NewsBank Hit with Class Action over Employee Data Breach
Last week, a class action was filed against NewsBank, Inc., a Florida-based news database company, related to a 2024 breach of employee personal information.
NewsBank provides a database of archived news publications utilized by libraries, higher education institutions, and other organizations. NewsBank suffered a security incident affecting its employees’ personal information between June and July 2024.
The lead plaintiff claims that, as an employee of NewsBank from January 2023 to November 2024, they were required to provide their personal information (i.e., name, date of birth, Social Security number, and financial account information) as part of their employment.
The lead plaintiff alleges they now face a heightened risk of identity theft due to the breach. The complaint states, “Plaintiff and class members must now and for years into the future closely monitor their medical and financial accounts to guard against identity theft. The risk of identity theft is not speculative or hypothetical but is impending and has materialized as there is evidence that the plaintiff’s and class members’ private information was targeted, accessed, has been misused, and disseminated on the dark web.” The lawsuit alleges claims of negligence, breach of implied contract, and breach of fiduciary duty.
Additionally, the lawsuit alleges that NewsBank failed to follow its policies, including those outlined in its website Privacy Policy, stating that NewsBank had implemented security procedures to protect personal information from unauthorized access, use, and disclosure.
The class seeks over $5 million in damages and injunctive relief, requiring NewsBank to implement enhanced security measures and provide affected individuals with lifetime identity theft protection services. The complaint alleges that “[o]nce private information is exposed, there is virtually no way to ensure that the exposed information has been fully recovered or contained against future misuse [. . . ] For this reason, plaintiff and class members will need to maintain these heightened measures for years, and possibly their entire lives, as a result of defendant’s conduct.”
The Supreme Court Gears Up to Resolve Circuit Split on Class Injury Requirements
On January 24, 2025, the Supreme Court granted certiorari in Laboratory Corp. of America v. Davis, No. 24-0304, which may result in the resolution of a long-standing circuit split on a dispute key to class certification. In its petition for writ of certiorari, petitioner Labcorp sought Supreme Court review of an issue that has divided federal circuit courts: what should courts do when a putative class contains numerous members who lack any Article III injury?
The underlying class action was filed against Labcorp, a leading clinical diagnostic laboratory, alleging that Labcorp’s self-service check-in kiosks, which are not independently accessible to blind individuals, violate the Americans with Disabilities Act (ADA) and California’s Unruh Act. The standing issue concerned how many members of the class were actually injured—Labcorp presented evidence that a significant percentage of visually-impaired patients were either unaware of or did not intend to use the self-service kiosks, preferring to check in with the front desk. Despite these standing issues, and applying existing Ninth Circuit law, the district court in the underlying action certified the class and the Ninth Circuit affirmed.
In its petition for certiorari, Labcorp identified three Circuit blocs that answer the question of absent class member injury in different ways: (1) “the Article III Circuits,” which deny class certification where the class includes members who have suffered no Article III injury; (2) “the De Minimis Circuits,” which apply Federal Rule of Civil Procedure 23(b)(3) and not Article III to reject classes where there are more than a de minimis number of uninjured members; and (3) “the Back-End Circuits” (including the Ninth Circuit), which do not deny class certification based on Article III issues with uninjured class members and only deny class certification under Rule 23(b)(3) if the class contains a large number of uninjured members.
The Supreme Court granted certiorari on the question: “Whether a federal court may certify a class action pursuant to Federal Rule of Civil Procedure 23(b)(3) when some members of the proposed class lack any Article III injury.” Notably, both the district court and Ninth Circuit’s decisions were unpublished. This suggests that the Court is likely poised to address the Circuit split and provide a definitive answer to the question whether any or many uninjured class members may be encompassed within a class in at the time of class certification. An answer restricting class certification to those who suffered harm from the alleged legal violation would be a game-changer for defendants facing lawsuits challenging practices that affect few people but present large potential exposure—such as those under the ADA and those concerning labels on consumer products that do not drive consumer purchasing decisions.
Navigating Text Messages in Discovery
In We The Protesters, Inc., et al., v. Sinyangwe et. Al, the Southern District of New York was recently called upon to resolve a discovery dispute that, according to the Magistrate Judge, “underscore[d] the importance of counsel fashioning clear and comprehensive agreements when navigating the perils and pitfalls of electronic discovery.” More specifically, the court was determining whether, without an express agreement between the parties’ counsel in place, plaintiffs could properly redact text messages based on responsiveness.
We The Protesters, Inc. Background
The litigation arose from a business divorce between the founders of nonprofit Campaign Zero. Plaintiffs’ complaint asserted 17 causes of action for inter alia, trademark infringement, unfair competition, misappropriation, and conversion. Defendants counterclaimed, accusing plaintiffs of copyright infringement, trademark infringement, cyberpiracy, and unfair competition.
In March 2024, the Hon. John P. Cronan granted in part and denied in part plaintiffs’ motion to dismiss three of defendants’ counterclaims. Discovery proceeded and the current dispute came to light after the parties exchanged productions of text messages and direct messages from a social media platform.
In drafting the operative discovery protocol, the parties agreed to collect and review all text messages in the same chain on the same day whenever a text within the chain hit on an agreed-upon search term. (Dkt. No. 64 at 1 & Ex. A). Plaintiffs understood this to mean they needed to produce only the portions of the messages from the same-day text chain that were responsive or provided context for a responsive text message.
Defendants had a different understanding, claiming the entire same-day text chain must be produced in unredacted form. Upon reviewing plaintiffs’ production, defendants objected and claimed plaintiffs’ unilateral redaction of these text messages was improper. Following an unsuccessful meet and confer, defendants filed a letter-motion seeking to compel production of unredacted copies of all text messages in the same chain that were sent or received within the same day. Plaintiffs responded, contending their redactions were proper and, in the alternative, seeking a protective order.
Discussion
Text Messages in Discovery
The court’s decision began with the observation that text messages are an increasingly common source of relevant and often critical evidence in 21st century litigation.[1] According to the court, text messages do not fit neatly into the paradigms for document discovery embodied by Rule 34 of the Federal Rules. Although amended in 2006 to acknowledge the existence of electronically stored information (ESI), i.e., email, the rules were crafted with different modes of communication in mind. Unlike emails, with text messages each text or chain cannot necessarily be viewed as a single, identifiable “document.”
And so, the issue is whether, for discovery purposes, each text message should be viewed as its own stand-alone “document”? Or is the relevant “document” the entire chain of text messages between the custodian and the other individual(s) on the chain, which could comprise hundreds or thousands of messages spanning innumerable topics?[2]
As the opinion notes, federal courts have adopted different approaches with respect to text messages. Some courts, including the Southern District of New York, suggest that a party must produce the entirety of a text message conversation that contains at least some responsive messages.[3] By contrast, other jurisdictions, like the Northern District of Ohio, hold “the producing party can unilaterally withhold portions of a text message chain that are not relevant to the case.”[4] “Still other courts have taken a middle ground.”[5]
Against this backdrop, the court noted that litigants are free to—and are well-advised to—mitigate the risk of this uncertain legal regime by agreeing on how to address text messages in discovery. Rule 29(b) specifically affords parties the flexibility to design their own, mutually agreed upon protocols for handling discovery, but “encourage[s]” counsel “to agree on less expensive and time-consuming methods to obtain information.”[6] Such “‘private ordering of civil discovery’” is “‘critical to maintaining an orderly federal system’” and “‘it is no exaggeration to say that the federal trial courts otherwise would be hopefully awash.’”[7]
The court noted a party may think twice about insisting on the most burdensome and costly method of reviewing and producing text messages for its adversary if it knows it will be subject to the same burden and cost. In general, the parties are better positioned than the court to customize a discovery protocol that suits the needs of the case given their greater familiarity with the facts, the likely significance of text message evidence, and the anticipated volume and costs of the discovery.[8]
Resolution Where Agreement is Incomplete
Here, the court noted the parties negotiated an agreement regarding the treatment of text messages. However, the agreement was incomplete. According to the court, email exchanged between the parties, along with the parties’ summary of the verbal discussions that took place show agreement that (1) discovery would include text messages; (2) specific search terms would be used to identify potentially responsive text messages; and (3) when a search term hit on a text message, counsel would review all messages in the same chain sent or received the same day, regardless of whether the text message that hit on the search term was responsive. The parties both produced responsive text messages in the form of same-day text chains, manifesting mutual assent that a same-day chain represented the appropriate unit of production. However, the parties’ agreement did not explicitly address whether, in producing those same-day text chains, texts deemed irrelevant and non-responsive would be redacted or, instead, the chains needed to be produced in their entirety. It was that failure that caused the instant dispute.
In resolving the dispute, the court viewed the issue through the prism of the parties’ prior agreement, discussions, and lack of discussions. The court indicated its task was not to determine the “right answer” to the redaction question in the abstract, but rather how to proceed with an agreement that was unknowingly incomplete. The court identified its task as akin to filling a gap in the parties’ incomplete agreement.[9]
In completing its task, the court noted the familiar principle of contract law that “contracting parties operate against the backdrop” of applicable law which, in this context, was supplied by Al Thani — the leading case in the Southern District on the issue of redactions from text messages and one authored by the presiding district judge in this litigation. Al Thani holds squarely that “parties may not unilaterally redact otherwise discoverable” information from text messages for reasons other than privilege.[10] Yet that is precisely what plaintiffs did.
The court further relied upon Judge Aaron’s decision in In re Actos Antitrust Litigation as instructive. In Actos, the issue involved “email threading,” i.e., the production of a final email chain in lieu of producing each separate constituent email. Specifically, a discovery dispute arose because defendants made productions “using email threading even though the Discovery Protocol, by its terms, did not permit such approach.”[11] Judge Aaron rejected defendants’ unilateral decision to use threading, explaining “if the issue had been raised when the parties were negotiating the Discovery Protocol, Plaintiffs may have been able to [avoid the issue], however, Plaintiffs were not provided the opportunity to negotiate how email threading might be accomplished in an acceptable manner.”[12] The court declined to impose threading on plaintiffs.
Here, the court found the Actos reasoning persuasive. If plaintiffs wanted to redact their text messages, it was incumbent upon them to negotiate an agreement to that effect or, in the absence of agreement, resolve the issue with the court before defendants made their production. Accordingly, as in Actos, the court construed the absence of a provision in the parties’ agreement allowing redaction of text messages to preclude plaintiffs from unilaterally redacting.
Considerations for Text Message Discovery
We The Protesters, Inc., is an important reminder of a few things. First, text messages and other forms of mobile instant messages are a critical form of evidence in today’s litigation. Any discovery protocol should address preservation, production, and potential redactions to that ESI. Additionally, given the cost and burden attendant to ESI, parties should leverage Rule 29(b) and fashion their own, mutually agreeable protocols for handling discovery, with an eye toward proportionality and efficiency. Finally, cooperation and communication are key in litigation. When in doubt, consider picking up the phone to opposing counsel. Here, had plaintiff confirmed its intention to redact content prior to production, much effort and cost may have been avoided.
[1] Mobile phone users in the United States sent an estimated 2 trillion SMS and MMS messages in 2021, or roughly 5.5 billion messages per day, a 25-fold increase from 2005. SMS and MMS messages represent only a subset of the universe of mobile instant messaging, or MIM, which also includes other means of messaging via mobile phones. MIM, in turn, does not account for the vast volume of instant messages, or IM, sent on computer-mediated communication platforms. The use of IM and MIM “has become an integral part of work since COVID-19.” Katrina Paerata, The Use of Workplace Instant Messaging Since COVID-19, Telematics and Informatics Reports (May 2023).
[2] After all, an email chain is typically confined to a single subject, whereas a single text chain can read more like a stream of consciousness covering countless topics.
[3] Lubrizol Corp. v. IBM Corp., (citing cases); see also Al Thani v. Hanke (noting the general rule that parties may not unilaterally redact otherwise discoverable documents for reasons other than privilege,) id. at *2; see also Vinci Brands LLC v. Coach Servs., Inc. (following Al Thani).
[4] Lubrizol at *4 (citing cases from various jurisdictions that follow this approach).
[5] Id. (citing cases from such jurisdictions).
[6] Id. 1993 Adv. Comm. Note.
[7] Brown v. Hearst Corp. (quoting 6 Moore’s Federal Practice § 26.101(1)(a)).
[8] See generally Jessica Erickson, Bespoke Discovery, 71 Vand. L. Rev. 1873, 1906 (2018) (“Parties should have more information than judges about the specific nature of their disputes and thus should be in a better position to predict the types of restrictions that will be appropriate.”).
[9] See In re World Trade Center Disaster Site Litig. (“In limited circumstances, a court may supply a missing term in a contract.”); Adler v. Payward, Inc.(“[C]ourts should supply reasonable terms to fill gaps in incomplete contracts.”) (citation omitted).
[10] Al Thani at *2.
[11] Id. at 551.
[12] Id.
Seventh Circuit Clarifies Plaintiffs’ Evidentiary Burden in FLSA Cases
In Osborn v. JAB Management Services, Inc., No. 24-1573 (January 22, 2025), the U.S. Court of Appeals for the Seventh Circuit affirmed a district court’s entry of summary judgment in favor of an employer on a former employee’s overtime claims under the Fair Labor Standards Act (FLSA), finding her testimony regarding the hours she worked insufficient to raise an issue of material fact.
The Seventh Circuit’s decision clarifies the evidence nonexempt employees must present to create a jury question as to whether they worked uncompensated overtime.
Quick Hits
The FLSA requires employers to pay nonexempt employees—including those paid on a salary basis—overtime for all hours worked beyond forty in any workweek.
The district court, applying a “just and reasonable inference” standard, found that an employee who had not tracked her time worked over forty hours and relied on her testimony of the duties performed to support her overtime claims had not presented evidence sufficient to overcome an order of summary judgment for the employer.
On appeal, the Seventh Circuit affirmed summary judgment for the employer, stating that Federal Rule of Civil Procedure 56 governs summary judgment, and the more lenient “just and reasonable inference” standard for calculating damages applies after a plaintiff meets the initial burden of establishing liability.
Background
Tara Osborn was a longtime employee of JAB Management Services, which contracts with other entities to provide prison healthcare. At the time of her termination of employment, Osborn was a technical support specialist providing on-call support regarding inmate medical records. The technical support specialist is a fully remote, salaried nonexempt position. Osborn was free to design her own schedule, although typical business hours ran from 8:00 a.m. to 5:00 p.m.
Osborn admitted she did not track any time she worked over forty hours. JAB Management did not track her overtime either. Still, Osborn claimed to have worked an average of ten hours per day and fifteen hours of overtime per week. When asked to describe her work, Osborn stated she “had to work outside of normal business hours to take support calls, respond to emails, drive to client sites, and ‘patch servers,’” including irregular weekend work.
The Seventh Circuit noted that toward the end of her employment with JAB Management, Osborn’s supervisors stated she “failed to explain what she was working on throughout the day, yet she complained about having too much to do.” As a result, some of her tasks were reassigned to her coworkers, while Osborn’s supervisors coached her to correct her performance. When Osborn’s performance did not improve, JAB Management terminated her employment.
Osborn then sued JAB Management, alleging the company had failed to pay her overtime compensation as required by the FLSA. JAB Management moved for summary judgment. The district court, applying a “just and reasonable inference” standard, granted JAB Management’s motion, holding that Osborn had failed to “prove by a just and reasonable inference the amount and extent of work she performed.” Osborn appealed to the Seventh Circuit.
The Seventh Circuit’s Analysis
The Seventh Circuit first clarified that the burden of proof at summary judgment (governed by Federal Rule of Civil Procedure 56) differs from the “just and reasonable difference” standard, stating, “The just and reasonable inference standard ‘applies to damages questions only after an employee has met the initial burden to establish liability.’”
To establish liability, an employee who claims that he or she was not compensated for overtime in violation of the FLSA must present evidence of the hours worked, which can be established through the employee’s testimony. To survive summary judgment, the employee’s evidence must place the employee’s version of events beyond the level of mere speculation or conjecture. As the Seventh Circuit noted, “While employees need not describe their schedules ‘with perfect accuracy,’ they should be able to offer ‘testimony coherently describ[ing]’ their typical workweeks.”
When pressed for details on what she did for ten hours per day, Osborn responded vaguely that she worked on “[c]ustomer issues, the database, the reports, it is very labor intensive.” While Osborn claimed to have coworkers who could testify regarding her workload, she failed to offer their sworn testimony. The court found her claim of consistently working fifteen hours of overtime per week to be inconsistent with her reports of call volume declining over time and significant changes to her duties.
Citing Sixth and Eighth Circuit decisions in support, the Seventh Circuit held, “[T]he evidence [Osborn] has produced fails to provide us with even a general sense of her typical workweek.”
“If this claim survived summary judgment,” the court continued, “then any FLSA claim in which the employee vaguely describes her schedule as having exceeded forty hours per week would reach a jury.”
Key Takeaways
JAB Management clarifies the evidentiary burden employees must meet at the summary judgment stage of proceedings when alleging failures to pay overtime compensation under the FLSA. Like other circuits, the Seventh Circuit has held that conclusory estimates about an employee’s average workweek, without more, do not permit a trier of fact to conclude an employee worked overtime. Under the court’s holding, nonexempt employees claiming unpaid overtime have a burden of producing at least some admissible evidence of their specific overtime hours worked and the duties they allegedly performed during those hours.
Thinking Like a Lawyer: Agentic AI and the New Legal Playbook
In the 20th century, mastering “thinking like a lawyer” meant developing a rigorous, precedent-driven mindset. Today, we find ourselves on the cusp of yet another evolution in legal thinking—one driven by agentic AI models that can plan, deliberate, and solve problems in ways that rival and complement human expertise.
In this article, we’ll explore how agentic reasoning powers cutting-edge AI like OpenAI’s o1 and o3, as well as DeepSeek’s R1 model. We’ll also look at a technical approach, the Mixture of Experts (MoE) architecture, that makes these models adept at “thinking” through complex legal questions. Finally, we’ll connect the dots for practicing attorneys, showing how embracing agentic AI can boost profitability, improve efficiency, and elevate legal practice in an ever-competitive marketplace.
The Business of Law Meets Agentic Reasoning
Legal practice is as much about economics as it is about jurisprudence. When Richard Susskind speaks of technology forcing lawyers to reconsider traditional business models, or when Ethan Mollick highlights the way AI can empower us with a co-inteligence, they’re tapping into the same reality: law firms are businesses first and foremost. Profit margins and client satisfaction matter, and integrating agentic AI is quickly becoming a competitive imperative.
Still, many lawyers hesitate, fearing automation will erode billable hours or overshadow human expertise. The key is to realize that agentic AI, tools that can autonomously plan, analyze, and even execute tasks, don’t aim to replace lawyers. Instead, they empower lawyers to practice at a higher level. By offloading rote tasks to AI, legal professionals gain the freedom to focus on nuanced advocacy, strategic thinking, and relationship-building.
A Quick Tour: o1, o3, and DeepSeek R1
OpenAI’s o1: Laying the Agentic Foundation
Introduced in September 2024, o1 marked a significant leap forward in AI’s reasoning capabilities. Its defining feature is its “private chain of thought,” an internal deliberation process that allows it to tackle problems step by step before generating a final output. This approach is akin to an associate who silently sketches out arguments on a legal pad before presenting a polished brief to the partner.
This internal “thinking” has proven especially useful in scientific, mathematical, and legal reasoning tasks, where superficial pattern-matching often falls short. The trade-off? Increased computational demands and slightly slower response times. But for most law firms, especially those dealing with complex litigation or regulatory analysis, accuracy often trumps speed.
OpenAI’s o3: Pushing Boundaries
Building on o1, o3 arrived in December 2024 with even stronger agentic capabilities. Designed to dedicate more deliberation time to each query, o3 consistently outperforms o1 in coding, mathematics, and scientific benchmarks. For lawyers, this improvement translates to more thorough statutory analysis, contract drafting, and fewer oversights in due diligence.
One highlight is o3’s performance on the Abstraction and Reasoning Corpus for Artificial General Intelligence (ARC-AGI). It scores nearly three times higher than o1, underscoring the leap in its ability to handle abstract reasoning, akin to spotting hidden legal issues or anticipating an opponent’s argument.
DeepSeek R1: The Open-Source Challenger
January 2025 saw the release of DeepSeek R1, an open-source model from a Chinese AI startup. With performance on key benchmarks (like the American Invitational Mathematics Examination and Codeforces) exceeding o1 but just shy of o3, DeepSeek R1 has quickly attracted viral attention. Perhaps its biggest draw is cost-effectiveness: it’s reportedly 90-95% cheaper than o1. That kind of pricing is hard to ignore, especially for smaller firms or legal tech startups that need powerful AI without breaking the bank. DeepSeek R1’s open-source license also opens the door to customization: imagine a specialized “legal edition” any firm can adapt.
The market impact has been swift: DeepSeek R1’s launch catapulted its associated app to the top of the Apple App Store and triggered a sell-off in AI tech stocks. This frenzy underscores a critical lesson: the world of AI is volatile, competitive, and global. Law firms shouldn’t pin their entire strategy on a single vendor or model; instead, they should stay agile, ready to explore whichever AI solution best fits their needs.
How Agentic Reasoning Actually Works
All these models—o1, o3, and DeepSeek R1—share a common thread: agentic reasoning. They’re built to do more than just respond; they deliberate. Picture an AI “intern” that doesn’t just copy-and-paste from a template but weighs the merits of different statutes, checks your prior briefs, and even flags contradictory language before you finalize a contract.
But how do they manage this level of autonomy under the hood? Enter the Mixture of Experts (MoE) architecture.
Mixture of Experts (MoE) Architecture
Experts: Think of each expert as a specialized “mini-model” focusing on a single domain—perhaps case law parsing, contract drafting, or statutory interpretation.
Gating Mechanism: This is the brains of the operation. Upon receiving an input (e.g., “Draft a motion to compel in a federal product liability case”), the gating system selects the subset of experts most capable of handling that task.
The process is akin to sending your question to the right department in a law firm: corporate experts for an M&A agreement, litigation experts for a discovery motion. By activating only the relevant experts for a given task, the AI remains computationally efficient, scaling easily without ballooning resource needs. This sparse activation mirrors an attorney’s own approach to problem-solving; you don’t bring in your tax partner for a maritime dispute, and you don’t put your entire legal team on every single project.
For agentic reasoning, MoE models shine because they allow the AI to break down multi-faceted tasks into manageable chunks, using the best “sub-models” for each piece. In other words, the AI can autonomously plan which mini-experts to consult, deliberate internally on their advice, and then execute a cohesive final output, much like a senior partner synthesizing input from various practice groups into one winning brief.
Practical Impacts on Legal Workflows
Research and Drafting
Lawyers spend countless hours researching regulations and precedents. With agentic AI, that time shrinks dramatically. For instance, an MoE-based system could route textual queries to the “case law expert” while simultaneously consulting a “regulatory expert.” The gating mechanism ensures each question goes to the sub-model best suited to answer it. That means more accurate, tailored research in less time.
Document Review and Due Diligence
High-stakes M&A deals or massive litigation cases involve reviewing thousands of pages of documents. Agentic AI can quickly triage which documents to flag for deeper human review, finding hidden clauses or issues that might otherwise take an associate weeks to spot. The result? Faster, cheaper due diligence that can be billed in alternative ways: flat fees, success fees, or other value-based structures, enhancing client satisfaction and firm profitability.
Strategic Advisory
Perhaps the most exciting application is strategic planning. By running different hypothetical arguments or settlement options through an agentic model, attorneys can gain insights into possible outcomes. Imagine a “simulation-expert” sub-model that compares potential trial outcomes based on past jury verdicts, local court rules, and judge profiles. While final decisions rest with the lawyer (and client), AI offers a data-driven edge in deciding whether to settle, proceed, or counter-offer.
Profitability: Beyond the Billable Hour
One of the biggest hurdles to adopting AI is the fear that automated tasks will reduce billable hours. But consider how value-based billing or flat-fee arrangements can transform the equation. If AI cuts a 10-hour research task down to 2, you can offer clients a predictable cost and still maintain or even improve your margin. Clients often prefer certainty, and they value speed if it means resolving matters sooner.
Additionally, adopting agentic AI can allow your firm to take on more cases or offer new services, like real-time compliance monitoring or rapid contract generation. Scaling your practice to handle more volume without expanding headcount can be a powerful revenue driver.
The Human Element: Lawyers as Conductors
Agentic AI models are not a substitute for the judgment, empathy, and moral responsibility that define great lawyering. Rather, think of AI as your personal ensemble of experts, each playing a specialized instrument. You remain the conductor, guiding the orchestra to create a harmonious legal argument or transaction.
If anything, the lawyer’s role becomes more vital in an AI-driven world. Your expertise ensures the AI’s recommendations make sense in the real world of courts, regulations, and human relationships. Your ethical obligations and professional standards guarantee that client confidentiality is safeguarded, conflicts of interest are managed, and justice is served.
Closing Thoughts
The real paradigm shift here comes from recognizing how AI agents, powered by a Mixture of Experts architecture, can function like a fully staffed legal team, all contained within a single system. Picture a virtual army of associates, each specialized in key practice areas, orchestrated to dynamically route tasks to the right “expert.” The result? A law firm that can harness collective knowledge at scale, ensuring top-notch work product and drastically reducing turnaround times.
Rather than replacing human talent, this approach enhances it. Lawyers can channel their energy into strategic thinking, client relationships, and creative advocacy, those tasks that define the very essence of the profession. Meanwhile, agentic AI handles heavy lifting in research, analysis, and repetitive drafting, enabling teams to serve more clients, tackle more complex matters, and ultimately become more impactful and profitable than ever before.
Far from an existential threat, these AI advancements offer us the freedom to practice law at its best, delivering deeper insights with greater efficiency. In embracing these technologies, we build a future where legal professionals can make more meaningful contributions to both their firms and the broader society they serve.
Supreme Court to Decide Key Question of Whether Rule 23(b)(3) Class May Be Certified if Some Proposed Class Members Lack any Article III Injury
On Friday, the U.S. Supreme Court granted certiorari in Laboratory Corporation of America Holdings v. Davis, No. 24-304, to decide “[w]hether a federal court may certify a class action pursuant to Federal Rule of Civil Procedure 23(b)(3) when some members of the proposed class lack any Article III injury.” This has the potential to be one of the most significant developments in class action law in several years.
The plaintiffs, who are blind, sued Labcorp under the Americans With Disabilities Act and California Unrah Civil Rights Act (Act) because its self-service kiosks were not accessible to the blind without assistance. They seek minimum statutory damages of $4,000 per violation under the Act—potentially $500 million per year. The proposed class was defined to include any legally blind person who walked into a facility that had a kiosk and was unable to use it, regardless of whether they were aware of it or desired to use it. The district court certified the class and the Ninth Circuit affirmed in an unpublished opinion with little analysis because prior Ninth Circuit decisions had held that only the named plaintiff must establish Article III standing. Here, a named plaintiff walked into the facility, inquired about a kiosk and then was assisted by an employee at the front desk. According to the petition for certiorari, many putative class members were not aware of the kiosks and used the front desk, and the plaintiffs did not identify anyone who was unable to receive services due to the kiosks.
Circuits are split on whether or what extent class members must have standing (i.e., a “concrete and particularized” “invasion of a legally protected interest” that is “actual or imminent, not conjectural or hypothetical”) at the class certification stage, or at some other stage in the case. Under Ninth Circuit precedent, it was sufficient for the named plaintiff to have sustained an injury, even if many other putative class members did not. The Second and Eighth Circuits have articulated a relatively strict approach that all class members must have standing. The First and D.C. Circuits appear to have required that a class contain no more than a “de minimus” number of proposed class members who lack standing. The Seventh Circuit has found that a class may be certified unless a “great many” class members lack standing. Finally, the Eleventh Circuit appears to have agreed with the Ninth Circuit that only a named plaintiff must have standing. I say “appears to have” because there is some debate about how to properly interpret some of these circuits’ case law, and in some circuits the cases are not entirely consistent.
This is an issue the Supreme Court was expected to decide in Tyson Foods, Inc. v. Bouaphakeo, 577 U.S. 442 (2016), but did not reach in that case.
Defendants will be hoping that the Court’s conservative majority will rein in this type of class action and require that all proposed class members have standing for a class to be certified, while the plaintiffs’ bar will be hoping the Court, if it does not affirm the Ninth Circuit, adopts more of a “middle ground” approach. Briefing is scheduled for March and April, to put the case in line for decision by the end of June. Stay tuned.
Federal Circuit Highlights the Importance of Separating Claim Construction and Infringement Analysis When Dealing with After-Arising Technology
Novartis Pharmaceuticals Corporation v. Torrent Pharma Inc., No. 23-2218 (Fed. Cir. 2025) — On January 10, 2025, the Federal Circuit reversed the district court’s opinion that claims of a Novartis patent are invalid for lack of adequate written description, but affirmed the district court’s finding that the claims were not proven invalid for lacking enablement or being obvious over the asserted prior art. The Federal Circuit emphasized that the proper analysis for enablement and written description challenges is focused on the claims and after-arising technology need not be enabled or described in the specification—even when the after-arising technology is found to infringe the claims because the issues of patentability and infringement are distinct. “It is only after the claims have been construed without reference to the accused device that the claims, as so construed, are applied to the accused device to determine infringement.”
Background
Novartis Pharmaceuticals Corporation (“Novartis”) sued multiple defendants accusing them of infringing all claims (1-4) of U.S. Patent No. 8,101,659 (“the ’659 patent”) titled “Methods of treatment and pharmaceutical composition.” The ’659 patent relates to a pharmaceutical composition comprising a combination of valsartan and sacubitril, which Novartis markets and sells as a treatment for heart failure under the brand name Entresto®.
The U.S. District Court for the District of Delaware found that although the claims of the ’659 patent were not shown to be invalid as being obvious, indefinite, nor lacking enablement, the claims were shown to be invalid for lacking a written description. The district court “construed the asserted claims [of the ’659 patent] to cover valsartan and sacubitril as a physical combination and as a complex.” After claim construction, defendants MSN Pharmaceuticals, Inc., MSN Laboratories Private Ltd., and MSN Life Sciences Private Ltd. stipulated to infringement of the as-construed claims. However, the district court found that since complexes of valsartan and sacubitril (which included the accused product) were unknown to a person of ordinary skill in the art as of the priority date of the ’659 patent (i.e., the accused product was an after-arising technology), “Novartis scientists, by definition, could not have possession of, and disclose, the subject matter of such complexes . . . and therefore, axiomatically Novartis cannot satisfy the written description requirement for such complexes.”
Novartis appealed the district court’s determination of invalidity.
Issues
The primary issues on appeal were:
Whether the claims of the ’659 patent are invalid for lack of written description?
Whether the claims of the ’659 patent are invalid for lack of enablement?
Whether the claims of the ’659 patent are invalid as being obvious?
Holdings and Reasoning
1. The claims of the ’659 patent are not invalid for lack of written description.
The Federal Circuit found that the district court clearly erred in finding that the claims of the ’659 patent are invalid for lack of a written description. Specifically, the Federal Circuit found the district court erred when it “construed [the claims] to cover complexes of valsartan and sacubitril.” And the district court’s written description analysis under this construction to be incorrect with respect to complexes of valsartan and sacubitril.
The Federal Circuit noted that the issue is whether the ’659 patent describes what is claimed (i.e., a pharmaceutical composition comprising valsartan and sacubitril administered in combination). And that the issue is not whether the ’659 patent describes complexes of valsartan and sacubitril—because the ’659 patent does not claim complexes of valsartan and sacubitril. The Federal Circuit found that by stating the claims of the ’659 patent were “construed to cover complexes of valsartan and sacubitril,” the district court “erroneously conflated the distinct issues of patentability and infringement.” The Federal Circuit explained that “claims are not construed ‘to cover’ or ‘not to cover’ the accused product. . . . It is only after the claims have been construed without reference to the accused device that the claims, as so construed, are applied to the accused device to determine infringement.” The Federal Circuit found that “the ’659 patent could not have been construed as claiming [] complexes [of valsartan and sacubitril] as a matter of law” because it was undisputed that the accused product was unknown at the time of the invention.
The Federal Circuit found that since the district court gave the disputed claim term its plain and ordinary meaning during claim construction (i.e., “wherein said [valsartan and sacubitril] are administered in combination”), the ’659 patent need only to adequately describe combinations of valsartan and sacubitril to satisfy the written description requirement.
The Federal Circuit further found that the ’659 patent “plainly described [combinations of valsartan and sacubitril] throughout the specification” and that accordingly, the claims of the ’659 patent are not invalid as lacking a written description.
2. The claims of the ’659 patent are not invalid for lack of enablement.
The Federal Circuit affirmed the district court’s ruling that the claims of the ’659 patent are not invalid for lack of enablement “for reasons similar to those that led us to reverse its written description determination: a specification must only enable the claimed invention.” The Federal Circuit found that “because the ’659 patent does not expressly claim complexes, and because the parties do not otherwise dispute that the ’659 patent enables that which it does claim . . . [the defendants] failed to show that the claims are invalid for lack of enablement.”
In affirming the district court’s ruling that the claims of the ’659 patent are not invalid for lack of enablement, the Federal Circuit agreed with the district court’s finding that “valsartan sacubitril complexes . . . are part of a ‘later-existing state of the art’ that ‘may not be properly considered in the enablement analysis.’”
3. The claims of the ’659 patent are not invalid as being obvious.
The Federal Circuit found “no clear error warranting reversal of the district court’s obviousness analysis” and thus affirmed the district court’s ruling that the claims of the ’659 patent are not invalid as being obvious. The Federal Circuit agreed that the district court’s rejection of the defendants’ two theories of obviousness: (1) that a person of ordinary skill in the art would have been motivated to modify a prior art therapy with valsartan and sacubitril to arrive at the claimed invention; and (2) that a person of ordinary skill in the art would have been motivated to individually select and combine sacubitril and valsartan from two different prior-art references to arrive at the claimed invention.
The Federal Circuit distinguished the cases defendants relied upon: Nalproprion Pharmaceuticals, Inc. v. Actavis Laboratories FL, Inc., 934 F.3d 1344 (Fed. Cir. 2019) and BTG International Ltd. v. Amneal Pharmaceuticals LLC, 923 F.3d 1063 (Fed. Cir. 2019). The Federal Circuit reasoned that in Nalproprion and Actavis, the prior art showed that the claimed drugs “were both together and individually considered promising . . . treatments at the time of the invention.” In contrast, the district court found that “there was no motivation in the relied-upon prior art to combine valsartan and sacubitril, let alone with any reasonable expectation of success.”
The Federal Circuit agreed “with the district court that [the defendants’] obviousness theories impermissibly use valsartan and sacubitril as a starting point and ‘retrace[] the path of the inventor with hindsight.’”
Listen to this post
January 2025 California Employment Law Notes
Plaintiff May Defeat Federal Question Removal With An Amendment To Complaint
Royal Canin USA v. Wullschleger, 604 U.S. ___, 2025 WL 96212 (2025)
In this non-employment-related opinion with important implications for litigation throughout the country, the United States Supreme Court held that after a defendant removes a case from state to federal court based on federal question grounds, the plaintiff may in an amended complaint delete all references to federal law and thereby deprive the federal court of supplemental jurisdiction over the remaining state-law claims, resulting in a remand back to state court. Since most plaintiffs prefer to litigate their cases in state court, this opinion will likely result in fewer successful removals to federal court by employers.
Disability Discrimination Claims Were Properly Dismissed Though Invasion Of Privacy Claims Survive
Wentworth v. Regents of the Univ. of Cal., 105 Cal. App. 5th 580 (2024)
Blake Wentworth, formerly a professor at the University of California, Berkeley, sued the University for failure to engage in the interactive process and failure to reasonably accommodate an alleged disability in violation of the Fair Employment and Housing Act (FEHA), as well as for violating the California Constitution and the Information Practices Act (the “IPA”) (Cal. Civ. Code § 1798, et seq.) by disclosing private information involving Wentworth’s medical history and the investigation of multiple student complaints that had been lodged against him. The Court of Appeal affirmed summary adjudication of the disability-related claims based on evidence that the University properly engaged in the interactive process and offered Wentworth a reasonable accommodation. As for the invasion of privacy claims, the Court held that there are triable issues of fact as to whether the University invaded Wentworth’s privacy by disclosing he had been offered a paid medical leave of absence and that 10 student complaints had been made against him and investigated by the University. The appellate court rejected Wentworth’s challenge to orders denying his motion to compel responses to discovery requests and his motion for a retrial but reversed the trial court’s order denying his motion for attorney’s fees and remanded the case for further proceedings.
Lowest Standard Of Proof Applies To Employer’s Defense Against FLSA Claims
EMD Sales, Inc. v. Carrera, 604 U.S. ___, 2025 WL 96207 (2025)
The question in this case is what standard of proof an employer must satisfy in defending against claims asserted under the federal Fair Labor Standards Act (FLSA). Several EMD sales representatives sued the company for violating the FLSA by failing to pay them overtime. EMD defended against the claims on the ground that the employees were exempt from overtime under the FLSA’s outside-sales exemption. The lower courts held that EMD needed to prove its case under the “clear-and-convincing” evidence standard, which is higher than the “preponderance-of-the-evidence” standard that is (according to the Supreme Court) the “default standard of proof in American civil litigation.” The Supreme Court reversed the lower court (specifically, the Fourth Circuit) and held that the preponderance-of-the-evidence standard does indeed apply and that the higher standard only applies when mandated by a statute, the Constitution, or in “other uncommon cases” in which the government seeks to take “unusual coercive action” against an individual. The Supreme Court’s holding is consistent with long-standing law in the Ninth Circuit. See Coast Van Lines, Inc. v. Armstrong, 167 F.2d 705 (9th Cir. 1948).
Employee Is Not Entitled To New Trial After Jury Awards Her No Emotional Distress Damages
Howell v. State Dep’t of State Hosps., 107 Cal. App. 5th 143 (2024)
After three years of litigation and a two-week trial, a Napa County jury found Ashley Howell’s former employer (the Department of State Hospitals) liable for disability discrimination and awarded her $36,751 in lost earnings and health insurance benefits but nothing for her alleged emotional distress/pain and suffering. In addition, the trial court awarded Howell $135,102 in fees and costs. The trial court denied Howell’s motion for a new trial on her claim for noneconomic (emotional distress) damages. The Court of Appeal held that the trial court had not abused its discretion by failing to grant a new trial based in part on the fact that Howell had previously been diagnosed with major depressive disorder and posttraumatic stress disorder following a sexual assault she suffered three years before she began employment with the Department. Some of the physicians who testified at trial attributed Howell’s mental distress largely to the pre-employment sexual assault and concluded that by February 2020 (less than a month after the termination) Howell “presented essentially the best [her qualified medical evaluator] had ever seen her” notwithstanding her “continued… mild to moderate PTSD.” The appellate court also held that the trial court properly struck the jury’s award for lost health insurance benefits because Howell failed to prove she suffered a loss (e.g., paid insurance premiums or out-of-pocket costs related to the loss of insurance). Finally, the appellate court affirmed the trial court’s award of $135,102 in fees and costs despite Howell’s request for $1.8 million on the ground (according to the trial court) that the fee request was “striking” and “unsupportable” and the time spent on various matters was “shocking” and “beyond all reason.” The Court of Appeal did, however, remand the case to the trial court to consider Howell’s unopposed request for prejudgment interest. Cf. Pollock v. Kelso, 2025 WL 47533 (Cal. Ct. App. 2025) (employee was properly awarded $493,577 in prevailing-party attorney’s fees after application of 1.8 multiplier).
Employer Could Not Recover Costs Under CCP § 998 In Wage/Hour Case
Chavez v. California Collision, LLC, 107 Cal. App. 5th 298 (2024)
Before trial on Samuel Zarate’s wage/hour claims, the employer (California Collision, LLC (“CCL”)) made an offer of settlement pursuant to Cal. Code Civ. Proc. § 998. After Zarate failed to recover at trial more money from CCL than it had offered before trial, the trial court awarded the company $54,473 in costs pursuant to Section 998. The Court of Appeal reversed, holding that the “to the extent they conflict, the specific one-way cost and fee shifting provisions [in favor of an employee] in Labor Code sections 1094 and 218.5 (absent a finding of bad faith [by the employee]) take precedence over the more general ones in Code of Civil Procedure sections 998 and 1032.”
Surgeon’s Whistleblower Claim Was Properly Rejected
Slone v. El Centro Reg’l Med. Ctr., 106 Cal. App. 5th 1160 (2024)
Johnathan Slone, M.D., sued his former employer (El Centro Regional Medical Center) for violation of Health & Safety Code § 1278.5 for retaliating against him after he reported his concerns about patient care. The case proceeded to a four-day bench trial after which the court found in favor of the Medical Center and against Slone. The Court of Appeal affirmed, holding that the trial court had properly concluded that the Medical Center did not discriminate or retaliate against Slone in any manner because of his “grievances, complaints, or reports” about patient care. Further, the trial court properly found no economic or noneconomic damages even assuming the Medical Center had unlawfully retaliated against Slone. The appellate court further noted that Slone’s opening appellant’s brief stated facts “almost exclusively in his favor” and “omitted material evidence favorable to [the Medical] Center that supported the judgment in its favor” contrary to the appellant’s duty to “fairly summarize all of the facts in the light most favorable to the judgment.” Finally, the Court held that “substantial evidence supports the [trial] court’s finding that [the Medical] Center did not discriminate or retaliate against Slone because of his complaints about health care safety in violation of section 1278.5.” See Winston v. County of Los Angeles, 107 Cal. App. 5th 402 (2024) (prevailing whistleblower was entitled to recover his attorney’s fees based on amendment to whistleblower statute (Cal. Lab. Code § 1102.5(j)) that became effective while the action was pending).
Employment Claims Against Religious Institution Are Barred By The First Amendment
Markel v. Union of Orthodox Jewish Congregations of Am., 124 F.5th 796 (9th Cir. 2024)
Yaakov Markel was employed by the Union of Orthodox Jewish Congregations of America (OU) as a mashgiach to supervise food preparation for kosher compliance. Markel’s relationship with OU and his supervisor, Rabbi Nachum Rabinowitz, “soured” after he did not receive a promotion and a raise that he claims he was promised. Markel resigned from his position and filed suit, alleging wage and hour violations and misrepresentation claims against OU and Rabbi Rabinowitz. The district court granted summary judgment to the defendants and the Ninth Circuit affirmed dismissal on the grounds that Markel was a “minister” within Orthodox Judaism and that OU is a religious organization. Based on the general principle of church autonomy in the First Amendment to the Constitution, the “ministerial exception” precludes the application of “laws governing the employment relationship between a religious institution and certain key employees” (citing Our Lady of Guadalupe Sch. v. Morrissey-Berru, 591 U.S. 732, 737 (2020)).
Employee Cannot Avoid Arbitration With “Headless” PAGA Claim
Leeper v. Shipt, Inc., 2024 WL 5251619 (Cal. Ct. App. 2024)
Christina Leeper entered into an independent contractor agreement with Shipt, Inc. (“Shipt”), a subsidiary of Target Corporation (“Target”), as well as an arbitration agreement that required her to arbitrate any personal/individual claims. She subsequently filed a purported “representative” lawsuit against Shipt and Target, alleging a “representative” PAGA claim – i.e., exclusively seeking penalties incurred by others (but not herself) stemming from alleged violations of the statute. Leeper opposed Shipt’s motion to compel arbitration on the ground that she had not alleged any individual claims and, therefore, her PAGA claim could not be compelled to arbitration. The trial court agreed and denied the motion to compel. However, the Court of Appeal reversed, finding that “the unambiguous language in [Labor Code] section 2699, subdivision (a), [states that] any PAGA action necessarily includes both an individual PAGA claim and a representative PAGA claim” (emphasis added). Further supporting its holding, the Court looked to the statute’s legislative history, noting that the legislature deliberately chose the word “and” after rejecting a prior version of the bill that phrased the language in the disjunctive. Accordingly, the Court directed the trial court to grant Shipt’s motion to compel arbitration and to stay any representative component of the PAGA claim pending the outcome of the arbitration. See also Huff v. Interior Specialists, Inc., 2024 WL 5231468 (Cal. Ct. App. 2024) (trial court erroneously dismissed and failed to stay representative action pending outcome of arbitration).
Non-Parties To Arbitration Agreement May Compel Arbitration Based On Equitable Estoppel
Gonzalez v. Nowhere Beverly Hills LLC, 107 Cal. App. 5th 111 (2024)
Edgar Gonzalez worked for Nowhere Santa Monica at its Erewhon market for approximately five months before filing a putative class action for wage-and-hour violations under the California Labor Code. Gonzalez filed suit against 10 Nowhere entities in response to which the 10 entities filed a motion to compel arbitration based upon an arbitration agreement between Gonzalez and Nowhere Santa Monica. The trial court granted the motion as to the Santa Monica entity but denied it as to the other entities because they were not parties to the agreement. The Court of Appeal reversed on the ground that “all of Gonzalez’s claims against [the other entities] are intimately founded in and intertwined with the employment agreement with Nowhere Santa Monica, an agreement which contains an arbitration agreement.” The Court held that the inextricable entwinement was based on Gonzalez’s joint employment theory and equitable estoppel principles. See also Trujillo v. J-M Mfg. Co., 107 Cal. App. 5th 56 (2024) (Code Civ. Proc. § 1281.98 (requiring payment of arbitration fees within 30 days) does not apply to post-dispute stipulation to arbitrate that was not drafted by the employer).
Arbitration Agreement Was Unconscionable And Thus Unenforceable
Jenkins v. Dermatology Mgmt., LLC, 107 Cal. App. 5th 633 (2024)
The employer in this case sought to compel to arbitration a putative class action that was filed by former employee Annalycia Jenkins who claimed unfair competition pursuant to Cal. Bus. & Prof. Code § 17200. The trial court denied the employer’s motion to compel because the arbitration agreement was substantially unconscionable based on a lack of mutuality (only Jenkins was required to arbitrate all potential claims); the purported shortening of the applicable statute of limitations to one year; the imposition of unreasonable restrictions on the parties’ discovery rights; and the requirement that Jenkins pay for an equal share of the arbitrator’s fees and costs. The trial court also found the agreement to be procedurally unconscionable and declined to sever the unconscionable terms because of their pervasiveness. The Court of Appeal affirmed.
Arbitrator’s Findings Barred SOX Claim Filed In Court
Hansen v. Musk, 122 F.4th 1162 (9th Cir. 2024)
Karl Hansen sued Tesla, Inc., its CEO (Elon Musk) and another entity alleging he was retaliated against for reporting “misconduct” at Tesla. The district court ordered most of Hansen’s claims to arbitration except his claim under the Sarbanes-Oxley Act (SOX), which cannot be compelled to arbitration pursuant to a predispute arbitration agreement (18 U.S.C. § 1514A(e)). Following the arbitrator’s decision in their favor, defendants filed a motion before the district court to lift the stay of proceedings and to confirm the arbitration award, which was granted. Defendants then filed motions to dismiss the entire suit (including the SOX claim), arguing that the arbitrator’s findings precluded Hansen from relitigating the issues that were key to his SOX claim. The district court granted the motion to dismiss. The Ninth Circuit affirmed the dismissal.
BANKING HEADACHES: Plaintiff Challenges Debt Collections Under TCPA ATDS Provisions
Hi Folks! We just saw an interesting complaint filed, where the plaintiff claims he revoked his consent to be contacted by a debt collector.
Generally, debt-collection-related TCPA lawsuits are at an all-time low, especially in the Ninth Circuit. However, Plaintiff Aaron Maxwell brought a complaint against First National Bank of Omaha for three different claims relating to its debt collection attempts, including a violation of the automatic telephone dialing system (“ATDS”) provisions of the TCPA. Maxwell v. First National Bank of Omaha, 2:25-cv-00652 (C.D. Cal. filed January 27, 2025). Plaintiff alleges that he revoked his consent to be contacted via a “certified notice” sent to Defendant. Id. The “certified notice” was a letter from Plaintiff’s counsel confirming that he represented Plaintiff and advising Defendant to no longer contact the Plaintiff. Id.
The de facto rule is that consumers may revoke TCPA consent through any reasonable means. New revocation rules—unimpacted by the 11th Circuit’s decision to strike down 1:1 consent requirements—are coming into effect April 11, 2025, which will codify the reasonable revocation rule into 47 C.F.R. § 64.1200, among additional changes.
It appears that a certified notice sent on Plaintiff’s behalf constitutes reasonable means through which to revoke consent.
Still, Maxwell v. First National Bank of Omaha is interesting because debt collectors have not been subject to many ATDS lawsuits in recent years, especially in the Ninth Circuit, as the Supreme Court in Facebook, Inc. v. Duguid and Ninth Circuit (subsequently) in Borden v. eFinancial, LLC have both held that an ATDS must generate random numbers—although those definitions are strangely inconsistent.
In any case, this is a TCPA lawsuit against a debt collector for violating the ATDS provisions. For debt collectors, courts within the Ninth Circuit have found that debt collection attempts are incompatible with ATDS usage because debt collectors do not generate random numbers. See McDonald v. Navy Federal Financial Group, 2023 WL 5797724 (D. Nev. Sept. 7, 2023) (finding implausible plaintiff’s claim that she was contacted by a debt collector using an ATDS).
It will be interesting to see how the court treats Plaintiff’s TCPA ATDS claim in this action. It seems that the ATDS claim should be dismissed, but courts within this circuit have gone the other way in recent years—even for debt collectors.
Supreme Court to Decide Whether Federal Courts May Certify a Class with Uninjured Class Members
On January 24, 2025, the Supreme Court granted certiorari in Lab. Corp. of Am. Holdings v. Davis, Case No. 24-304, on the question of “[w]hether a federal court may certify a class action pursuant to Federal Rule of Civil Procedure 23(b)(3) when some members of the proposed class lack any Article III injury.” In TransUnion LLC v. Ramirez, 594 U.S. 413, 431 (2021), the Supreme Court made clear that “[e]very class member must have Article III standing in order to recover individual damages,” but the Court did not answer the question of when a class member’s standing must be established and whether a class can be certified if it contains uninjured class members.
Since Transunion, the question of whether a court can even certify a class in the first place if it contains uninjured class members has divided the Circuits. Some courts have denied class certification if there are uninjured class members while other courts have found that questions of class member standing can be addressed after certification. Even the courts that have denied class certification are not in agreement, with some finding that the issue arises under Article III and others addressing the impact of uninjured class members in the context of Federal Rule of Civil Procedure 23. Those addressing the issue under Article III have generally found that Article III bars certification where the class includes any class member who lacks standing, while courts addressing the issue under Rule 23 usually find that more than a de minimis number of uninjured class members will cause individual issues to predominate over common ones. Thus, until now, whether a class could be certified with any uninjured class members—and, if so, how many class members were permitted to be uninjured for the class to still be certified—largely depended on where the case was pending. The Supreme Court is now poised to address the question of when and how class member standing must be addressed and what impact it has on class certification.
The Court has ordered an accelerated briefing schedule in the matter — the Petitioner’s brief on the merits is to be filed on or before March 5, 2025; Respondents’ brief on the merits is to be filed on or before March 31, 2025; and the reply brief is to be filed by April 21, 2025. This accelerated schedule indicates that the Court will hear and decide the case this term. We should therefore have an answer by late June/early July 2025 on whether a federal court can certify a class containing uninjured class members under Rule 23(b)(3).
We will keep you posted with further developments in the case.
Illinois Loses First Shot at Interchange Fees on State and Local Taxes
Illinois enacted a law that prohibits a credit card holder’s bank from charging or receiving interchange fees on the portions of transactions that include Illinois state or local taxes and gratuities, in effect starting July 1, 2025. IL Interchange Fee Prohibition Act (“IFPA”) 815 ILCS 151/150-1 et seq. The Illinois Bankers Association and others collectively sought relief in the federal courts to prevent the IFPA from taking effect and asserted that the IFPA is preempted by federal laws, is unconstitutional under the Supremacy Clause of the United States Constitution, and is discriminatory under the dormant Commerce Clause of the United States Constitution because it imposes a regulatory measure that “benefit[s] in-state economic interests by burdening out-of-state competitors.” Compl. ¶ 202 to 224. They won a preliminary injunction that temporarily blocks the law while the challenge proceeds. Illinois Bankers Association’s et al. v. Kwame Raoul, in his official capacity as Illinois Attorney General, No. 24 C 7307 (N. D. Ill. Dec. 20, 2024).
A preliminary injunction in any court requires, at a minimum, the court to believe that the party seeking the injunction has a reasonable likelihood of success on the merits of the actual case and will suffer irreparable harm if application of the law is not stayed while the case proceeds. This means at least two things. First, you have to be prepared for a mini-proceeding on the case before you get to the trial stage at which you would put on your full case. That is, if you cannot demonstrate that you are likely to ultimately win and you would be harmed by not halting the law early, why would the court want to stay the application of a law at an early stage of your case? Second, if you win a preliminary injunction, you are more likely to ultimately prevail.
The court found that:
the IFPA prohibits charging or receiving interchange fees on the portion of a credit card transaction that includes Illinois state or local taxes or gratuities;
the IFPA defines an interchange fee as “a fee established, charged, or received by a payment card network for the purpose of compensating the issuer for its involvement in an electronic payment transaction[;]”
under the federal National Bank Act powers, banks are authorized to engage in any activity that is “incidental to the business of banking [;]”
Office of the Comptroller of the Currency guidance makes clear that processing credit and debit card transactions is part of the business of banking;
the IFPA directly regulates credit and debit card transactions by dictating the amount that banks can charge for a transaction; and
by barring a credit card issuer from charging interchange fees on state and local taxes and gratuities, the IFPA alters a bank’s right to determine how best to structure their non-interest fee arrangements with merchants.
The banks demonstrated irreparable harm by proving that costs to make changes to their payment processing systems (the current systems do not distinguish whether the transaction is for state and local tax or gratuities) would not be recouped if the law was later struck down.
The takeaway here is that a preliminary injunction and a challenge in federal court are powerful tools that can add leverage if the case is right for using them. Often state tax challenges are prohibited in federal courts under the Tax Injunction Act, which provides that federal courts “shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.” 28 USC § 1341. However, if you can get there, make a federal case out of it!
What Does the Change in Presidential Administration Mean for Pending Mandamus Actions?
In recent years, many immigration applicants have filed mandamus actions with the federal courts, seeking them to compel U.S. Citizenship and Immigration Services (USCIS) and the Department of State (DOS) to adjudicate delayed immigration benefits applications. Invariably, when a mandamus action is brought, the defendants not only include USCIS, its director, the DOS, and its secretary, but also the U.S. attorney with jurisdiction over the application, the Department of Justice, and the attorney general. With a new presidential administration soon taking office, many mandamus plaintiffs are concerned about whether their lawsuits will be dismissed and if they will need to refile suit.
The Federal Rules of Civil Procedure 25(d) provide that when a public officer who is a party in an official capacity resigns or otherwise ceases to hold office while the application is pending, the federal court action does not cease. In fact, the officer’s successor is automatically substituted as a party to the mandamus action. Later proceedings should be in the substituted party’s name, but a change in public officer cannot adversely impact the parties’ substantial rights. Thus, those who have relied on the courts to help them get decisions on their pending immigration applications may continue pursuing this course of action. 2024 saw a continued increase in mandamus actions nationwide as USCIS and DOS struggle to meet processing time goals even where statutorily required.