Class Action Settlement Value Soars in 2017, Law Firm Says

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By Michael Trimarchi

The value of employment-related class action settlements rose in 2017, with the top 10 settlements in employment-related categories up nearly $1 billion from 2016, a law firm said Jan. 10.

The top 10 settlements totaled $2.72 billion in 2017, Seyfarth Shaw said in its 885-page report, which analyzed 1,408 class action rulings on a circuit-by-circuit and state-by-state basis. The top 10 settlement totals were $1.75 billion in 2016, $2.48 billion in 2015, and $1.85 billion in 2014, the law firm said in its 14th annual “ Workplace Class Action Litigation Report.”

Wage-and-hour class and collective actions filed in federal courts under the Fair Labor Standards Act totaled 7,575 in 2017, down from 8,308 in 2016, the report said. The decline was the second in a row after a steady rise to 8,954 in 2015 from 6,779 cases in 2011. Although the number of class actions filed in 2017 fell from the previous year, the total was the sixth lowest since 2012. “When viewed on a continuum, the current volume of wage-and-hour cases within the pipeline in the federal courts is as large and vast as ever,” the report said.

The number of FLSA class actions filed indicates how the litigation of the cases is chosen, the report said. Employers have “a diminished appetite to invest in long-term cases that are fought for years, and where the chance of a plaintiffs’ victory is fraught with challenges either as a certification or on the merits. Hence, this reflects the various difference in success factors in bringing employment discrimination and [Employee Retirement Income Security Act] class actions, as compared to FLSA collective actions.”

Employers with operations in multiple states are susceptible to copycat class actions, the report said. A domino effect is created in such cases with court filings that challenge “corporate policies and practices in numerous jurisdictions at the same time,” it said.

“Hence, workplace class actions can adversely impact a corporation’s business operations, jeopardize or cut short the careers of senior management, and cost millions of dollars to defend,” the report said. “For these reasons, risks from workplace class actions are at the top of the list of challenges that keep business leaders up late at night.”

The Supreme Court’s 2011 ruling in Wal-Mart Stores Inc. v. Dukes (131 S. Ct. 2541) continues to have a wide-ranging effect on class actions with regard to certification, the report said. In Wal-Mart, a proposed class of women claimed that Wal-Mart violated Title VII of the 1964 Civil Rights Act by discriminating against them in pay and promotions nationwide. The high court said the employees did not present a common issue of law or fact as required for class certification under Rule 23 of the Federal Rules of Civil Procedure.

The same issue regarding certification was true of the 2013 decision by the Supreme Court in Comcast Corp. v. Behrend (133 S. Ct. 1426). The ruling interpreted Rule 23 to require that a claimant’s approach to damages showed that damages may be measured on a classwide basis.

Monetary relief in a Rule 23 context is limited, but “certification is the ‘holy grail’ in class action litigation, and certification of any type of class--even a nonmonetary injunctive relief class claim--often drives settlement decisions,” the report said.

In light of the Wal-Mart and Comcast decisions, employers were settling fewer employment-discrimination class actions than at any time over the past decade, the report said.

“The cases decided in 2017 foreshadow the direction of class action litigation in the coming year,” said Gerald L. Maatman Jr., general editor of the report and co-chairman of the class-action litigation group at Seyfarth Shaw. “One certain conclusion is that employment law class action and collective action litigation is becoming ever more sophisticated and will continue to be a source of significant financial exposure to employers well into the future,” he said.

To contact the reporter on this story: Michael Trimarchi at mtrimarchi@bloombergtax.com. To contact the editor on this story: Michael Baer at mbaer@bloombergtax.com.

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