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FMG Law Blog Line

Posts Tagged ‘class action’

Arbitration Agreement Litigation Wins Continue to Fall Like Dominoes for Pizza Hut

Posted on: June 26th, 2018

By: Tim Holdsworth

Following the Supreme Court’s opinion in Epic Systems that class and collective actions waivers in arbitration agreements are enforceable, a federal court recently granted a motion to compel arbitration to one of the nation’s largest Pizza Hut franchisees in a lawsuit in Illinois.

In Collins et al. v. NPC International Inc., case number 3:17-cv-00312, in the U.S. District Court for the Southern District of Illinois, drivers from Illinois, Florida, and Missouri filed a collective action under the Fair Labor Standards Act asserting that their employer had failed to reimburse them for vehicle expenses. In May 2017, the judge stayed the franchisee’s motion to compel individual arbitration pending the Supreme Court’s ruling in Epic Systems. The franchisee renewed that motion after the Supreme Court’s ruling, and the judge granted it.

The drivers will now have to bring their claims individually against the franchisee in arbitration, likely saving the franchisee expenses and time.

Epic Systems gave credence to arbitration agreements containing class and collective action waivers, and employers using them continue to reap the benefits. If you have any questions about the issues above or want to learn more about implementing arbitration agreements, please contact me at [email protected], or any of Freeman, Mathis & Gary’s experienced labor and employment law attorneys.

Google, The Supremes & Cy Pres

Posted on: June 14th, 2018

By: Samantha Skolnick

At the end of April, the U.S. Supreme Court accepted a certiorari petition in the case Frank v. Gaos, No. 17-961, 2018 WL 324121 (U.S. Apr. 30, 2018). The Supreme Court will determine if a class-action settlement involving Google met federal law requirements when $5.3 million of the $8.5 million settlement fund was given to outside groups. The question presented: “Whether, or in what circumstances, a cy pres award of class action proceeds that provides no direct relief to class members supports class certification and comports with the requirement that a settlement binding class member must be ‘fair, reasonable, and adequate.’”

Cy pres is a doctrine where the original objective of the settlor or testator becomes impracticable, impossible and in some instances illegal to perform. Cy pres allows the Court to alter terms of the charitable trust to get as close to the original intention of the testator or settlor as to allow the trust to remain and not flounder.

The core issue in this case is whether this settlement complied with Rule 23(e)(2) which sets the requirement that proposed class action settlements be “fair, reasonable and adequate.” In certain class action situations, funds can be unclaimed when the members claims are small or the process is difficult. To prevent the unclaimed amounts from entering the defendant’s pocket, the money can be directed to other causes, charities and foundations.

Here, the class action stems from allegations that web browsers disclosed Google searches to third-party websites. Three of the named plaintiffs received $15,000 incentive awards, and the rest of the class received nothing. The cy pres award was allegedly given to organizations who promised to use the money to protect internet privacy.  The cy pres recipients included:  World Privacy Forum; Carnegie Mellon University; the Center for Information, Society and Policy at Chicago-Kent College of Law; the Berkman Center for Internet and Society at Harvard University; the Stanford Center for Internet and Society; and AARP. According to the cert petition, class members that were absent received “no relief at all in exchange for their claims—no money, no alteration of the defendant’s allegedly injurious conduct, not even coupons.”

The implications of this decision and how settlement funds are distributed particularly in class actions can be huge. Class actions span from internet privacy to self-driving cars to the on-going tobacco litigation. For now, we wait and see.

If you have any questions or would like more information, please contact Samantha Skolnick at [email protected].

High Court OKs Employers’ Use of Class Waivers

Posted on: May 23rd, 2018

By: Paul Derrick

Class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (FAA), says the U.S. Supreme Court in a much-anticipated decision.

The Supreme Court’s long-awaited decision resolves a circuit split on whether class or collective action waivers contained in employment arbitration agreements violate the National Labor Relations Act (NLRA). By a 5-4 margin, the Court ruled that, under the FAA, arbitration agreements providing for individualized proceedings, rather than class or collective actions, are enforceable.

Arbitration agreements that require employees to pursue work-related claims in arbitration, rather than in court, have long been enforced pursuant to the FAA. Six years ago, however, the National Labor Relations Board decided that employers violate the NLRA when they require employees, as a condition of employment, to agree that they will resolve workplace disputes individually pursuant to an arbitration provision containing a class or collective action waiver.

The Supreme Court’s opinion makes it clear that the Board and various courts were wrong in believing that the NLRA trumps the FAA.  It noted that that nothing in a class or collective action waiver interferes with an employee’s right to participate in a union or engage in collective bargaining.

So, what does the Court’s ruling mean for employers right now?

First, they should look at their arbitration agreements and consider modifying them to include class action waivers if they are not already included.

Second, they should consider including an arbitration agreement and class waiver provision as part of their onboarding paperwork (but remember such clauses should not be included within the text of an employee handbook).

Finally, employers should expect that there is more litigation yet to come as employees and unions angle for ways to get around the Supreme Court’s decision.  Especially in states such California, there are other avenues by which employees can still maintain class and collective actions as a means of redressing their workplace disputes.  Despite these anticipated end-run attempts, employers should rest better knowing that the Supreme Court has explicitly approved the use of class action waivers in arbitration agreements.

If you have any questions or would like more information about this or any other labor law issue, please contact Paul Derrick at [email protected].

9th Circuit Holds Inadmissible Evidence May Support Class Cert

Posted on: May 17th, 2018

By: Ted Peters

Courts around the country are split over whether admissible evidence is needed to support a class certification.  The Fifth Circuit requires it, and the Seventh and Third Circuits appear to be of the same opinion.  In contrast, the Eighth Circuit has indicated that inadmissible evidence can be considered.  On May 3, 2018, the Ninth Circuit join ranks with the Eighth Circuit when it issued an opinion indicating that certification of a class action can be supported by inadmissible evidence.

The case arises out of the district court’s decision to deny class certification to a group of nurses based, in part, on the finding that two of the named plaintiffs had not offered evidence that they were underpaid.  Their only evidence consisted of a paralegal’s analysis of time cards reflecting that hours were not properly calculated.  While perhaps not sufficiently trustworthy to be admitted at trial, the Ninth Circuit concluded that the district court prematurely rejected such evidence when ruling on whether the class could be certified.  The Court stated: “Notably, the evidence needed to prove a class’s case often lies in a defendant’s possession and may be obtained only through discovery.  Limiting class-certification-state proof to admissible evidence risks terminating actions before a putative class may gather crucial admissible evidence.”

The Court also concluded that, because there was no consideration as to whether the employer controlled the nurses after they clocked in, the district court misapplied the definition of “work” under California jurisprudence.  Lastly, the Court was critical of the finding that the law firm representing the putative class action was incapable of properly representing the class, focusing on “apparent errors by counsel with no mention of the evidence in the record demonstrating class counsel’s substantial and competent work on [the] case.”

If you have questions or would like more information, please contact Ted Peters at [email protected].

Winemakers Decan’t Warn a Consumer About Every Risk

Posted on: May 16th, 2018

A Pour Result for Plaintiffs’ Attorneys in California, but a Grape Win for Vintners

By: Robyn Flegal

In May 2018, the California Court of Appeals refused to revive a class action lawsuit claiming wines made by fifteen winemakers should contain an arsenic warning. The lawsuit was originally filed in 2015, alleging that these wines exposed consumers to arsenic in violation of California law. The panel of the California Court of Appeals held that the alcoholic beverage warning on these wines sufficiently notified customers about the potential risks associated with consuming the wine, despite the lack of a specific arsenic warning.

California’s Proposition 65—the safe drinking water and toxic enforcement act of 1986—protects the state’s drinking water sources from being contaminated with chemicals known to cause cancer, birth defects, or other reproductive harms. Prop 65 requires businesses to disclose exposures to such chemicals to Californians.

The appeals court held that the Office of Environmental Health Hazard Assessment requires companies to disclose one chemical for each health risk. Thus, because the alcoholic beverage warning alerted customers that wine could result in cancer and reproductive harm, the additional arsenic warning was unnecessary. The failure to provide a separate arsenic warning was therefore not a violation of the regulations.

Companies doing business in California should be aware of Proposition 65 and the labeling and disclosure requirements thereunder. For more information, please contact Robyn Flegal at [email protected] or any of FMG’s Commercial Litigation Professionals.