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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.

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!

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!

Executive Summary

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.

 

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

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

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

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

Case Background

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

U.S. Supreme Court Decision

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

Ninth Circuit’s Standing Analysis

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

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

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

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

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

Outlook

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

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