Jackson Lewis Class Action Trends Report Summer 2018

Below is a link to the latest issue of the Jackson Lewis Class Action Trends Report.  This report is published on a quarterly basis by our firm’s class action practice group in conjunction with Wolters Kluwer.  We hope you will find this issue to be informative and insightful.  Using our considerable experience in defending hundreds of class actions over the last few years alone, we have generated another comprehensive, informative and timely piece with practice insights and tactical tips to consider concerning employment law class actions.

Jackson Lewis Class Action Trends Report Summer 2018

Rule 23 Amendments Awaiting Congressional Review

The final amendments to the Federal Civil Rules of Procedure, including amendments to Rule 23 class actions, are waiting for approval from Congress. The primary changes to Rule 23 affect the class action notice and settlement processes. The amendments acknowledge advancements in technology and the popularity of social media, while formalizing procedural and substantive notice and approval requirements already being employed in some federal courts.

If approved, the amendments will become effective December 1, 2018.

Here’s what employers need to know:

Preliminary Approval: No longer is moving for preliminary approval a perfunctory task. The amendments to Rule 23(e) would place additional substantive requirements on parties moving for preliminary approval, requiring them to demonstrate the proposed settlement will likely be granted and the court will likely certify the class for purposes of settlement. Historically, federal courts had denied preliminary approval motions for failure to provide estimated class size, description of how the settlement funds would be distributed, and a draft notice. By requiring this information at the preliminary approval stage, the amendment makes mandatory what courts were already considering. While this amendment likely will result in more extensive early class discovery, it reduces the risk associated with a notice process that may never be approved.

Form of Notice: The amendments to Rule 23(b)(3) eliminate the requirement that class notice must be sent by first class mail, instead permitting delivery through “electronic means” such as emails and text message, which will likely be more cost effective. In permitting alternate means of notice, counsel remains obligated to consider the class members’ overall accessibility to email and social media. And, because inboxes are flooded with hundreds of daily emails, to maximize the deliverability rate, it is critical for a notice to be drafted and distributed in a manner that will not get filtered out. Employers should consider revising their electronic communication policies to ensure professional email accounts are not being used for non-work related purposes to minimize workplace disruption.

Settlement Approval: The amendments to Rule 23(e)(1) expand upon the idea that a settlement must be “fair, reasonable, and adequate” by setting core factors the parties must demonstrate in seeking approval. To standardize the final approval process, the amendments set the following criteria: whether “class representatives and class counsel have adequately represented the class”; whether the settlement was “negotiated at arm’s length”; whether the relief provided for the class is adequate (taking into account such factors as costs, risks, and effectiveness of the proposed method of distributing relief to the class, among others); and whether “class members are treated equitably relative to each other.”

Class-Member Objections: The amendments to Rule 23(e)(5) clarify what must be included in an objection, requiring the objector to state with specificity the basis for any objection and whether the objection is being made only by the objector, by a subset of the class, or by the entire class. These amendments may deter “serial objectors” with ulterior and personal financial motives from delaying settlement approval and distribution to injured class members.

Appeals: Amended Rule 23(f) would clarify that interlocutory appeals may be sought only after class certification is granted or denied, not from an order to give notice under Rule 23(e)(1). It would also expand the filing time for an interlocutory appeal to 45 days (from 14 days) if any party is the United States, a United States agency, or a United States officer.

Restaurant Industry Association Files Suit Challenging “80/20” Rule

The Restaurant Law Center, a public policy affiliate of the National Restaurant Association, has filed suit against the Department of Labor and its Wage and Hour Division, seeking to declare unlawful the DOL’s 2012 revision to its Field Operations Handbook, purporting to establish, through sub-regulatory guidance, the “80/20” tip credit rule or “20% Rule.” Restaurant Law Center v. U.S. Dept. of Labor, No. 18-cv-567 (W.D. Tex. July 6, 2018).

Click here to access our Wage and Hour blog and learn more about this lawsuit and potential future implications.

California May Lower the Standing Threshold in Data Breach Litigation

A key issue for any business facing class action litigation in response to a data breach is whether the plaintiffs, particularly consumers, will have standing to sue. Standing to sue in a data breach class action suit, largely turns on whether plaintiffs establish that they have suffered an “injury-in-fact” resulting from the data breach. Plaintiffs in data breach class actions are often not able to demonstrate that they have suffered financial or other actual damages resulting from a breach of their personal information. Instead, plaintiffs will allege that a heightened “risk of future harm” such as identity theft or fraudulent charges is enough to establish an “injury-in-fact”.

Click here for an article on our Workplace Privacy, Data Management & Security Report blog for an update regarding a new pending bill that, if passed, would allow consumers to sue a business in response to a data breach without any showing of harm at all.

Gig-Economy Delivery Couriers are Not Employees, New York Court Rules, Reverses Unemployment Board

A delivery courier fired by app-based Postmates is an independent contractor, not an employee entitled to unemployment insurance benefits, the Third Judicial Department of the New York Supreme Court has ruled. Matter of the Claim of Luis A. Vega, No. 525233 (June 21, 2018). The case is one of many disputes across the country over the status of workers in the gig economy.

Postmates Inc. is an app-based food delivery service known for its ability to deliver from hard-to-reach restaurants around Manhattan, Brooklyn, and Queens.

Luis Vega was a delivery courier for Postmates. Vega applied for unemployment insurance benefits after Postmates terminated its relationship with him based upon alleged negative consumer feedback or fraudulent activity. The Unemployment Appeal Board, reversing a decision by an Administrative Law Judge (ALJ), found that an employer-employee relationship existed between Postmates and Vega. Contesting the Board’s decision, Vega filed suit on behalf of himself and others similarly situated.

The court, by a 3-2 vote, reversed the Board. The case turned on how much control the company had over the delivery couriers. The court found the company did not exert enough control over Vega or those similarly situated to be held liable for unemployment insurance contributions.

The majority found significant that, in order to work as a courier for Postmates, claimant and others similarly situated “need only download Postmates’ application software platform and provide his or her name, telephone number, Social Security number and driver’s license number; there is no application and no interview.” Further, they “were not required to report to any supervisor,” “they unilaterally retain[ed] the unfettered discretion as to whether to ever log on to Postmates’ platform and actually work,” and were “free to work as much or little as he or she want[ed] — there is no set work schedule.”

The panel concluded, “[W]hile proof was submitted with respect to Postmates’ incidental control over the couriers, the fact that Postmates determines the fee to be charged, determines the rate to be paid, tracks the subject deliveries in real time and handles customer complaints … does not constitute substantial evidence of an employer-employee relationship.”

Jackson Lewis attorneys are available to answer inquiries regarding this case and other developments.

Class Action Stacking Is Not Permitted, U.S. Supreme Court Rules

Once class action certification has been denied, a putative class member may not start a new class action beyond the applicable statute of limitations, the U.S. Supreme Court has ruled, 9-0, in an opinion by Justice Ruth Bader Ginsburg. China Agritech, Inc. v. Resh, No. 17-432 (June 11, 2018). Justice Sonia Sotomayor filed an opinion concurring in the judgment.

In 1974, the Court held in American Pipe and Construction Co. v. Utah that “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action.” 414 U.S. 538, 554. Noting that “[t]he watchwords of American Pipe are efficiency and economy of litigation,” the Court concluded in China Agritech that “American Pipe does not permit the maintenance of a follow-on class action past expiration of the statute of limitations.” American Pipe equitable tolling rule does not apply to individual claimants banding together and filing a subsequent (“stacked”) class action.

You can read our analysis of the decision here: https://www.jacksonlewis.com/publication/class-action-stacking-not-permitted-us-supreme-court-rules

Is Silence Golden? Supreme Court to Rule on Silent Class Arbitration Waivers

The United States Supreme Court is taking another bite at the arbitration waiver apple.  In addition to its landmark decision in Epic Systems Corp. v. Lewis, where the Supreme Court held that class and collective action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act, the Supreme Court has granted cert to review the Ninth Circuit’s decision in Varela v. Lamp Plus, Inc. and will decide whether workers can arbitrate on a class-wide basis where the agreement in question is silent on class arbitration.

The arbitration clause in Varela is silent on the issue of whether the workers who signed it can pursue their claims through class arbitration.  The Ninth Circuit held that the agreement’s silence rendered it ambiguous on the issue, and thus the most reasonable reading of the broad contract language would allow employees to pursue their claims through class arbitration.

We will continue to monitor this case and provide you with updates.  While Epic Systems has provided employers with a roadmap for crafting future arbitration agreements, the decision in Varela will affect the rights of employees and employers alike who have already entered into arbitration agreements that are silent on class arbitration.

Supreme Court: Class Action Waivers in Employment Arbitration Agreements Do Not Violate Federal Labor Law

Class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (FAA), the U.S. Supreme Court has held in a much-anticipated decision in three critical cases. Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP et al. v. Morris et al., No. 16-300; National Labor Relations Board v. Murphy Oil USA, Inc., et al., No. 16-307 (May 21, 2018).

The Supreme Court’s decision resolves the circuit split on whether class or collective action waivers contained in employment arbitration agreements violate the National Labor Relations Act (NLRA). In a 5-4 decision authored by Justice Neil Gorsuch, the Court held that the FAA states that arbitration agreements providing for individualized proceedings are enforceable and neither the FAA nor the NLRA require otherwise. Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas, and Samuel Alito joined in that decision.

You can read our analysis of the decision here: https://www.jacksonlewis.com/publication/supreme-court-class-action-waivers-employment-arbitration-agreements-do-not-violate-federal-labor-law


Arbitrating Class Actions – Does Arbitration Bind Employees Who Do Not Opt-in?

The Second Circuit Court of Appeals heard arguments last week to determine whether an arbitrator’s award in a Title VII class action applies only to the 254 employees who are named plaintiffs or otherwise opted in to the class, or whether it extends to all 70,000 similarly situated employees. (Jock et al. v. Sterling Jewelers, Inc., Case No. 18-153 (2d Cir.)). The Second Circuit’s decision could have a huge impact on employers whose arbitration agreements are silent on arbitrability of class actions claims (as in this case), because it raises the stakes in a forum where arbitrators are not bound to follow the law and their decisions are not appealable except in extremely narrow circumstances.

A major difference between class actions proceeding in federal court and class actions proceeding in arbitration is that federal courts derive jurisdiction over litigants pursuant to Article III of the U.S. Constitution, while arbitrators’ jurisdiction is derived exclusively from contractual agreements. Thus, while similarly situated individuals can be included in a class action unless they opt out under Rule 23 of the Federal Rules of Civil Procedure, arbitrators have no jurisdiction in the first instance over individuals who have not agreed to arbitrate their claims.

In a 2010 decision in this case, the Second Circuit held that an agreement to arbitrate class claims may either be expressly stated in an arbitration agreement, or it may be implied by the parties’ consent to have an arbitrator decide the issue of class arbitrability. Appearing as a named plaintiff or opt-in plaintiff in a class arbitration constitutes consent.

Subsequently, in a 2017 decision in this case, the Second Circuit clarified that putative class members who did not opt-in to class arbitration may not have agreed to arbitrate their class claims if the arbitration agreement is silent on class actions, and remanded the issue to Judge Rakoff in the U.S. District Court for the Southern District of New York.

In 2018, Judge Rakoff held that, absent language in the arbitration agreement compelling class arbitration, similarly situated employees who had not opted in to the class arbitration were not part of the class before the arbitrator because their consent to arbitrate could not be implied. Judge Rakoff’s decision is currently being challenged on appeal to the Second Circuit.

In the Jock case, the plaintiffs are the ones who pursued their class claims in arbitration in the first instance, which constituted their consent to arbitrate class claims. No matter the outcome in the Jock case, there is still an argument to avoid arbitration of class actions in the typical case where a plaintiff files suit in court and resists arbitration. If an arbitration agreement is silent on class action arbitrability, a plaintiff may be limited to pursuing an individual claim in arbitration because they may not have consented to having the issue of class action arbitrability decided by an arbitrator. We will continue to keep you abreast of developments in the arbitration of class actions. Should you have any questions regarding this or other related cases, please reach out to the Jackson Lewis attorney with whom you regularly work with.

Ninth Circuit Concludes that Admissibility is Not a Factor in Deciding Class Certification

On May 3, 2018, in Sali v. Corona Medical Center, et al., Case Number 15-56460, a putative wage-hour class action, the U.S. Court of Appeals for the Ninth Circuit held that evidence does not have to be admissible for it to be considered in support of class certification. The Ninth Circuit concluded that the district court erred by striking a declaration at the class certification stage because district courts cannot “decline to consider evidence solely on the basis that the evidence is inadmissible at trial.” Id. at 10.

In support of their motion for class certification, Plaintiffs submitted a declaration from a paralegal at Plaintiffs’ counsel’s law office summarizing the named Plaintiffs’ injuries after a review of the time and payroll records for the named Plaintiffs. Id. at 11. Defendants objected to the declaration on various grounds, including that it constituted improper lay opinion testimony, the opinions were unreliable, the declaration lacked foundation and the data underlying the analysis was unauthenticated hearsay. Id. In response to Defendants’ objections, the named Plaintiffs submitted declarations authenticating the data relied upon and the conclusions reached in the paralegal’s declaration. Id. at 11-12. The district court agreed with the arguments raised by Defendants and struck the declaration based on inadmissibility. The district court also declined to consider the subsequent declarations submitted by the named Plaintiffs because they “were new evidence improperly submitted in reply.” Id. at 12. Once the district court struck the declarations, the district court concluded that the motion for class certification did not offer any admissible evidence of Plaintiffs’ injuries and denied class certification. Id. at 8.

The Ninth Circuit reversed the district court’s ruling and held: “Although we have not squarely addressed the nature of the ‘evidentiary proof’ a plaintiff must submit in support of class certification, we now hold that such proof need not be admissible evidence. Inadmissibility alone is not a proper basis to reject evidence supported in support of class certification.” Id. at 14. The Ninth Circuit continued:

“[I]n evaluating a motion for class certification, a district court need only consider ‘material sufficient to form a reasonable judgment on each [Rule 23(a)] requirement.’ The court’s consideration should not be limited to only admissible evidence . . . By relying on admissibility alone as a basis to strike [the declarations], the district court rejected evidence that likely could have been presented in an admissible form at trial . . . When conducting its ‘rigorous analysis’ into whether the Rule 23(a) requirements are met, the district court need not dispense with the standards of admissibility entirely. The court may consider whether the plaintiff’s proof is, or will likely lead to, admissible evidence . . . But admissibility must not be dispositive. Instead, an inquiry into the evidence’s ultimate admissibility should go to the weight that evidence is given at the class certification stage.” Id. at 15-18.

Under Sali, employers in the Ninth Circuit have lost one arrow in their quiver to defeat class certification because they can no longer rely on inadmissibility of evidence to support class certification even if such evidence would be inadmissible at the summary judgment/adjudication stage or at trial. There is a split among several of the circuits on this issue, and perhaps the issue may be taken up by the U.S. Supreme Court for a definitive answer.