Labor & Employment Law Daily Seyfarth’s Workplace Class Action Litigation Report shows 5-year low in settlement values
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Thursday, January 10, 2019

Seyfarth’s Workplace Class Action Litigation Report shows 5-year low in settlement values

Employment litigation garnered “unprecedented attention” in 2018, according to Seyfarth Shaw’s 15th annual edition of the Workplace Class Action Litigation Report. Among other things, settlement values reached a five-year low, the report found. In its largest edition so far, Seyfarth analyzed a record number of 1,453 class action rulings on a circuit-by-circuit and state-by-state basis to capture key themes from 2018 and emerging litigation trends facing U.S. companies in 2019.

“Fueled by the Supreme Court’s key rulings this year and the ‘Me Too’ movement, employment litigation generated unprecedented attention in 2018—unlike anything we have studied or seen in our report’s 15-year history,” said Seyfarth partner and author of the report, Gerald L. Maatman, Jr. “Overall, we saw a surprisingly sharp drop in settlement values this past year. Combined with the Supreme Court’s decision to grant employers their most powerful tool in decades to limit class action exposure in the Epic Systems ruling, 2019 presents several new dynamics for employers to navigate as we continue to keep a close watch on the shifting priorities of the White House as well.”

Key 2019 trends. The report details five key employment litigation trends for corporations in 2019:

1.

SCOTUS takes center stage: As predicted in Seyfarth’s 2018 Report, the U.S. Supreme Court continued to play an unusually active role in reshaping employment law and class action dynamics during the past year with several key opinions. The Epic Systems ruling, which upheld the legality of class action waivers in mandatory arbitration agreements, has proven transformative for employers and marks the most important SCOTUS decision for employers in nearly two decades. Following the appointments of Justices Neil Gorsuch and Brett Kavanaugh, the class action playing field for employers may shift even further in 2019.

2.

Government enforcement litigation hits three-year high but settlement payouts drop sharply: Despite the transition to a more business-friendly Trump Administration, government enforcement litigation rose again to a new three-year high in 2018. The EEOC filed 199 lawsuits last year, up from 184 in 2017, but the value of the top government settlements cratered, dropping from $485.25 million in 2017 to $126.7 million in 2018.

3.

Plaintiffs’ win percentage reaches record level: For the first time in the Report’s 15-year history, the plaintiffs’ bar posted a record-high certification success rate in 2018 of 79 percent in the largest category of workplace litigation: wage & hour litigation. Employer efforts to successfully decertify these cases also dropped by 11 percent as employers won only 52 percent “second stage” decertification rulings, down from 63 percent in 2017.

4.

Settlement values collapse: After reaching an all-time record high of $2.72 billion in 2017, the monetary value of the top workplace class action settlements decreased by more than 50 percent in 2018. Settlements sank to a five-year low of $1.32 billion in 2018, experiencing a record one-year drop of $1.4 billion. Even with a better success rate in 2018, settlements shrank across the board as plaintiffs failed to monetize class action victories at the same rate as 2017.

5.

‘Me Too’ movement: This past year provided the first annual look at how the Me Too movement is gaining momentum in workplace litigation. In particular, 74 percent of the EEOC’s Title VII filings this past year targeted sex-based discrimination, up from 65 percent in 2017. Also rising were the EEOC’s 2018 sex discrimination lawsuits including claims of sexual harassment, which grew to 41 lawsuits, up from 33 in 2017.

2018 at the Supreme Court. The report, among other things, details the important 2018 Supreme Court rulings—four employment-related cases and three class action cases—that will influence complex employment-related litigation in the coming years. A rough scorecard of the decisions shows one distinct plaintiff/worker-side victory, and defense-oriented rulings in six cases.

  • Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018): Decided on May 21, 2018, this employment case involved the interpretation of mandatory 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, bi-lateral 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. In a 5-4 ruling, the Supreme Court held that class action waivers in arbitration agreements are valid. The decision is likely to have far-reaching implications for litigation of class and collective actions.
  • Cyan, Inc. v. Beaver County Employees Retirement Fund, 138 S. Ct. 1061 (2018): Decided on March 20, 2018, this class action case posed the issue of whether federal law bars state courts from hearing certain securities class actions. The case turned on interpretation of the Private Securities Litigation Reform Act of 1995 (SLUSA)—which imposes tougher standards on securities class actions brought in federal courts—and whether it mandated that state courts can no longer hear class actions based on the Securities Act of 1933. In a 9-0 decision, the Supreme Court held that SLUSA did not strip state courts of jurisdiction over class actions alleging violations of securities laws and that defendants cannot remove such lawsuits from federal court to state court. In this regard, it did not spell the end of what many have viewed 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., 138 S. Ct. 1134 (2018): Decided on April 2, 2018, in this wage & hour case the Supreme Court examined 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 Supreme Court held 5-4 that service advisors are exempt under the FLSA. The ruling is apt to have far-reaching implications on the legal tests for interpretation of statutory exemptions under the FLSA, as the broader reading of the exemption potentially could reduce the number of workers allowed to assert wage-hour claims against their employers.
  • CNH Industrial N.V. v. Reese, 138 S. Ct. 761 (2018): Decided on February 20, 2018, in this employment case, the Supreme Court held in a per curium opinion that collective bargaining agreements are to be interpreted according to ordinary principles of contract law, including the rule that a contract is not ambiguous unless it is subject to more than one reasonable interpretation. The case involved a collective bargaining agreement, which provided health care benefits under a group benefit plan to certain employees who retired under the pension plan. The agreement expired by its terms in May 2004. At that time, a class of CNH retirees and surviving spouses filed a lawsuit seeking a declaration that their health care benefits vested for life. In reversing lower court rulings that determined that the collective bargaining agreement was ambiguous and they therefore could rely on extrinsic evidence in interpreting the contract to favor the claims of the union members, the Supreme Court held that the “only reasonable interpretation of the 1998 agreement was that the health care benefits expired when the collective bargaining agreement expired in 2004.”
  • Janus v. AFSCME, 138 S. Ct. 2448 (2018): Decided on June 27, 2018, in this employment case the Supreme Court considered 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 nonmembers. In ruling 5-4, the Supreme Court held that the application of a mandatory public sector union fee requirement is a violation of the First Amendment, thereby overruling Abood. This ruling had an immediate impact on millions of workers in 22 states that do not have right-to-work laws. Since many workers are apt to cease paying union dues with the abolishment of the fair share fee payments requirement, the decision will have a significant impact on the ability of public-sector unions to conduct their business.
  • China Agritech, Inc. v. Resh, 138 S. Ct. 1800 (2018): Decided on June 11, 2018, in this class action the Supreme Court examined whether the tolling rule for class actions established in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), tolled the statute of limitations to permit a previously absent class member to bring a subsequent class action outside the applicable limitations period. American Pipe had 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. The Supreme Court interpreted American Pipe more narrowly and held that it does not permit the maintenance of a follow-on class action past the expiration of the statute of limitations. In essence, the ruling limits the tolling rule in American Pipe to apply only to subsequent individual claims.
  • Jesner v. Arab Bank, PLC, 138 S. Ct. 1386 (2018): Decided on April 24, 2018, this class action posed the issue of whether foreign-based corporations can be sued in U.S. courts for alleged violations of the Alien Tort Statute. The Supreme Court decided 5-4 that plaintiffs may not do so. The end result will be to bring a halt to class actions brought to hold foreign-based corporations responsible in U.S. courts for alleged human rights violations committed overseas.

These decisions “are sure to shape and influence workplace class action litigation in a profound manner,” according to the report.

First look at 2019. Turning to what is already in the works at the High Court for 2019, the report noted the following cases:

  • Frank v. Gaos, No. 17-961: Argued on October 31, 2018, this case concerns whether and in what circumstances a cy pres award in a class action—that supplies no direct relief to class members—nonetheless comports with the Rule 23 requirement that a settlement binding class members must be fair, reasonable, and adequate. The ultimate ruling by the Supreme Court likely will determine the legality of cy pres awards, and if approved, create guidelines for the appropriateness of cy pres awards in class action settlements.
  • Home Depot U.S.A. v. Jackson, No. 17-1471: Slated for argument January 15, 2019, this case involves the Class Action Fairness Act and the circumstances under which defendants may remove a class action to federal court where the defendants file a counterclaim. The ultimate decision likely will determine if the Supreme Court’s earlier ruling in Shamrock Oil & Gas Co. v. Sheets, 313 U.S. 100 (1941)—that a plaintiff may not remove a counterclaim against it—extends to third-party defendants bringing counter-claims.
  • Lamps Plus, Inc. v. Varela, No. 17-988: Argued on October 29, 2018, this case asks whether the Federal Arbitration Act forecloses a broad interpretation of an arbitration agreement that allows prosecution of a class arbitration based solely on general language commonly used in arbitration agreements. Given the ruling in Epic Systems in 2018, the upcoming decision in this case will be of critical significance to employers involved in arbitration of workplace disputes.
  • New Prime Inc. v. Oliveria, No. 17-340: Argued on October 29, 2018, this case concerns whether a court or an arbitrator must determine the applicability of § 1 of the FAA—which applies only to “contracts of employment”—to independent contractor agreements. The decision in this case will be important to employers seeking to use class action waivers in workplace arbitration agreements used with independent contractors.

The Supreme Court is expected to issue decisions in these cases by the end of the 2018/2019 term in June of 2019. Rulings in these cases “will have significance for employers in complying with employment discrimination laws, structuring arbitration proceedings, and defending class action litigation,” according to the report.

More about the report. Additional videos, charts and data from the Workplace Class Action Litigation Report are available here, where a copy of the report may be requested.

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