Jackson Lewis Class Action Trends Report Winter 2018 Now Available

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 (Winter 2018)

A PAGA Case Cannot Stand Without Standing: Court of Appeal Affirms Trial Court’s Dismissal of PAGA Action After the Plaintiff Settles His Individual Labor Code Claims In Arbitration

In Kim v. Reins International California, Inc. (B278642, Cal. Ct. App., December 29, 2017), the State of California Court of Appeal for the Second Appellate District addressed for the first time the question of whether an employee-plaintiff, who had settled and dismissed his individual claims under the Labor Code against his employer, was able to maintain a representative action under the Labor Code Private Attorneys General Act (the “PAGA”) on behalf of other “aggrieved employees”. The Court held that because of the settlement and dismissal of his individual claims, the employee-plaintiff was no longer an “aggrieved employee” and therefore did not have standing to represent other “aggrieved employees” under the law.

Under the PAGA, an “aggrieved employee” may bring a representative action on behalf of him or herself and other “aggrieved employees” for any violation of the California Labor Code. Cal. Labor Code §§ 2698, et seq. Since the law was first enacted in 2004, many employers around the state have been on the receiving end of PAGA actions, in which employees can seek substantial civil penalties that were previously only recoverable by the State of California. PAGA cases have become increasingly favored by plaintiffs’ attorneys for a number of reasons, including the fact that PAGA-claims cannot be compelled into arbitration.

This case involves many common elements familiar to experienced class and representative action litigants in California: Kim, a former employee of Reins International, brought a wage and hour class action alleging various violations of the Labor Code as well as a claim for civil penalties under PAGA for the same underlying violations. Kim had also signed an arbitration agreement when he began working for the company. Reins International responded to the lawsuit with a common countermeasure: it moved to compel arbitration of Kim’s individual claims, dismiss the class claims, and stay the PAGA cause of action until the arbitration was complete. The trial court granted the motion to compel arbitration, reserved the issue of class arbitrability for the arbitrator, and stayed the cause of action under PAGA.

While the case proceeded in arbitration, the parties reached a settlement of Kim’s individual claims. Pursuant to the settlement, Kim dismissed his individual claims with prejudice and the class claims without prejudice, leaving only the PAGA cause of action. As a result, the trial court lifted the stay and the parties proceeded to litigate the PAGA claim back in Superior Court.

Following the lifting of the stay, Reins International filed a motion for summary adjudication of the PAGA cause of action in its favor on the grounds that following the settlement and dismissal of all of his individual claims against his employer, Kim was no longer an “aggrieved employee” and therefore could not maintain the PAGA cause of action. The trial court agreed and dismissed the PAGA cause of action.

The Court of Appeal upheld the trial court’s decision, holding that “where an employee has brought both individuals claims and a PAGA claim in a single lawsuit, and then settles and dismisses the individual employment causes of action with prejudice, the employee is no longer an ‘aggrieved employee’ as that term is defined in the PAGA, and therefore that particular plaintiff no longer maintains standing under PAGA.”

The Court was not swayed by Kim’s arguments that the PAGA claim should have been unaffected by his individual settlement in that it did not release the rights and potential claims of other individual employees nor the State of California, in whose stead Kim was seeking civil penalties. In fact, the Court noted that it agreed with Kim’s arguments that his individual settlement did not impair the ability of the State of California nor another employee from pursuing the same claims individually or in a representative capacity under PAGA; nonetheless, his ability to do so ended the moment he settled and dismissed all his individual claims against Reins International.

The Court stated that its holding is confined to the specific circumstances in the case – involving the voluntary settlement and dismissal of individual claims in arbitration – and declined to opine on what effect an adverse determination in arbitration would have on PAGA standing generally. Nonetheless, the Court’s in-depth application of the standing doctrine to PAGA actions – where previously the California Supreme Court has only made surface-level references – has potentially far reaching implications in cases where employees are seeking PAGA penalties for alleged Labor Code violations that they cannot establish they have suffered individually, in cases where the employee litigates and loses in arbitration, and in cases where they have resolved their individual disputes in private settlements. These issues and others will undoubtedly be tackled by the Courts of Appeal and the California Supreme Court as they continue to interpret and mold the PAGA.

Illinois Court of Appeals Holds BIPA Plaintiffs Must Allege Some Actual Harm

In a ruling that may have significant impact on the recent wave of biometric privacy suits, an Illinois state appeals court held that plaintiffs must claim actual harm to be considered an “aggrieved person” covered by Illinois’ Biometric Information Privacy Act (BIPA), in a dispute arising from the alleged unlawful collection of fingerprints from a Six Flags season pass holder. Rosenbach v. Six Flags Entertainment Corp., 2017 IL App (2d) 170317 (Ill. App. Ct. Dec. 21, 2017).

Click here for an article on our Workplace Privacy, Data Management & Security Report blog which discusses the impact of this case and provides additional resources to help navigate biometric information protection laws.

U.S. Supreme Court to Rule on Application of American Pipe Tolling Decision on Class Actions

Earlier this month, the U.S. Supreme Court granted certiorari to China Agritech, Inc., a fertilizer manufacturer, from the Ninth Circuit’s decision in Resh v. China Agritech, Inc., 857 F.3d 994 (9th Cir. 2017).  In reviewing Resh, the Court will consider whether its American Pipe and Construction Co. v. Utah, 414 U.S. 538 (1974) ruling tolls statutes of limitation to allow previously absent class members to bring a subsequent class action outside of the applicable limitations period.  In other words, whether its American Pipe ruling applies only to subsequent individual claims or if it extends more broadly to successive class actions.

Background

In American Pipe, the Supreme Court held that the filing of a class action suit tolls the running of the statute of limitations for all purported members of the class who make timely motions to intervene after the court has found the suit inappropriate for class action status.  However, there is currently a circuit split regarding the interpretation of American Pipe as it relates to tolling for subsequent putative class actions.  As stated in its Petition, China Agritech argues that the First, Second, Third, Fifth, Eighth and Eleventh Circuits have found the American Pipe decision to allow for tolling for individual actions only—and not serial class actions.  Three other courts of appeal—including the Ninth Circuit in the decision at issue—have rejected this notion and instead interpret American Pipe to mean that the limitations period is tolled not only as to individual claims but also as to future class action claims.

Ninth Circuit Opinion

Plaintiffs in Resh brought a putative class action alleging violations of the Securities Exchange Act of 1934.  Plaintiffs were also previously unnamed plaintiffs in two earlier putative class actions against some of the same defendants, and class action certification was denied in both cases. In December 2014, a California district court dismissed Resh’s proposed class action and concluded that the statute of limitations was tolled for the individual claims of the named plaintiffs in Resh but was not tolled for plaintiffs’ would-be class action.  In May 2015, a Ninth Circuit panel reversed that decision, holding that permitting future class action named plaintiffs to avail themselves of the American Pipe tolling would “advance the policy objectives that led the Supreme Court to permit tolling in the first place.”  The Ninth Circuit also stated that this rule promotes “economy of litigation by reducing incentives for filing duplicative, protective class actions because ‘[a] putative class member who fears that class certification may be denied would have every incentive to file a separate action prior to the expiration of his own period of limitations.’”

Before the Supreme Court, China Agritech argues that the Ninth Circuit erred in extending American Pipe to class actions, the decision cannot be reconciled with the principles animating American Pipe tolling, and affirming this decision would lead to significant adverse policy consequences.

Our Class Actions and Complex Litigation practice group is carefully monitoring this case, as it could have a significant impact on class action litigation going forward. If you would like to discuss this case in more detail, please reach out to Stephanie Adler-Paindiris or the Jackson Lewis attorney with whom you regularly work.

ALERT- Plaintiff’s Bar Currently Targeting Online Hiring Practices: What Your Company Needs to Know

 The latest target of the plaintiff’s overly-aggressive tactics—a company’s use of recruitment ads in hiring employees.  All industries and all forms of advertising are potentially coming under attack, including social media platforms and websites dedicated to employee recruiting.  Specifically, the plaintiff’s bar has repeatedly targeted certain advertisements on social media sites that encourage individuals to apply for jobs at their company, using information obtained from user profiles.

What is the claim?

The legal argument being asserted is that the advertisements are alleged class violations of federal, state, and local laws that prohibit age discrimination in employment advertising, recruitment, sourcing, and hiring, including the federal Age Discrimination in Employment Act (ADEA).  The theory is as follows: certain social media sites have a feature that allows a user to see the reason they were identified to receive a particular advertisement.  The language under the targeted advertisement might state, for example, that the company intends for the ad to reach a certain demographic, i.e. people ages 28 to 45 who live or were recently in the United States.  The plaintiff’s bar is seizing upon this type of advertisement and language to allege that the plaintiff is in receipt of direct evidence that the company “regularly targets younger prospective job applicants on [social media sites]” and, therefore, that the Company is likely engaged in other forms of hiring discrimination.  Based on these ads and these allegations, the plaintiff’s bar is threatening legal action—including filing class and associational charges of discrimination with federal, state, and/or local agencies.

How can we help?

Our Class Actions and Complex Litigation team has been tracking this issue very closely.  Our goal in bringing these lawsuits to your attention is to provide information and advance notice around a potentially serious issue.  To respond to these threats, Jackson Lewis has put together an internal team to provide an immediate response and to efficiently handle the defense of this issue.  If you have any questions, or if you would like to discuss your Company’s recruiting and hiring practices in more detail, please reach out to Stephanie Adler-Paindiris, Paul Patten, and Eric Magnus.

 

 

Spokeo Strikes Again – Biometric Data Privacy Class Action Fails On Its Face (Scan)

On November 21, 2017, the U.S. Court of Appeals for the Second Circuit held that a plaintiff bringing a putative class action under the Illinois Biometric Information Privacy Act (“BIPA”) could not establish an injury-in-fact and therefore lacked Article III standing, further adding to the legacy of the U.S. Supreme Court’s holding in Spokeo v. Robins and providing companies with additional firepower to fight against claims of bare procedural statutory violations of privacy statutes where individuals suffer no actual harm or risk of real harm.  (Santana v. Take-Two Interactive Software, Inc.)

Take-Two, the developer of the video game series NBA 2K, has included a feature in several of its recent releases that allows players to scan their face into the video game to create a personalized avatar basketball player for use in the game.

Prior to scanning their face and creating an avatar, players are required to agree that “Your face scan will be visible to you and others you play with and may be recorded or screen captured during gameplay.” The lawsuit alleged that this disclaimer did not provide sufficient notice under the BIPA.

BIPA requires that individuals are given written notice that biometric identifying data is being collected and are informed of the organization’s purpose and length of time for which the data will be collected, stored, and used. BIPA also requires that the organization make publicly available a written policy identifying the length of time that the organization will retain biometric identifying data and its rules regarding the destruction of such data.

The plaintiff alleged that Take-Two failed to inform him of the purpose and duration for which his data would be stored, failed to make a publicly available written policy regarding its retention/destruction schedule, and, as a result, collected and disseminated his biometric identifying data without his informed consent.

The Circuit Court affirmed the District Court’s dismissal for lack of Article III standing, holding that the alleged procedural violations failed to raise a material risk of harm that plaintiff’s biometric data would be misused, disclosed, or accessed by third parties. The Court held that, under Spokeo, plaintiff failed to show a “risk of real harm sufficient to confer injury-in-fact.”  The Court also found plaintiff’s argument that he was deterred from using biometrics in the future insufficient to establish a risk of future harm.

The Court also took note that plaintiff was well-aware that Take-Two was collecting his biometric data. As a result, this decision may have limited application in cases where the individual may be unaware that his or her biometric data is being collected and stored.  Nonetheless, this decision further prevents individuals from asserting procedural statutory violations that are completely divorced from actual harm or risk of real harm.

For more information regarding the use of biometrics identifiers and the law related to same, please contact the Jackson Lewis attorney with whom you regularly work.

Restaurant Supply Driver’s Federal FLSA Claims Shown the Exit Ramp on MSJ Ruling

Finding not a “scintilla” of evidence to support claims of minimum wage violations, a New York federal district court in Yu Sen Chen et al v. MG Wholesale Distribution Inc. et al, 16-cv-04439 (E.D.N.Y.) dismissed a proposed collective action (and refused to exercise supplemental jurisdiction of the corresponding state law claims).  In doing so, the district court relied on simple arithmetic and the plaintiff’s own admissions. 

Basis of Complaint

After spending more than a decade working as a truck loader and driver’s helper for a restaurant supply distribution company in Queens, New York, the named plaintiff filed a putative collective action alleging minimum wage and overtime violations under federal and state law.  In doing so, he claimed he worked 12 hours per day, six days per week, for a set salary of approximately $600/week. 

Allegations Taken with a Grain of Salt

Last year, the named plaintiff voluntarily dismissed the overtime claims.  Discovery ensued on the remaining claims.  During the course of discovery, the plaintiff alleged he worked approximately 72 hours per week (although he claimed that at times he may have worked upwards of 77 hours).  He testified his salary was approximately $600/week.  While the named plaintiff claimed the times sheets utilized in the litigation were falsified (and he thus worked much more), the Court applied plaintiff’s testimony regarding hours worked. 

Applying basic arithmetic, and accepting as fact that the named plaintiff worked 72 hours per week (or even 77 hours per week), he earned more than the $7.25 federal minimum wage, the Court ruled. As a result, no federal minimum wage claim existed, making the prospective collective action ripe for dismissal.  The Court also refused to exercise supplemental jurisdiction over the state law claims (minimum wage and spread of hours claims).    

Takeaway

While the information discovered regarding hours worked may have suggested potential issues under state law, simple math proved there was no minimum wage claim under the FLSA.  This finding was enough to divest the court of subject matter jurisdiction, and the Court punted on the state law claims.  This lesson should not be lost on any employer (regardless of the industry).  Employers facing a collective action should not overlook the possibility of attacking the pleadings of the federal claims.  If a court dismisses those claims, the employer may live to fight the state law claims another day (assuming the plaintiff even re-files them).   So pay attention to simple math; it may prove to be your salvation. 

11th Circuit Allows Intervenors in Buccaneers Class Action Lawsuit

The Eleventh Circuit Court of Appeals recently considered two class action lawsuits under the Telephone Consumer Protection Act (TCPA), which involved the same class and allegations and the question of whether additional parties could intervene in a pending case. In Technology Training Associates, Inc., et al. v. Buccaneers Limited Partnership, Cin-Q Automobiles, Inc. filed a complaint on behalf of a putative class, alleging that Buccaneers Limited Partnership was responsible for unsolicited faxes that violated the TCPA.  The case was litigated for approximately three years, with Medical & Chiropractic Clinic, Inc. joining in as a second named plaintiff.  In 2016, Technology Training Associates, Inc. et al. filed a complaint on behalf of the same putative class based on the same allegedly unlawful acts by Buccaneers, which subsequently settled.  After the settlement was announced, Cin-Q and Medical & Chiropractic Clinic (the “movants”) moved to intervene in the case.  The district court denied the movants (named plaintiffs in the first class action case) the opportunity to intervene in the second class action, but on October 26, 2017, a three judge panel of the Eleventh Circuit remanded the case to the district court with instructions to grant the movants’ motion to intervene, holding that the movants had satisfied Federal Rule of Civil Procedure 24(a)(2)’s requirements for intervention.

The movants originally filed a lawsuit in 2013 on behalf of a putative class against the defendant alleging violations of the TCPA. In 2016, the named plaintiffs in the second case filed a second complaint on behalf of the same putative class based on the same allegations against the same defendant.  One of the attorneys from the firm representing the plaintiffs in the first action changed firms, and his new firm represented the plaintiffs in the second action.  Soon after the second lawsuit was filed in 2016, the parties in the second lawsuit announced that they had reached a settlement, part of which involved the defendant agreeing to waive its statute of limitations defense against the plaintiffs in the second lawsuit.

After the settlement was announced in the second lawsuit, the movants moved to intervene in the second lawsuit, and the district court denied that motion and preliminarily approved the settlement agreement. The movants appealed the denial of their motion to intervene.

The Eleventh Circuit ultimately held that the movants satisfied Rule 24(a)(2)’s requirements for intervention, and in doing so found significance in a series of emails exchanged within the law firm representing the plaintiffs in the second case.  The emails appeared to show that the law firm in the second case not only knew how much the law firm from the first case wanted to settle their class action for, but also that the second law firm filed the second action with the intent to underbid the law firm in the first action.  In addition, the Court of Appeals found the fact that the plaintiffs’ claims in the second lawsuit might be time barred allowed the movants to meet the “minimal” burden of showing the plaintiffs’ representation in the second action might be inadequate, because the plaintiffs in the second action had a greater incentive to settle as their claims may have been time barred.

The Eleventh Circuit concluded its opinion by observing that the record suggested that plaintiffs’ counsel in the second action deliberately underbid the movants in an effort to collect fees, while at the same time doing a fraction of the work that movant’s counsel had done in the first lawsuit, together with a brief discussion of the American Bar Association’s Ethical Guidelines for Settlement Negotiations.

This case is a reminder of the complex procedural issues at stake in class action litigation.  For more information regarding this case or to discuss recent trends in TCPA class action litigation, please contact the Jackson Lewis attorney with whom you regularly work.

Jackson Lewis Class Action Trends Report Fall 2017 Now Available

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.

Fall 2017 Class Action Trends Report

General Awareness Is Not Enough for Willfulness Under the FLSA

A recent decision from the Third Circuit Court of Appeals involving the nature of the evidence sufficient to create a jury question on willfulness has carved out additional guidance for employers defending against Fair Labor Standards Act (FLSA) lawsuits. Though the FLSA generally applies a two-year statute of limitations, the limitations period can be extended to three-years for willful violations of the Act. That extra year means more dollars in a plaintiff’s pockets.

On September 20, 2017, a three-judge panel upheld the ruling of a district judge from the Middle District of Pennsylvania who granted the County’s motion for a directed verdict on the question of willfulness. In Souryavong v. Lackawanna County, two employees brought suit under the FLSA, arguing that although each of their part-time positions did not result in overtime hours, their combined hours well exceeded 40 hours per workweek. The only issue at the November 2015 trial was whether the violations were willful.

To support their argument, the employees’ evidence at trial was limited to testimony from two witnesses that the County was “generally aware” of its obligations, and an internal email that was circulated with the subject line “County wage and hour issues” discussing certain employees who were working second-jobs in excess of 40 hours per week. In granting the County’s motion for a directed verdict at trial, the Judge stated that the “employees’ evidence did not ‘measure up.’” The Third Circuit agreed.

“Willfulness” as defined by the Supreme Court includes situations where the employer knew its conduct was prohibited at the time of the FLSA violation or where the employer demonstrates a “reckless disregard” for the matter.

Despite there being evidence that the County was “generally aware” of its obligations under the FLSA, that alone was insufficient to create a genuine issue of fact for the jury. For the jury to rule on the issue of willfulness, the evidence must have established that the County was specifically aware of the two-job overtime issue as it related to the employees – prior to the dates of the violations.

In contrast, the Third Circuit referred to instances where its sister circuits allowed the question of willfulness to reach a jury: Flores v. City of San Gabriel, 824 F.3d 890 (9th Cir. 2016) (finding a jury question of “willfulness” where a city is aware of the FLSA requirements and has a system in place to classify pay and benefits, yet continues to allow a misclassification of a monthly payment for nine years); Davila v. Menendez, 717 F.3d 1179 (11th Cir. 2013) (finding a jury question of willfulness where a family fails to pay a nanny minimum wage, admits to knowing about the minimum wage laws, and where the family instructed the nanny to lie about her employment and the hours worked). Here, the Third Circuit could find no such level of egregiousness so as to send the issue to the jury.

The question of willfulness is a hot-button issue in the context of FLSA claims. The decision in Souryavong serves to further limit the kinds of factual scenarios when the statute of limitations for FLSA claims is extended to three years.

 

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