handle employment contracts should keep a close eye on this case. The decision in Lamps Plus Inc. v. Varela may very well impact an employer’s process in drafting arbitration clauses.

Furthermore, the Supreme Court’s decision to review this matter, while also considering Epic Systems Corp. v. Lewis, No. 16-285, indicates a significant interest in class action issues. Both of these matters have the potential to greatly impact employment class action litigation. Make sure to watch the video above for a detailed explanation of the Varela debate, and stay tuned to our blog for the latest updates!

By: Gerald L. Maatman, Jr. & Michael L. DeMarino

Seyfarth Synopsis:  In September 2017, our blog posted a video highlighting an emerging class action litigation risk for employers – the Illinois Biometric Information Privacy, commonly known as “BIPA.”  Since this time, class action filings under BIPA have exploded, including a potentially-landmark case against social media giant Facebook.  Today, Seyfarth Shaw Associate Mike DeMarino discusses the Facebook case, as well as its potential impact on employers, with Partner Jerry Maatman.

The BIPA statute was enacted by the Illinois legislature in 2008 in an effort to keep up with various industries’ use of employees’ biometric data.  In this context, biometric data refers to a number of measurements of individual biological patterns that can be used to identify individuals.  Examples we have seen cited in BIPA litigation include retina/iris scans, fingerprints, voiceprints, and scans of hand/face geometry.

Though the BIPA statute was enacted in Illinois ten years ago, employers and litigators are still waiting to see how certain aspects of the law will be interpreted.  A recent class action, entitled In Re Facebook Biometric Information Privacy Litigation, Case No. 15-CV-3747 (N.D. Cal.), may provide some important answers.  This matter, filed by three Facebook users in Illinois, involves allegations that Facebook violated users’ rights to privacy under BIPA through its automatic face-tagging feature.  On April 16, 2018, a federal judge in California certified (see order here) the class as all “Facebook users located in Illinois for whom Facebook created and stored a face template after June 7, 2011.”  The case is set for trial in June 2018.

As Jerry explains in the video, employers should keep a close eye on the outcome of this class action.  The key debate, centered around the concept of “standing” under Spokeo, Inc. v. Robins 136 S. Ct. 1540 (2016), has the potential to significantly impact future BIPA litigation.  For a full explanation of this case and employer class action litigation risk under BIPA, make sure to watch the video above!

By Gerald L. Maatman, Jr.

Seyfarth Synopsis: On Monday, March 26, the U.S. Supreme Court focused on two notable class action issues, each with the potential to significantly impact workplace litigation.  In today’s video vlog, Partner Jerry Maatman of Seyfarth Shaw breaks down the importance of class action tolling issues and the concept of “cy pres” settlements for employers.

The first Supreme Court case discussed in the video is China Agritech v. Resh, et al. No. 17-432.  This case involves allegations of securities fraud by a class of shareholders against a Chinese fertilizer company.  Plaintiffs failed to gain class certification in two successive class actions, and while these lawsuits were pending, the two-year statute of limitations for securities fraud claims expired.  Nevertheless, the 9th Circuit allowed a third class action to move forward on the basis of American Pipe tolling, and Defendant China Agritech appealed to the Supreme Court. The Supreme Court’s consideration of the boundaries of American Pipe tolling in the China Agritech case may well have profound implications for workplace class action litigation.

Next, we analyze the legal concept of “cy pres” distributions in class action settlement.  “Cy pres” is a French doctrine translated to mean “as close as possible.”  This notion was originally intended to apply to trust-law and the division of excess charitable funds.  However, it has been adapted by the Plaintiffs’ bar to apply in situations involving class action settlements without a clear beneficiary.  On March 26, the Supreme Court denied certiorari in two matters addressing this topic, including Tavares et al. v. Gene Whitehouse et al., No. 17-429, and the combined cases Tingle v. Perdue, No. 17-807 and Mandan v. Perdue, No. 17-897.  The Perdue cases considered the distribution from a $380 million settlement of a landmark 2010 Native American discrimination case known as the Keepseagle.

As Jerry discusses in the video, the outcomes of both debates have the potential to shift important facets of class action litigation.  Notably, for the China Agritech case, the Supreme Court might re-shape the landmark 1974 decision in American Pipe & Construction v. Utah, 414 U.S. 538 (1974).  Regarding “cy pres” settlement distributions, though the Supreme Court denied review in this instance, the debate is too pressing in respect to class action litigation to be avoided for long.  Make sure to watch the video above for Jerry’s complete analysis on both topics!

By Gerald L. Maatman, Jr., Timothy F. Haley, and Ashley K. Laken

Seyfarth Synopsis: Over the past few weeks, we have been covering the release of our 14th Annual Workplace Class Action Litigation Report. Today’s post focuses on an emerging trend in the workplace class action space — regarding workplace antitrust class actions. In this video blog, Associate Ashley Laken of Seyfarth Shaw, joined by Partner Jerry Maatman and Senior Counsel Tim Haley, provides an overview on the expected rise in class action filings alleging no-hire or no-poaching agreements.

At the core of our topic today are anticipated filings of workplace class actions alleging wage suppression in violation of Section 1 of the Sherman Act.  The Department of Justice (“DOJ”) has recently stated that it is currently investigating a number of no-hire or no-poaching agreements among employers, and it anticipates announcing what may be criminal enforcement actions in the next couple of months.  We previously blogged about this announcement here.

DOJ enforcement actions such as this frequently lead to follow-on private class actions.  For example, this is what occurred in the highly publicized consolidated class action entitled In Re High-Tech Employee Antitrust LitigationHigh-Tech involved and alleged series of agreements among large Silicon Valley companies not to cold call each other’s employees.  After the Court granted plaintiffs’ motion for class certification, the case settled for a total of $435 million.

As our team explains in this video, we believe the key issue in these cases is class certification.  Employers have had little success prevailing on motions to dismiss or motions for summary judgment.  The potential damages, which are trebled under the antitrust laws, are staggering putting enormous pressure on employers to settle the case if class certification is achieved.  When defendants win at the class certification stage, they are able to resolve these cases on very favorable terms.  However, when they lose class certification, they have settled for tens or hundreds of millions of dollars.  Speaking from decades of experience, Jerry and Tim elaborate on this strategy and more in the video, making the clip an absolute must-watch for employers!

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

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

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

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

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

******

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

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

Case Background

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

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

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

The Court’s Decision

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

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

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

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

Implications For Employers

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

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

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

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

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

The engaging discussion focused on four key trends that were identified in the 2018 Workplace Class Action Litigation Report, including: (1) the monetary value of the top workplace class action settlements rose dramatically in 2017; (2) while federal and state courts issued many favorable class certification rulings for the plaintiffs’ bar in 2017, evolving case law precedents and new defense approaches resulted in better outcomes for employers in opposing class certification requests; (3) filings and settlements of government enforcement litigation in 2017 did not reflect a head-snapping pivot from the ideological pro-worker (or anti-big business) outlook of the Obama Administration to a pro-business, less regulation/less litigation viewpoint of the Trump Administration; and (4) class action litigation increasingly has been shaped and influenced by recent rulings of the U.S. Supreme Court.

Maatman provided several noteworthy takeaways, including three highlights:

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

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

Overall, Maatman and Cooper’s discussion left little doubt that 2018 will be an eventful year in terms of the workplace class action arena.  Employers should anticipate that the private plaintiffs’ bar and government enforcement attorneys at the state level are apt to be equally, if not more, aggressive in 2018 in bringing class action and collective action litigation against employers.  As such, businesses absolutely should stay tuned in regarding developments in this space.

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