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: On February 6, 2018, Seyfarth Shaw Partner Jerry Maatman and Bloomberg Law Senior Legal Editor Perry Cooper presented a timely event on “Top Trends In Workplace Class Action Litigation Panel Discussion.” The discussions focused on views of cutting edge issues relative to the workplace class action litigation landscape. With over 1,000 people attending either in person at our Chicago office or via our live Webcast, Maatman and Cooper’s discussion was a “must see” for representatives of businesses across the country.
Following Seyfarth Shaw’s recent launch of its 2018 Workplace Class Action Litigation Report, Jerry Maatman distilled the 900-page publication into key trends and takeaways on the most important developments impacting employers from the past year in class action litigation, as well as future trends that businesses should keep on their radar. Perry Cooper added further in-depth analysis relative to many of the key U.S. Supreme Court cases affecting employment law and class actions, which she has been tracking and writing about extensively on Bloomberg’s behalf.
The engaging discussion focused on four key trends that were identified in the 2018 Workplace Class Action Litigation Report, including: (1) the monetary value of the top workplace class action settlements rose dramatically in 2017; (2) while federal and state courts issued many favorable class certification rulings for the plaintiffs’ bar in 2017, evolving case law precedents and new defense approaches resulted in better outcomes for employers in opposing class certification requests; (3) filings and settlements of government enforcement litigation in 2017 did not reflect a head-snapping pivot from the ideological pro-worker (or anti-big business) outlook of the Obama Administration to a pro-business, less regulation/less litigation viewpoint of the Trump Administration; and (4) class action litigation increasingly has been shaped and influenced by recent rulings of the U.S. Supreme Court.
Maatman provided several noteworthy takeaways, including three highlights:
- 2017 was “by far the largest cash-take for plaintiffs’ lawyers” ever in terms of workplace class actions settlements, as the top ten settlements in various employment-related class action categories totaled $2.72 billion in 2017, a “breathtaking and remarkable” increase of over $970 million from $1.75 billion in 2016. Check out how Jerry explained the importance of this increase in settlements by clicking the video below!
- In 2018, “as the government’s administration is getting settled in,” employers should anticipated seeing, “smaller governmental enforcement lawsuits brought on behalf of a smaller number of employees.”
- Regarding the recent onslaught of workplace sexual harassment accusations and investigations in the context of the #MeToo campaign, “although headlines in the paper may be very difficult to stomach for some employers, and the piper must be paid in a certain respect, I’m not convinced it will be through successful prosecution of class action litigation insofar as sex harassment is concerned. That theory will run smack into the Rule 23 barriers created by Wal-Mart Stores, Inc. v. Dukes.”
Overall, Maatman and Cooper’s discussion left little doubt that 2018 will be an eventful year in terms of the workplace class action arena. Employers should anticipate that the private plaintiffs’ bar and government enforcement attorneys at the state level are apt to be equally, if not more, aggressive in 2018 in bringing class action and collective action litigation against employers. As such, businesses absolutely should stay tuned in regarding developments in this space.
Thank you to everyone who joined us either here in Chicago or via our live webcast. For those interested in viewing a video of the presentation, stay tuned. We will be posting a complete video of the event this week.
Seyfarth Synopsis: Earlier this week, our blog posting analyzed pivotal rulings by the U.S. Supreme Court in 2017, which was the penultimate trend of this year’s Workplace Class Action Report (WCAR). In today’s finale of the WCAR video series, author Jerry Maatman provides his analysis on the Supreme Court jurisprudence for our readers. In addition to outlining the highlights of 2017, Jerry discusses the importance of the Supreme Court itself, as well as what hot topics employers should monitor in 2018. Watch our video in the link below!
Seyfarth Synopsis: The fourth and final key trend from our 14th Annual Workplace Class Action Litigation Report involves rulings by the U.S. Supreme Court. Over the past few years, the country’s highest court has issued a number of rulings that impacted the prosecution and defense of class actions in significant ways. Today, we provide readers with an outline of the most important workplace rulings issued by the Supreme Court in 2017, as well as which upcoming decisions employers should watch for in 2018. Read the full breakdown below!
Over the past decade, the U.S. Supreme Court – led by Chief Justice John Roberts – increasingly has shaped the contours of complex litigation exposures through its rulings on class action and governmental enforcement litigation issues. Many of these decisions have elucidated the requirements for pursuing employment-related class actions.
The 2011 decision in Wal-Mart Stores, Inc. v. Dukes and the 2013 decision in Comcast Corp. v. Behrend are the two most significant examples. Those rulings are at the core of class certification issues under Rule 23. To that end, federal and state courts cited Wal-Mart in 586 rulings in 2017; they cited Comcast in 238 cases in 2017.
The past year also saw a change in the composition of the Supreme Court in April of 2017, with Justice Neil Gorsuch assuming the seat of Antonin Scalia after his passing in 2016. Given the age of some of the other sitting Justices, President Trump may have the opportunity to fill additional seats on the Supreme Court in 2018 and beyond, and thereby influence a shift in the ideology of the Supreme Court toward a more conservative and strict constructionist jurisprudence. In turn, this is apt to change legal precedents that shape and define the playing field for workplace class action litigation.
Rulings In 2017
In terms of direct decisions by the Supreme Court impacting workplace class actions, this past year was no exception. In 2017, the Supreme Court decided seven cases – three employment-related cases and four class action cases – that will influence complex employment-related litigation in the coming years. The three “game-changers” in 2017 can be seen in the following graphic:
The employment-related rulings included one case brought under the Worker Adjustment and Retraining Notification Act, one ERISA case, and one EEOC case. A rough scorecard of the decisions reflects two distinct plaintiff/worker-side victories, and defense-oriented rulings in five cases.
- EEOC v. McLane Co., 137 S. Ct. 1159 (2017) – Decided on February 21, 2017, the case involved the applicable standard of appellate review of district court decisions to quash or enforce EEOC subpoenas. The Supreme Court held that the standard must be based on an abuse of discretion, and contrary lower court decisions – which called for de novo review – were rejected. The EEOC has broad statutory authority to issue subpoenas in the course of investigating charges of employment discrimination, and it may seek enforcement of its subpoenas in federal court when employers refuse to comply with them. In that event, the applicable test favors enforcement of the subpoena. The Supreme Court determined that if the charge is proper and the material requested is relevant, the subpoena should be enforced unless the employer can establish that the subpoena is too indefinite, has been issued for an illegitimate purpose, or is unduly burdensome. In sum, the Supreme Court underscored the breadth of the agency’s authority to subpoena information from employers in the course of investigating discrimination charges.
- Expressions Hair Design, et al. v. Schneiderman, 137 S. Ct. 1144 (2017) – Decided on March 29, 2017, this case involved a class action by a group of New York merchants, arguing that a New York statute that prohibits merchants from charging a surcharge to customers who use credit cards violated the First Amendment because it regulates what they say about their prices. The lower courts had dismissed the suit out of hand, concluding that price regulations regulated conduct alone and thus are immune from scrutiny under the First Amendment. The Supreme Court held that because the statute goes beyond the pure regulation of price sufficiently into the realm of regulating speech, it is subject to scrutiny under the First Amendment. As a result, the case was remanded for further consideration of the validity of the statute under the First Amendment. The ruling is a narrow one, but ensures the continuation of class action litigation over the New York statute.
- Advocate Health Care Network, et al. v. Stapleton, 137 S. Ct. 1652 (2017) – Decided on June 5, 2017, this ruling determined that pension plans that otherwise meet the definition of a church plan definition under the ERISA can qualify for the exemption without being established by a church. The decision is the culmination of a wave of ERISA class actions brought by employees of religiously affiliated non-profit hospitals who asserted that the employers improperly claimed that their pension plans were ERISA-exempt “church plans.”
- Microsoft Corp. v. Baker, et al., 137 S. Ct. 1702 (2017) – Decided on June 12, 2017, this ruling determined that the voluntary dismissal of individual claims by class representatives after denial of class certification deprives appellate courts of jurisdiction over review of the underlying class certification decision. The case involved consideration of a strategy for appealing denials of class certification whereby plaintiffs responded to a denial of class certification with a voluntary agreement to dismiss their claims. With that dismissal in hand, they would claim they have a final order that they can appeal, planning to revive their claims if the appeal reversed the certification order. The Supreme Court unanimously rejected this practice. It held that plaintiffs in putative class actions cannot transform a tentative interlocutory order into a final judgment simply by dismissing their claims with prejudice – subject, no less, to the right to revive those claims if the denial of class certification was reversed on appeal. The ruling should help corporate defendants in defeating piece-meal attacks on favorable class certification orders.
- Bristol-Myers Squibb Co., et al. v. Superior Court Of California, 137 S. Ct. 1773 (2017) – Decided on June 19, 2017, this opinion established limitations on personal jurisdiction over non-resident plaintiffs in “mass actions,” a litigation strategy often utilized by plaintiffs’ class action lawyers to sue corporations in plaintiff-friendly jurisdictions that have little to no connection with the dispute. The Supreme Court determined that the requisite connection between the corporate defendant and the litigation forum must be based on more than a combination of the company’s connections with the state and the similarity of the claims of the resident plaintiffs and the non-resident claimants. The ruling reversed a lower court decision that hundreds of plaintiffs who sued a corporation in California state court over alleged injuries associated with a corporation’s product could not sue in that state because they were not residents. In effect, it reversed a decision of the California Supreme Court and directed the dismissal of 592 non-California claims from 33 other states. The ruling has significant implications for the location and scope of class action litigation. As a result, the ruling supports the view that plaintiffs cannot simply “forum shop” in large class actions, and instead must sue where the corporate defendant has significant contacts for purposes of general jurisdiction or limit the class definition to residents of the state where the lawsuit is filed. It should provide some measure of protection to corporations that often are hauled into plaintiff-friendly jurisdictions across the country to which they have nor the plaintiffs suing them had any connection.
- CalPERS, et al. v. ANZ Securities, Inc., 137 S. Ct. 2042 (2017) – Decided on June 26, 2017, this decision involved a relatively technical question regarding the right to opt-out of a class action – when plaintiffs file a class action, are members of the class entitled to opt-out and represent themselves, and how statutes of limitations work in that situation. Federal securities laws include two different kinds of filing deadlines for claims about misrepresentations in connection with the issuance of securities, including a one-year deadline running from the discovery of the untrue statement and an outside three-year deadline running from the date on which the statement was made. The Supreme Court held that tolling under American Pipe applies only to the one-year deadline, not the three-year deadline. Applying that rule, it barred the action brought in this case by CalPERS, which had opted-out of a large class action brought against Lehman Brothers; the original action was brought in a timely manner, but CalPERS did not opt-out of that action until more than three years after the challenged statements. The ruling closes off a tactic of successive class claims by barring the traditional power of lower federal courts to modify statutory time limits in the name of equity despite any practical obstacles this creates in class actions.
- Czyzewski, et al. v. Jevic Holding Co., 137 S. Ct. 973 (2017) – Decided on March 22, 2017, this case involved the Worker Adjustment and Retraining Notification (“WARN”) Act and the interplay between worker rights under that statute and the rights of creditors in bankruptcy proceedings after a company allegedly violates the WARN Act. In considering whether priority in distributing assets in bankruptcy may proceed in a manner that allegedly violates the priority scheme in the Bankruptcy Code, the Supreme Court held that such a distribution is improper and priority rules may not be evaded in Chapter 11 structured dismissals. The Supreme Court’s ruling protects workers with WARN claims and bars priority deviations in bankruptcies implemented through non-consensual structured dismissals.
The decisions in Advocate Health Care Network, Baker, Bristol-Myers, CalPERS, Expressions Hair Designs, Jevic, and McLane Co. are sure to shape and influence workplace class action litigation and government enforcement litigation in a profound manner. Theses rulings will impact standing concepts and jurisdictional challenges, liability under the WARN and the ERISA, appeals of class certification decisions, challenges to EEOC administrative subpoenas, and rules on American Pipe tolling and application of statute of limitations in class actions. To the extent that extrinsic restrictions on class actions – i.e., limits on the ability of representative plaintiffs to appeal certification orders (as in Baker), and jurisdictional restrictions on bringing cases in “plaintiff-friendly” jurisdictions (as in Bristol-Myers) – were tightened, class actions will become harder to maintain and litigate. On the other hand, McLane Co. is certainly a setback for employers and strengthens the EEOC’s ability to conduct wide-ranging administrative investigations through its subpoena power.
Rulings Expected In 2018
Equally important for the coming year, the Supreme Court accepted five additional cases for review in 2017 – that will be decided in 2018 – that also will impact and shape class action litigation and government enforcement lawsuits faced by employers.
Those cases include three employment lawsuits and two class action cases. The Supreme Court undertook oral arguments on two of these cases in 2017; the other three will have oral arguments in 2018.
The corporate defendants in each case have sought rulings seeking to limit the use of class actions or raise substantive defenses to class actions or employment-related claims. Further complicating several of these cases, government agencies have either taken opposing stances with each other or reversed positions they held in pervious Supreme Court terms or in the lower court proceedings in these cases.
- Epic Systems Corp. v. Lewis, NLRB v. Murphy Oil USA & Ernst & Young LLP v. Morris, 16-285, 16-300 & 16-307 – Argued on October 2, 2017, these three consolidated appeals in employment cases deal with the interpretation of workplace arbitration agreements between employers and employees and whether class action waivers within such agreements – which require workers to arbitrate any claims on an individual basis (and waive the ability to bring or participate in a class action or collective action) – violate employees’ rights under the National Labor Relations Act to engage in “concerted activities” in pursuit. The Supreme Court’s ultimate decision is likely to have far-reaching implications for litigation of class actions and collective actions. The issue started when the NLRB under the Obama Administration began challenging employers’ use of arbitration agreements with class action waivers. During briefing of the issue before the Supreme Court, The Department of Justice under President Trump opposed the NLRB’s position, and has sided with employers and argued that the Federal Arbitration Act favors the validity and enforcement of arbitration agreements that include class waivers.
- Cyan, Inc., et al. v. Beaver County Employees Retirement Fund, 15-1439 – Argued on November 28, 2017, this class action case poses the issue of whether federal law bars state courts from hearing certain securities class actions. The case turns on interpretation of the Private Securities Litigation Reform Act of 1995 – which imposes tougher standards on securities class actions brought in federal courts – and if it mandates that state courts can no longer hear class actions based on the Securities Act of 1933. The ultimate ruling by the Supreme Court will impact what many view as a “cottage industry” of state court-based class action filings in states such as California where class action lawyers target public companies with securities claims over drops in stock process.
- Encino Motors, LLC v. Navarro, et al., 16-1362 – In this case, the Supreme Court will examine whether service advisors at car dealerships are exempt under 29 U.S.C. § 213(b)(10)(A) from the overtime pay provisions of the Fair Labor Standards Act. The future ruling in the case may have far-reaching implications on the legal tests for interpretation of statutory exemptions under the FLSA. A broader reading of the exemption potentially could reduce the number of workers allowed to assert wage & hour claims against their employers. The case is set for argument on January 17, 2018.
- Janus, et al. v. AFSCME, 16-1466 – In this employment case, the Supreme Court will consider whether Abood v. Detroit Board of Education, 431 U.S. 209 (1977), should be overruled and public-sector “agency shop” arrangements invalidated under the First Amendment so as to prevent public-sector unions from collecting mandatory fees from non-members. In deciding the constitutionality of “fair share fees” being imposed on public-sector employees as a condition of employment, the Supreme Court’s future ruling likely will impact millions of workers in 22 states that do not have right-to-work laws. Since many workers are apt to cease paying union dues if the fair share fee payments requirement is abolished, the future ruling will have a significant impact on the ability of public-sector unions to conduct their business. The case is set for oral argument on February 26, 2018.
- Resh, et al. v. China Agritech, Inc., 17-432 – In this class action case, the Supreme Court will examine whether the tolling rule for class actions established in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), tolls the statute of limitations to permit a previously absent class member to bring a subsequent class action outside the applicable limitations period. In American Pipe, the Supreme Court held that the filing of a class action tolls the running of the statute of limitations for all putative members of the class who make timely motions to intervene after the lawsuit is deemed inappropriate for class action status. In essence, a future ruling in this case will limit or expand the tolling rule in American Pipe to apply only to subsequent individual claims or if it is expanded broadly to successive class actions where plaintiffs were unnamed class members in failed class actions. The case has yet to be set for oral argument.
The Supreme Court is expected to issue decisions in these five cases in 2018.
Implications For Employers
Each decision outlined above may have significant implications for employers and for the defense of high-stakes class action litigation. Further, the decision in Epic Systems / E & Y / Murphy Oil may well end up being one of the most significant rulings for employers since Wal-Mart Stores, Inc. v. Dukes in 2011. Employers have to keep a close eye on this case, since the decision may shift the class action landscape in terms of the ability of employees to bring suit against a company. As always, we will closely monitor all Supreme Court case developments and report them to our readers. Stay tuned!
Seyfarth Synopsis: At 878 pages, Seyfarth’s 14th Annual Workplace Class Action Litigation Report analyzes 1,408 rulings and is our biggest and most voluminous Report ever.
Click here to access the microsite featuring all the Report highlights. You can read about the four major trends of the past year, order your copy of the eBook, and download Chapters 1 and 2 on the 2018 Executive Summary and key class action settlements.
The Report was featured today in an exclusive article in the Wall Street Journal. 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 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.’” Furthermore, EPLiC recognized our Report as the “state-of-the-art word” on workplace class action litigation. You can read more about the review here.
The 2018 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 2017 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!
The prosecution of workplace class action litigation by the plaintiffs’ bar has increased exponentially over the past decade. More often than not, class actions pose unique “bet-the-company” risks for employers. 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 adversely impact a corporation’s business operations, jeopardize or cut short the careers of senior management, and cost millions of dollars to defend. For these reasons, risks from workplace class actions are at the top of the list of challenges that keep business leaders up late at night.
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. 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 in 2017, governmental enforcement litigation pursued by the EEOC and the U.S. Department of Labor (“DOL”) continued to manifest an aggressive “push-the-envelope” agenda by 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.
Adding to this mosaic of challenges in 2018 is the continuing evolution in federal policies based on a new political party occupying the White House for part of 2017. Furthermore, while changes to government priorities started on Inauguration Day and are on-going, others are being carried out by new leadership at the agency level who were appointed in the fourth quarter of 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 2017
An overview of workplace class action litigation developments in 2017 reveals four key trends.
First, the monetary value of the top workplace class action settlements rose dramatically in 2017. These numbers increased over past years, even after they had reached all-time highs in 2014 to 2016. The plaintiffs’ employment class action bar and governmental enforcement litigators were exceedingly successful in monetizing their case filings into large class-wide settlements, and they did so at decidedly higher values than in previous years. The top ten settlements in various employment-related class action categories totaled $2.72 billion in 2017, an increase of over $970 million from $1.75 billion in 2016. Furthermore, settlements of employment discrimination class actions experienced over a three-fold increase in value; statutory workplace class actions saw nearly a five-fold increase; and government enforcement litigation registered nearly a ten-fold increase. Whether this is the beginning of a long-range trend or a short-term aberration remains to be seen as 2018 unfolds, but the determinative markers suggest this upward trend will rise further in 2018, at least insofar as private plaintiff class actions are concerned.
Second, 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. 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 employment discrimination and ERISA class actions, the plaintiffs’ bar scored well in securing class certification rulings in federal courts in 2017 (over comparative figures for 2016). Class actions were certified in significant 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. Yet, while the sheer volume of wage & hour certification decisions in 2017 increased as compared to last year, employers actually fared better in litigating those class certification motions in federal court than last year. Of the 257 wage & hour certification decisions in 2017, plaintiffs won 170 of 233 conditional certification rulings (approximately 73%), but lost 15 of 24 decertification rulings (approximately 63%). By way of comparison, there were 224 wage & hour certification decisions in 2016, where plaintiffs won 147 of 195 conditional certification rulings (approximately 76%) and lost 13 of 29 decertification rulings (approximately 45%). In sum, employers beat slightly more first stage conditional certification motions in 2017, and dramatically increased their odds – a jump of 18% – of fracturing cases with successful decertification motions.
Third, 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/litigation viewpoint of the Trump Administration. Instead, as compared to 2016, government enforcement litigation actually increased in 2017. As an example, the EEOC alone brought 184 lawsuits in 2017 as compared to 86 lawsuits in 2016. Further, the settlement value of the top ten settlements in government enforcement cases jumped dramatically – from $52.3 million in 2016 to $485.25 million in 2017. The explanations for this phenomenon are wide and 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 2017. This trend is 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 2018 opens, it appears that the content and scope of enforcement litigation undertaken by the DOL and the EEOC in the Trump Administration will tilt away from the pro-employee/anti-big business mindset of the previous Administration. Trump appointees at the DOL and the EEOC 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 2018. The ultimate effect, however, may well prompt the private plaintiffs’ class action bar to “fill the void” and expand the volume of workplace litigation pursued against employers over the coming year as the DOL and the EEOC adjust their litigation enforcement activities.
Fourth and finally, class action litigation increasingly has been shaped and influenced 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 – and 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 years. More cases also were accepted for review in 2017 that are positioned for rulings in 2018, including what may be the most high-stakes issue impacting employers since the Wal-Mart ruling in 2011 – the Epic Systems, Murphy Oil, and E & Y trilogy of cases on the legality of workplace arbitration agreements with class action waivers. The ruling expected in the Epic System, Murphy Oil, and E & Y cases in 2018 may well change the class action playing field in profound ways. Coupled with the appointment of Justice Neil Gorsuch in 2017 and potential additional appointments to the Supreme Court by President Trump in 2018 and beyond, litigation dynamics may well be re-shaped in ways that further change the playbook for prosecuting and defending class actions.
Implications For Employers
The one constant in workplace class action litigation is change. More than any other year in recent memory, 2017 was a year of great change in the landscape of Rule 23. As these issues play out in 2018, additional chapters in the class action playbook will be written.
The lesson to draw from 2017 is 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.
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 2018.
Seyfarth Synopsis: Following remand from the U.S. Supreme Court, the Ninth Circuit found that the plaintiff suing Spokeo, Inc. under the Fair Credit Reporting Act alleged sufficient injury to establish standing to proceed in federal court and to proceed with his class action.
On August 15, 2017, the U.S. Court of Appeals for the Ninth Circuit issued the latest opinion in the Robins v. Spokeo, Inc. litigation that gave us last year’s U.S. Supreme Court opinion on Article III standing (which we discussed here). After the Supreme Court found that the Ninth Circuit, in its prior February 2014 opinion (found here), had analyzed only whether the alleged injury was particular to Plaintiff, it remanded the case back for the second part of the analysis to determine whether Plaintiff alleged a concrete injury-in-fact, as required by Article III.
This new ruling is a “must read” for employers, as it has the potential to allow plaintiffs to launch more workplace class actions.
The case was originally filed in the U.S. District Court for the Central District of California in 2010 against Spokeo, Inc., which operates an online search engine by the same name that compiles publicly available information on individuals into a searchable database on the internet. The plaintiff alleged that Spokeo’s database showed inaccurate information about him, such as that he had a greater level of education and more professional experience than he in fact had, that he was financially better off than he actually was, and that he was married (he was not) with children (he did not have any). Instead of any actual damages, the plaintiff alleged that Spokeo, as a consumer reporting agency, failed to “follow reasonable procedures to assure maximum possible accuracy of the information concerning” Plaintiff, and that its violation of section 1681e(b) of the Fair Credit Reporting Act (FCRA) was “willful” in order to seek statutory damages of between $100 and $1,000 for himself, as well as for each member of a putative nationwide class.
U.S. Supreme Court Decision
The issue of whether the plaintiff had standing to sue for the alleged statutory violation made its way to the U.S. Supreme Court, which in 2016 (in a 6 to 2 opinion by Justice Samuel A. Alito, Jr.) explained that “an invasion of a legally protected interest” that is both “concrete and particularized” is required to establish standing to proceed in federal court. To be concrete, the alleged injury must “actually exist” and must be “real” and not “abstract.” The Court further discussed that plaintiffs do not “automatically” meet the injury-in-fact requirement where the violation of a statutory right provides a private right of action. The plaintiff here, therefore, “could not, for example, allege a bare procedural violation divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” Because the Ninth Circuit had not completed both parts of the standing analysis, however, the case was remanded for further review.
Ninth Circuit’s Standing Analysis
In light of the Supreme Court’s directive, the Ninth Circuit opened by affirming the threshold principle that “even when a statute has allegedly been violated, Article III requires such violation to have caused some real—as opposed to purely legal—harm to Plaintiff.” The Court explained that intangible harms, such as restrictions on First Amendment freedoms and harm to one’s reputation, can be concrete enough for standing, though the Court noted this is a “murky area.” Either way, Plaintiff cannot simply point to a statutory cause of action to establish an injury-in-fact.
Turning to its standing analysis of the plaintiff’s particular allegations, the Ninth Circuit conducted a two-step inquiry:
- “whether the statutory provisions at issue were established to protect [the plaintiff’s] concrete interests (as opposed to purely procedural rights)”; and, if so
- “whether the specific procedural violations alleged in [the] case actually harm, or present a material risk of harm to, such interests.”
First, the Ninth Circuit cited a long history of protections against dissemination of false information about individuals that underlies the FCRA, including common law protections against defamation and libel, to find that the interests protected by the FCRA are real and concrete. The harm alleged in the case, the Ninth Circuit concluded, “has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit,” even if it is not the exact historical harm itself.
In the second step, the Ninth Circuit reasoned that in many cases, “a plaintiff will not be able to show a concrete injury simply by alleging that a consumer-reporting agency failed to comply with one of the FCRA’s procedures.” The statute may be violated, but the violation alone is not enough. Here, however, the plaintiff pointed to multiple examples of information (e.g., his education level, etc.) that might be relevant to a prospective employer. A court also has to look at the nature of the inaccuracy as part of its analysis. Even if the inaccuracy has a debatable negative impact (e.g., a greater level of education could make a plaintiff deemed to be overqualified and passed over for a job), the information is nevertheless relevant, and the Court held, its dissemination is not simply a technical statutory violation. The Ninth Circuit also pointed out that the injury alleged in this case was not speculative because the dissemination of information already occurred, and the dissemination itself was the harm. The Court commented that further alleged harm, such as being able to point to an actual missed job, was not required.
Overall, the Ninth Circuit’s decision adopted an expansive interpretation of the type of harm that will suffice for Article III standing, though indicating that this interpretation will not extend so far as to find standing to sue for bare statutory or procedural violations. In the present case, however, the Ninth Circuit focused on the specific allegedly inaccurate information to find harm, in line with Justice Ginsburg’s dissent (found here) to the Supreme Court’s majority, which was concerned more with the reporting of allegedly false information that “could affect [the plaintiff’s] fortune in the job market.” Further allegations of actual injury, according to the Ninth Circuit, were not required to establish standing. However, the Ninth Circuit stopped from opining on other specific circumstances and noted that the specific facts will need to be considered to determine if the threshold of “concrete harm” is satisfied.
Thus, the Ninth Circuit provides further guidance on standing, affirming that bare statutory violations continue to be insufficient. The specific factual allegations of such cases, however, may present courts with greater latitude to find standing in civil litigation alleging violations of the FCRA, as well as cases under ERISA, the Americans With Disabilities Act, and a host of other workplace statutes. As courts address similar inquiries, we are likely to see increased guidance regarding standing. Additionally, with this decision, there seems to be more evidence of a potential split among the federal Courts of Appeals, which could result in another petition to the U.S. Supreme Court.
Seyfarth Synopsis: In Harrington v. Sessions, No. 15-8009, No. 16-5285 & No. 16-5286 (D.C. Cir. July 21, 2017), the U.S. Court of Appeals for the D.C. Circuit found that absent class members may intervene in an appellate court proceeding to pursue a Rule 23(f) petition abandoned by a settling class representative, even if the intervention motion is filed after the dismissal of the settling representative’s claims. The D.C. Circuit’s ruling illustrates that even the denial of class certification and final settlement of a class representative’s claims may not put an end to class action litigation.
In Harrington v. Sessions, No. 15-8009, No. 16-5285 & No. 16-5286, 2017 U.S. App. LEXIS 13111 (D.C. Cir. July 21, 2017), the D.C. Circuit addressed whether it had jurisdiction to rule upon absent class members’ motion to intervene in an appellate court proceeding to pursue a Rule 23(f) petition abandoned by a settling named plaintiff-appellant. The absent class members filed their motion to intervene after the settling plaintiff-appellant had already filed a stipulated dismissal of his settled claims.
The D.C. Circuit found that it indeed had jurisdiction to entertain the absent class members’ motion to intervene in the Rule 23(f) petition. It explained that the elimination of an Article III case or controversy does not preclude a district court or appellate court from entertaining a subsequent motion to intervene for purposes of filing an appeal, as long as the intervenor has a sufficient Article III stake in the appeal. The D.C. Circuit further opined that absent class members may have a sufficient stake to appeal the denial of class certification even if the named plaintiff does not appeal. As such, the D.C. Circuit found that it had jurisdiction under Rule 23(f) to hear the absent class members’ motion to intervene for purposes of appealing the denial of class certification.
On the merits, the D.C. Circuit found that the absent class members satisfied the prerequisites for intervention as a matter of right and, thus, it addressed their Rule 23(f) petition. However, the D.C. Circuit declined to review the denial of class certification under Rule 23(f) as the absent class members presented no special circumstances justifying such review.
In 2008, U.S. Marshal David Grogan filed a putative class action in the U.S. District Court for the District of Columbia against the U.S. Marshals Service (the “Marshals”) alleging racial discrimination under Title VII of the Civil Rights Act of 1964. 2017 U.S. App. LEXIS 13111, at *2-3 (D.C. Cir. July 21, 2017). The complaint sought both injunctive and monetary relief, but alleged that “injunctive and declaratory relief [we]re the predominant forms of relief sought.” Id. at *3.
By 2013, after pleading and motion practice, the named plaintiff Herman Brewer (“Plaintiff”) was the sole plaintiff representing the putative class. Id. at *4. Plaintiff retired from the Marshals a few months before discovery closed. Id. After discovery closed, Plaintiff filed: (i) a motion to amend the complaint to substitute four additional plaintiffs as class representatives; and (ii) a Rule 23 motion for class certification. Id. at *5.
The district court denied Plaintiff’s motion to substitute new plaintiffs, finding that Plaintiff had not diligently pursued such substitution. Id.
The district court also denied Plaintiff’s motion for class certification. Id. at *5-6. The district court found that, because Plaintiff had retired and was no longer an employee of the Marshals, Plaintiff could not adequately represent a class predominantly seeking injunctive relief. Id. at *6. The district court also found that Plaintiff’s individual claims for monetary relief were not typical of the class-wide claims for injunctive relief and, as such, did not provide a basis to certify a class either. Id. Finally, the district court refused to certify a narrower class, seeking damages only, because doing so constituted “claim splitting” and jeopardized class members’ ability to subsequently pursue other claims in the face of potential res judicata arguments. Id.
Plaintiff timely petitioned the D.C. Circuit under Rule 23(f) for interlocutory review of the denial of class certification. Id. However, during the pendency of the petition, Plaintiff settled his individual claims and filed a stipulation of dismissal under Rule 41(a)(1)(A)(ii). Id. at *7.
On the same day Plaintiff filed the stipulated dismissal, three current and one former African-American employee of the Marshals (the “Intervenors”) moved to intervene in the district court to appeal the district court’s denial of class certification and moved to intervene in the appellate court to pursue the Rule 23(f) petition filed by Plaintiff. Id.
While their motion to intervene in the district court was still pending, the Intervenors filed a notice of appeal from: (i) Plaintiff’s stipulated dismissal; (ii) the order denying class certification; and (iii) the “effective” denial of their motion to intervene insofar as the district court had not decided their motion to intervene within the time Intervenors believed they had to file a notice of appeal (i.e., within 60 days of Plaintiff’s stipulated dismissal). Id. at *7-8. Thereafter, the district court dismissed the Intervenors’ motion to intervene based on the rationale that the Intervenors’ notice of appeal stripped the district court of jurisdiction to rule on the motion. Id. at *8.
On the Intervenors’ motion, Plaintiff’s Rule 23(f) petition and the Intervenors’ appeal were consolidated before the D.C. Circuit. Id.
The D.C. Circuit first addressed whether it had jurisdiction. Id. at *9. The stipulated dismissal of Plaintiff’s claims, which removed any live Article III case or controversy from the district court and appellate court, presented a quandary. Although intervention could cure that quandary by substituting Intervenors for Plaintiff, the D.C. Circuit had to have jurisdiction in the first place to rule on the intervention motion. See id. (“Thus, the situation may appear to present a Catch-22: Intervention can overcome the apparent jurisdictional problem created by the stipulated dismissal, but a court may grant intervention only if it has jurisdiction to do so.”). The D.C. Circuit resolved the quandary by finding that it had jurisdiction over the Intervenors’ motion to intervene in the Rule 23(f) petition. Id.
In so finding, the D.C. Circuit rejected the decisions of other courts that have held that a stipulated dismissal precludes a court from taking further action on motions filed after, or even before, such a dismissal. Id. at *11-12. The D.C. Circuit explained that a stipulated dismissal and a court-ordered dismissal are no different in their jurisdictional effect – both eliminate a live case or controversy. Id. at *12-14. As such, the D.C. Circuit found that it had jurisdiction to entertain any motion after a stipulated dismissal that it could entertain after a court-ordered dismissal.
In that regard, the D.C. Circuit explained that it is well-established that, even in the absence of a live controversy, courts retain jurisdiction to hear motions to intervene for purposes of appealing dismissed claims, as long as the intervenor has an Article III interest sufficient to pursue the appeal. Id. at *14 (citations omitted). Moreover, the D.C. Circuit asserted that it is similarly well-established that absent class members may have a sufficient Article III interest to appeal the denial of class certification even if the named plaintiff does not appeal. Id. at *14-15 (citing Twelve John Does v. District of Columbia, 117 F.3d 571, 575 (D.C. Cir. 1997)). Indeed, “[w]hen an absent plaintiff intervenes to appeal a denial of class certification, he has the same Article III stake on appeal as he would have had in the action had the class been certified.” Id. at *15 (citing Twelve John Does, 117 F.3d 571, 575). The D.C. Circuit reasoned that, because the absence of an Article III controversy does not preclude a court from hearing a motion to intervene for purposes of appealing and because an appellate court has jurisdiction to hear an absent plaintiff’s appeal from the denial of class certification, it had jurisdiction under Rule 23(f) to hear the Intervenors’ motion to intervene. Id. at *15-16.
In finding such jurisdiction, the D.C. Circuit distinguished the recent U.S. Supreme Court decision of Microsoft Corp. v. Baker, 137 S. Ct. 1702, 1712-1713 (2017), wherein the Supreme Court held that a plaintiff’s voluntary dismissal of his claims, subsequent to an appellate court’s denial of his Rule 23(f) petition, did not create a final, appealable order. Harrington, 2017 U.S. App. LEXIS 13111, *16. The D.C. Circuit explained that, unlike Baker, the issue here involved only a petition for review under Rule 23(f), not an appeal from a final order. Id. at *17. Furthermore, equitable considerations present in Baker, where the plaintiff had orchestrated guaranteed appellate review of his Rule 23 claims through voluntary dismissal, were not present here. Id. (For further discussion of Microsoft Corp. v. Baker, see here).
Next, the D.C. Circuit turned to the motion to intervene. It stated that it could address the motion to intervene in the first instance on appeal primarily for purposes of judicial economy. Harrington, 2017 U.S. App. LEXIS 13111, *18-19 . The D.C. Circuit then found that the Intervenors easily met the criteria for intervention as a matter of right under Rule 24(a)(2). Id. at *19-23.
Nonetheless, the D.C. Circuit rejected the Intervenors’ Rule 23(f) request and declined to review the district court’s denial of class certification. Id. at *24-31. It found that the Intervenors failed to show that any special circumstances warranted such review. Id.
Finally, the D.C. Circuit dismissed the Intervenors’ appeal from final judgment in the case below, restoring the district court’s jurisdiction over the case. Id. at *31. It ordered that, on remand, the district court should allow reasonable time for the Intervenors to file both a motion to substitute a new class representative and a renewed motion for class certification. Id.
Implication for Employers
Defeating the class representative does not necessarily end class litigation. Absent class members may be able to pursue such litigation after the class representative exits. Accordingly, employers should litigate with an eye toward defeating the class even where they anticipate that a named representative is inadequate or that the claims of a named representative may be defeated.
Seyfarth Synopsis: In Bristol-Myers Squibb Company v. Superior Court of California, et al., No. 16-466 (U.S. June 19, 2017), the U.S. Supreme Court articulated the narrow circumstances under which specific jurisdiction will lie when it rejected the California Supreme Court’s “sliding scale” approach to evaluating specific jurisdiction. The decision is decidedly employer-friendly. As a new weapon against forum shopping, this case is a must read for any employer facing class action litigation in a jurisdiction where the company is not incorporated or does not have its principal place of business.
In Bristol-Myers Squibb Company v. Superior Court of California, et al., No. 16-466 (U.S. June 19, 2017), 86 California residents and 592 non-residents from 33 other states sued Bristol-Myers in California state court, asserting California state law claims for product liability, negligent representation, and misleading advertising. Id. at 2. Plaintiffs specifically alleged that the company’s drug, Plavix, damaged their health. Id. In contrast to the California residents, the non-resident plaintiffs did not allege that they obtained Plavix in California, nor did they claim that they were injured by Plavix or treated for their injuries in California. Id.
After Bristol-Myers challenged personal jurisdiction with respect to the non-residents’ claims in the trial Court and the California Court of Appeal, the California Supreme Court held that specific jurisdiction existed. Id.
Although the California Supreme Court determined that general jurisdiction was lacking, it nonetheless found that specific jurisdiction existed under its “sliding scale” approach. Under this approach, the more wide-ranging the defendants’ forum contacts, the greater the connection between the forum contacts and the claim. Id. at 3. Because of Bristol-Myers’ extensive contacts with California, the California Supreme Court required less direct connection between the company’s forum activities and the non-residents’ claims than otherwise might be required. Id. Particularly important to the California Supreme Court’s determination that specific jurisdiction existed was that the claims of the California residents and the claims of the non-residents were similar. Id.
The Company thereafter successfully secured review by the U.S. Supreme Court.
In an 8-1 decision, the U.S. Supreme Court held that the California Supreme Court failed to identify an adequate link between the State of California and the 592 non-resident plaintiffs to support specific jurisdiction. After explaining that specific jurisdiction requires an “affiliation between the forum and the underlying controversy” the Supreme Court noted that the “sliding scale” approach relaxes this requirement and “resembles a loose and spurious form of general jurisdiction.” Id. at 7.
The Supreme Court further explained that “[t]he mere fact that other plaintiffs were prescribed, obtained, and ingested Plavix in California — and allegedly sustained the same injuries as did the non-residents — does not allow the State to assert specific jurisdiction over the non-residents’ claims.” Id. at 8. Importantly, the Supreme Court emphasized “[w]hat is needed — and what is missing here — is a connection between the forum and the specific claims [i.e., the non-residents’ claims] at issue.” Id.
Implication For Employers
Although the Supreme Court’s decision does little to alter the requirements of specific jurisdiction, it is nonetheless important in its practical effect of impeding forum shopping in the class action context. Plaintiffs, for instance, will have a much more difficult time suing in a jurisdiction where the company is not “at home” for general jurisdiction purposes and where the company’s conduct in the forum state is not sufficiently connected to the claims of nonresident plaintiffs.
This decision is particularly important to employers with a national presence or satellite offices. The lesson here is employers should not take personal jurisdiction for granted, particularly when defending claims brought by residents and nonresidents of a forum state where there is no general jurisdiction.
Seyfarth Synopsis: In Microsoft Corp. v. Baker, No. 15-457 (U.S. June 12, 2017), the U.S. Supreme Court ruled on a procedural issue that is of importance in any class action in terms of when and in what circumstances a plaintiff may appeal orders that terminate their rights in a case. In that respect, the decision is required reading for any employer involved in class action litigation.
In Microsoft Corp. v. Baker, No. 15-457, 582 U.S. ___ (2017), the Supreme Court was confronted with the question of whether courts of appeal have jurisdiction to review an order denying class certification after the named plaintiffs have voluntary dismissed their claims with prejudice.
Litigants have an immediate right to appellate review only of “final decisions of the district courts,” as set forth in 28 U.S.C. § 1291. The denial of class certification is not a final order and, therefore, not necessarily entitled to such immediate review. Nonetheless, Fed. R. Civ. P. 23(f) provides litigants the opportunity to appeal an adverse class certification decision, which the appellate court has unfettered discretion to review or not.
If the appellate court decides not to exercise discretion over such an appeal, plaintiffs still have options to ultimately obtain appellate review, including petitioning the district court to certify the interlocutory order for appeal pursuant to 28 U.S.C. § 1292 or pursuing the litigation to a final judgment at which point the class certification denial becomes final and appealable. However, as the Supreme Court’s decision in Baker makes clear, what plaintiffs may not do is circumvent that process by dismissing a case with prejudice after the denial of class certification in order to manufacture the appellate court’s jurisdiction over such an appeal. According to the Supreme Court, such a tactic impermissibly stretches Section 1291, circumvents the rules governing interlocutory appeals, including 23(f), and leads to protracted and piecemeal litigation.
Plaintiffs, purchasers of Microsoft’s Xbox 360 console, filed a class action alleging design defect of the console. (Slip Op. 8.) The district court struck Plaintiffs’ class allegations based on the denial of class certification in a previously-filed case of the same nature, finding that comity mandated its decision. (Id. at 8-9.)
Plaintiffs petitioned the Ninth Circuit for appellate review of the interlocutory order under Rule 23(f), but the Ninth Circuit declined to exercise jurisdiction. Id. at 9. Rather than pursue their individual claims further, Plaintiffs moved to voluntarily dismiss their claims with prejudice and represented to the district court that they would appeal the order striking their class allegations thereafter. (Id. at 10.) Microsoft stipulated to the voluntary dismissal with prejudice, but argued that Plaintiff would have no right to appeal. The district court granted the stipulated motion to dismiss. Id.
As promised, Plaintiffs only appealed the district court’s decision to strike their class allegations. Id. The Ninth Circuit held that it had jurisdiction to entertain the appeal under the 28 U.S.C. § 1291, rejecting Microsoft’s argument that Plaintiffs had impermissibly circumvented Rule 23(f). Id. Then the Ninth Circuit reversed the district court’s decision to strike Plaintiffs’ class allegations. Id. at 11. The Ninth Circuit expressed no opinion as to the merits of class certification, but merely found that comity did not require denial on the pleadings; such a decision would more properly be made on Plaintiffs’ eventual motion for class certification. Id.
The Supreme Court granted certiorari to address a Circuit split over the question: “Do federal courts of appeals have jurisdiction under [28 U.S.C.] § 1291 and Article III of the Constitution to review an order denying class certification (or . . . an order striking class allegations) after the named plaintiffs have voluntarily dismissed their claims with prejudice?” Id.
The Supreme Court, sitting with eight justices, unanimously found that the Ninth Circuit had improperly exercised discretion over Plaintiffs’ appeal.
Justice Ginsburg, authoring the opinion of the Court in which Justices Kennedy, Breyer, Sotomayor and Kagan joined, ruled that Plaintiffs’ voluntary dismissal with prejudice did not transform the district court’s denial of class certification into a final order. Such a tactic, the Supreme Court concluded, impermissibly attempts to subvert the final judgment rule in § 1291 as well as the process Congress implemented for refining that rule and providing for appeals of interlocutory orders. Id. at 12.
The Supreme Court explained that Plaintiffs’ tactic encouraged “protracted litigation and piecemeal appeals” as well as indiscriminate review of interlocutory orders. Id. Indeed, as the Supreme Court pointed out, under Plaintiffs’ theory, “the decision whether an immediate appeal will lie resides exclusively with the plaintiff” because plaintiff “need only dismiss her claims with prejudice whereupon she may appeal the district court’s order denying class certification.” Id. at 12-13. Thus, if Plaintiffs here had subsequently been denied class certification on remand from the Ninth Circuit, they could have again voluntarily dismissed and forced an appeal of that decision, thereby circumventing the purpose of Rule 23(f) and, in conjunction, the rulemaking process Congress bestowed upon the Supreme Court. Id. at 13-16.
Justice Thomas, joined by Chief Justice Roberts and Justice Alito issued a concurring opinion, concurring only in the judgment. Justice Thomas agreed that Plaintiffs could not appeal under the circumstances of this case, but under a different rationale. Specifically, Justice Thomas concluded that Plaintiffs’ voluntary dismissal with prejudice had indeed resulted in a final appealable order. However, such dismissal destroyed any live case or controversy. Accordingly, Plaintiffs had no standing under Article III of the Constitution to bring the appeal.
Implication for Employers
A decision on class certification is often the most significant event in the life of class litigation. As such, plaintiffs who are denied certification craft inventive strategies to circumvent rules limiting their appellate rights. With the Baker decision, one such strategy is no longer available to plaintiffs. Employers should pay careful attention to alternative tactics similarly contravening the purpose and structure of the federal statutes and rules governing appellate review.
Seyfarth Synopsis: After the U.S. Supreme Court clarified in McLane Co. v. EEOC, No. 15-1248, 2017 U.S. LEXIS 2327 (U.S. 2017), that the scope of review for employers facing EEOC administrative subpoenas was the abuse-of-discretion standard, a relatively high bar of review, the Ninth Circuit applied that standard of review on remand and vacated the District Court’s original decision that denied the enforcement of an EEOC subpoena.
An often contentious issue in EEOC investigations involves the scope of administrative subpoenas, which can be burdensome for employers when the subpoenas seek a broad range of company-wide information. When analyzing the standard of review for decisions relating to the enforcement of EEOC subpoenas, in McLane Co. v. EEOC, No. 15-1248, 2017 U.S. LEXIS 2327 (U.S. Apr. 3, 2017), the U.S. Supreme Court held that such decisions were examined under an abuse-of-discretion standard. The abuse-of-discretion standard sets a relatively high bar for review, as we blogged about here. Following the U.S. Supreme Court’s remand to the Ninth Circuit in McLane, the Ninth Circuit vacated the District Court’s denial of enforcement of the subpoena and sent the matter back to the District Court for further proceedings. EEOC v. McLane Co., No. 13-15126, 2017 U.S. App. LEXIS 9027 (9th Cir. May 24, 2017).
For employers, this is an important case to follow as it provides clarification as to the standard of review used when Appellate Courts address district court subpoena enforcement decisions.
The EEOC issued an administrative subpoena as part of its investigation into a charge of discrimination filed by a former employee of a McLane subsidiary. Id. at *3. The employee alleged that McLane discriminated against her on the basis of sex when it fired her after she failed to pass a physical capability strength test. Relevant here, the subpoena requested “pedigree information” (name, Social Security number, last known address, and telephone number) for employees or prospective employees who took the test. Following the Court’s precedent at the time, the Ninth Circuit applied a de novo review to the District Court’s ruling that the pedigree information was not relevant to the EEOC’s investigation. Id. at *3-4. The U.S. Supreme Court vacated the Ninth Circuit’s judgment after holding that a district court’s decision whether to enforce an EEOC subpoena should be reviewed for abuse of discretion. The U.S. Supreme Court remanded the case to the Ninth Circuit so that the Ninth Circuit could re-evaluate the District Court’s ruling under the proper standard of review.
The Ninth Circuit’s Decision On Remand
After reviewing the District Court’s decision under the abuse-of-discretion standard, the Ninth Circuit still held that the District Court abused its discretion by denying enforcement of the subpoena. Id. at *4. The District Court found that the pedigree information was not relevant “at this stage” of the EEOC’s investigation because the evidence McLane had already produced would “enable the [EEOC] to determine whether the [strength test] systematically discriminates on the basis of gender.” Id. The Ninth Circuit rejected this approach, noting that the District Court’s ruling was based on the wrong standard for relevance. The Ninth Circuit stated that under Title VII, the EEOC may obtain evidence if it relates to unlawful employment practices and is relevant to the charge under investigation. Quoting EEOC v. Shell Oil Co., 466 U.S. 54, 68-69 (1984), the Ninth Circuit opined that the relevance standard encompasses “virtually any material that might cast light on the allegations against the employer.” Id. at *5.
Applying Shell Oil, the Ninth Circuit found that the pedigree information was relevant to the EEOC’s investigation since conversations with other McLane employees and applicants who have taken the strength test “might cast light” on the allegations against McLane. Id. McLane argued that, given all of the other information it had produced, the EEOC could not show that the production of nationwide pedigree information was relevant to the Charge or its investigation under either a disparate treatment or disparate impact theory. Id. at *6. The Ninth Circuit construed the District Court’s application of relevance to be a heightened “necessity” standard, and noted that the governing standard was “relevance,” not “necessity.” Id.
The Ninth Circuit then found that the District Court erred when it held that pedigree information was irrelevant “at this stage” of the investigation. Id. Rejecting the District Court’s conclusion that the EEOC did not need pedigree information to make a preliminary determination as to whether use of the strength test resulted in systemic discrimination, the Ninth Circuit held that the EEOC’s need for the evidence—or lack thereof—did not factor into the relevance determination. Id. at *6-7. While McLane had argued that the pedigree information was not relevant because the charge alleged only a “neutrally applied” strength test, which by definition cannot give rise to disparate treatment, systemic or otherwise, the Ninth Circuit rejected this approach, holding “[t]he very purpose of the EEOC’s investigation is to determine whether the test is being neutrally applied; the EEOC does not have to take McLane’s word for it on that score.” Id. at *7. Accordingly, the Ninth Circuit held that because the District Court based its ruling on an incorrect view of relevance, it necessarily abused its discretion when it held that the pedigree information was not relevant to the EEOC’s investigation.
The Ninth Circuit concluded by noting that on remand, McLane was free to renew its argument that the EEOC’s request for pedigree information was unduly burdensome. Id. at *8. Further, explaining that it did not reach the issue in its original decision, the Ninth Circuit instructed that “[o]n remand, the district court should also resolve whether producing a second category of evidence — the reasons test takers were terminated — would be unduly burdensome to McLane.” Id. Accordingly, the Ninth Circuit vacated the District Court’s judgment and remanded for further proceedings.
Implications For Employers
As employers who are confronted with EEOC subpoenas may ultimately find themselves in a subpoena enforcement action, the McLane case is a must-follow in terms of what standard of review will be applied if those district court decisions are later reviewed. The U.S. Supreme Court’s adoption of the more “hands off” abuse-of-discretion standard means that greater weight will be given to district court decisions. Nonetheless, the Ninth Circuit’s ruling here illustrates that appellate courts may still be willing to overturn district court decisions to enforce or quash EEOC subpoenas depending on the circumstances. The decision will also, no doubt, be cited by an emboldened EEOC as authority for its position that expansive pedigree information is relevant in a broad swath of cases. Understanding these trends will provide useful guidance for employers when deciding if and how to challenge what often can be burdensome demands for information from the EEOC.
Readers can also find this post on our EEOC Countdown blog here.