Duane Morris Takeaway: This week's episode of the Class Action Weekly Wire features Duane Morris partner Jennifer Riley and associate Nathan Norimoto with their analysis of key procedural issues in class action litigation addressed by the Second, Third, and Seventh Circuit Courts.
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Episode Transcript
Jennifer Riley: Thank you for being here again for the next episode of our Friday weekly podcast, the Class Action Weekly Wire. I'm Jennifer, Riley, partner at Duane Morris, and joining me today is Nathan Norimoto. Thank you so much for being on the podcast today, Nathan.
Nathan Norimoto: Thanks. Happy to be here again, Jen. I appreciate it.
Jennifer: So, today we wanted to discuss trends and important developments with procedural issues in class action litigation. In our Class Action Review, this topic is somewhat of a catch-all in terms of the legal issues involved. Class action litigation presents significant procedural issues to litigants and courts alike. In 2024 courts addressed myriad procedural issues in class action litigation. Nathan, can you tell our listeners some of the highlights in this area over the past year?
Nathan: Certainly, jurisdiction is always an important consideration in class action litigation. Jurisdictional defenses are often can be dispositive when a defendant challenges the ability of plaintiffs to maintain their class action in court. This past year, the plaintiffs in Hasson v. FullStory, Inc. challenged district court decisions dismissing their class action lawsuits against FullStory, Inc., one of the defendants, and also Papa John's International, Inc., for lack of personal jurisdiction, and essentially in their complaint plaintiffs allege that they were being unlawfully wiretapped by the defendants without their consent. Both of the defendants were incorporated in Delaware and based in Georgia, and the core legal issue that was presented in both cases centered on whether the defendants' actions constituted sufficient contact with Pennsylvania to warrant jurisdiction from the court. The district court ruled against the plaintiffs on the grounds that they had failed to show that FullStory, one of the defendants, specifically aimed its conduct at Pennsylvania, where the action was venue. The district court also found that the claims were inadequate under both the "traditional" and "effects" tests for establishing personal jurisdiction. This decision from the district court was appealed to the Third Circuit, which ultimately affirmed the district court's ruling. The Third Circuit ruled that the plaintiff's allegations had failed to show that one of the one of the defendants, Papa John's, targeted Pennsylvania specifically as the company's website was intended for a national audience. The Court of Appeals also held that just simply operating an accessible website does not equate to targeting a specific state for purposes of the personal jurisdiction analysis. Additionally, the Third Circuit rejected one of the plaintiffs' arguments that Papa Johns' business activities in Pennsylvania established sufficient jurisdiction, analyzing that the alleged wiretapping would have occurred regardless of the company's operations in that state. The court acknowledged Papa Johns' significant presence in Pennsylvania but found that the plaintiffs' claims did not arise out of or relate sufficiently to those contacts. So, ultimately the Third Circuit ruled that the connection between the website's operation and the wiretapping claims was too weak to satisfy jurisdictional requirements as to the other plaintiff's claims. The Third Circuit ruled that the plaintiff did not allege that FullStory, the other defendant, knew that he or any other user was in Pennsylvania before this alleged wiretapping app application was dispatched to his browser. The court held that FullStory was a degree removed from the alleged harm in the chain of events preceding this application's transmission to the plaintiff's browser failed to establish that FullStory, the defendant, expressly aimed its alleged wiretapping at Pennsylvania. So, for these reasons, the Third Circuit affirmed the district court's ruling dismissing the case.
Jennifer: Thanks, Nathan. The issue of standing is always also a hot topic in class action litigation. For instance, I know the Second Circuit weighed in on associational standing in a case called Do No Harm, et al. v. Pfizer Inc. this past year. So, associational standing is a legal doctrine that allows an organization to sue on behalf of its members when those members have suffered injury, even if the organization itself hasn't experienced harm. Essentially, it gives an organization the right to act as a representative of its members in court. So, in that case the defendant was Pfizer. It launched a program called the Breakthrough Fellowship Program in 2021 to increase minority representation and leadership opportunities. The program included a summer internship, two years of full-time employment, a fully paid MBA, MPH, or MS degree, additional internships, and postgraduate employment with Pfizer, the defendant. Eligibility for the program was restricted to the U.S. citizens or permanent residents who were undergraduate juniors with 3.0 GPAs and who exhibited commitment to pursuing one of those degrees, and it specifically aimed to enhance opportunities for Black/African American, Latino/Hispanic, and Native American candidates. The plaintiff in that case was an advocacy organization and filed a lawsuit claiming that the fellowship's focus on increasing diversity excluded White and Asian American applicants in violation of Title VII. The organizations sought a temporary restraining order, or TRO, to halt the selection process for 2023. The district court in that one dismissed the case, ruling that the plaintiff, the association, lacked standing because it failed to identify any harmed members by name, and also did not sufficiently demonstrate that its members were directly affected. The district court there opined also that the fellowship program did not violate the federal civil rights laws. On appeal, the Second Circuit affirmed the ruling of the district court. The plaintiff argued that the dismissal was premature because it had met the standing requirements for a preliminary injunction. The Second Circuit disagreed. It ruled that the plaintiff, who was of course pursuing claims as an association, had to name at least one injured member in order to establish standing, and therefore the dismissal was appropriate because the plaintiff failed to meet that requirement.
Nathan: Interesting. I'm interested to see how that doctrine progresses through 2025. Jen, I also wanted to address the issue of consolidation and class action litigation, since oftentimes consolidation issues surface when defendants are subject to multiple class actions and are assessing whether or not to consolidate multiple cases in one form is a strategic imperative for defendants. In Willis, et al. v. Government Employees Insurance Co., the plaintiffs filed a collective action alleging that GEICO had failed to pay overtime wages under the Fair Labor Standards Act, or the FLSA. The case was connected to two other FLSA collective actions against GEICO already pending in that court and the defendant, GEICO, had sought a dismissal of the case as duplicative since the named plaintiffs were also part of another lawsuit entitled Benvenutti v. GEICO. The court denied the motion and ultimately consolidated the actions, stating that the Benvenutti action specifically involved service representatives at GEICO's operation working out of its Macon, Georgia call center, and had alleged that GEICO failed to pay overtime under a policy that had only compensated logged in hours. The current plaintiffs, while also part of the Benvenutti case, represented employees in different positions who had similar claims regarding unpaid hours worked. The court noted that there was a substantial overlap in the parties' issues and relief sought between the two cases, emphasizing that both actions revolved around claims of unpaid overtime under these alleged timekeeping practices. And so, the court ruled that consolidating the cases would actually enhance judicial efficiency and avoid repetitive litigation to provide a more streamlined resolution of the common issues.
Jennifer: Thanks, Nathan. Agreed – centralization is key for parties when attempting to litigate the claims of several actions in a particular forum. So, let's talk about one more topic, and one that is always interesting in terms of how courts rule – sanctions, sanctions in class action litigation. Were there any interesting rulings on sanctions in 2024?
Nathan: Definitely. One interesting sanctions case was Mazurek, et al. v. Metalcraft Of Mayville, Inc. The plaintiff machinist had filed a collective action alleging that the defendant had failed to pay overtime compensation in violation of again the FLSA. The plaintiff specifically asserted that the defendant's timekeeping system allowed employees to clock in and out up to 15 minutes before and after their scheduled shifts. However, the plaintiff alleged that if employees clocked in early but didn't ultimately end up working that time, the recorded start time was adjusted to reflect the regular shift start time that was already programmed in the system. The plaintiff claimed employees were not compensated for this early time, despite them working. So, a timeclock issue. The court initially granted conditional certification of the collective action, but after discovery it subsequently decertified the collective action. The plaintiffs, following that decertification ruling, filed 16 additional cases which the court moved to consolidate or consolidated, and then the court selected two cases for summary judgment briefing. Out of those 16, the court had granted summary judgment to the defendant in all the selected cases. It ruled that even though the FLSA plaintiffs have a lower burden of proof when employer records are inaccurate. For example, the plaintiffs must still provide some proof of the hours they worked and were not compensated for that time. And so, the court noted that reconstructed work time had to be more than mere guesswork and found that plaintiffs' attempts to estimate their work hours were just insufficient. So, in a separate order, in addition to that motion for summary judgment order, the court noted that since the two selected cases shared similar issues, it might be indicative of the broader problem with all of the pending cases. The court instructed plaintiffs' counsel to then provide any specific facts or legal arguments that could differentiate the remaining cases from the two that have already been decided. In response, the plaintiffs in the remaining cases voluntarily dismissed their complaints with prejudice. Given the court's ruling and the other actions, the defendant then moved for sanctions across all 16 cases, arguing that the allegations were based on speculation rather than evidence, and that plaintiffs' counsel should have realized the cases were baseless when they filed the complaints. The district court ultimately denied the sanctions motion finding that while the evidence provided by the plaintiffs was insufficient to win at summary judgment, it still didn't rise to the level of frivolousness or baselessness to warrant sanctions. Defendants appealed, and on appeal, the Seventh Circuit affirmed the district court's ruling, agreeing that the plaintiffs' claims were based on legitimate legal arguments and methods of proof and also, of course, that the district court had not abused its discretion denying that motion for sanctions.
Jennifer: Thanks, Nathan, great insights and analysis. I know that these are only some of the manners in which procedural issues can and have impacted and shaped class action litigation. I expect the ways in which both sides utilize these procedural tools, and the manner in which the courts rule on their applications, will continue to evolve in 2025. Thanks so much for joining us today. And thank you, Nathan, for your insight and excellent analysis.
Nathan: Thank you, listeners. Thank you, Jen.
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