By Latoya R. Laing, Thomas E. Ahlering, and Erin Dougherty Foley

Seyfarth Synopsis: Following an opinion by the Illinois Supreme Court, the 9th Circuit will discuss the Illinois Biometric Privacy Act issue — whether the Act requires class plaintiffs to show that they suffered actual harm in order to seek statutory damages and injunctive relief. A California District Court certified a class of Illinois users who claim Facebook used their biometric data in a way that violated the Illinois Biometric Privacy Act. Facebook appealed the ruling arguing that the plaintiffs could not be considered “aggrieved” individuals as required by the statute.

The Case — Patel et. al. v. Facebook Inc., Case No. 18-80052, — is pending in the U. S. Court of Appeals for the Ninth Circuit. Plaintiffs allege that Facebook violated Illinois’ BIPA when it unlawfully collected and stored biometric data on Facebook users without prior notice or consent. 2018 U.S. Dist. LEXIS 30727, *4.

Facebook filed a motion to dismiss the class action, asserting that plaintiffs lacked standing under Article III. Facebook argued that the collection of biometric information without notice or consent did not result in “real-world harms.”

The District Court denied Facebook’s motion, noting that BIPA’s plain language supported a finding of standing. The court pointed to the subsections of the BIPA in so much that it “vested in Illinois residents the right to control their biometric information by requiring notice before collection and giving residents the power to say no by withholding consent.” Since the plaintiffs in this case were never offered the opportunity to withhold consent, the court rejected Facebook’s argument and found standing satisfied under the allegations. The District Court went on to certify the plaintiffs as a class; Facebook appealed the certification to the 9th circuit. The Court will issue an opinion on the appeal in the coming months.

In 2017 we blogged about an Illinois Appellate Court ruling which held that a Plaintiff must allege an actual injury to be “aggrieved” under the Act in order to seek statutory damages and injunctive relief. In that decision, the Court noted that “if the Illinois legislature intended to allow for a private cause of action for every technical violation of the Act, it could have omitted the word ‘aggrieved’ and stated that every violation was actionable.” Rosenbach v. Six Flags Entertainment Corp., 2017 IL App (2d) 170317, *4.

The decision represented a win for employers because class action suits brought under the BIPA frequently consist of cookie cutter complaints merely alleging technical violations of the BIPA (i.e., failure to obtain written consent, failure to maintain a “publicly available” biometric privacy plan, and failure to provide notice of biometric retention and destruction policies) and not an actual injury (i.e., identity theft). Plaintiffs in Rosenbach filed an appeal to the Illinois Supreme Court; Oral arguments were heard on November 20, 2018.

On September 28, 2018, the Illinois Appellate Court in the First District held that a statutory violation alone was sufficient to establish standing in BIPA claims. In Sekura v. Krishna Schaumburg Tan, Inc., 2018 IL App (1st) 180175, the Court held that “the Act does not require actual harm in addition to a violation of the Act to file suit” pursuant to “both the plain language of the statute itself and its legislative history and purpose.” In Sekura, the Plaintiff purchased a membership with L.A. Tan, which required her to scan her fingerprint.

In her complaint, the Plaintiff noted that L.A. Tan (1) never informed her of the specific purpose or length of time for which her information was stored, (2) that she was never informed of any biometric data retention policy, (3) she never signed, nor was she provided with a written release allowing L.A. Tan to collect or store her fingerprints, and (4) she never signed a release allowing L.A. Tan to disclose her biometric data with any third party.

The Court found this sufficient to satisfy the “aggrieved” person standard as required by the Act, reversing the Trial Court’s decision. Defendant Schaumburg Tan, Inc., appealed the Appellate Court’s Decision, an opinion on the case is pending.

On January 25, 2019, the Illinois Supreme Court issued a decision which reversed the Illinois Appellate Court decision in Rosenbach. The Supreme Court focused its analysis on the basic principles of statutory construction and the Illinois legislature’s intent when drafting the Act.

A person may be “aggrieved” when “a legal right is invaded by the act complained of or his pecuniary interest is directly affected by the decree or judgment.” The term “aggrieved” has been defined this way by Illinois courts long before the creation of the BIPA. The Court noted the Illinois legislature must have been “aware of that precedent and acted accordingly” when drafting the BIPA. Section 15 of the BIPA imposes a duty upon private entities with regard to the collection, retention, disclosure, and destruction of a person’s or customer’s biometric identifiers. Because section 20 of the BIPA authorizes a private right of action, — and offers no other enforcement mechanism — the Court provides that “it is clear the legislature intended for this provision to have substantial force.”

Ultimately, the Court held that “an individual need not allege some actual injury or adverse effect, beyond violation of his or her rights under the Act, in order to qualify as an ‘aggrieved’ person.”

Class action lawsuits alleging violations of BIPA have increased tremendously over the last few years. Following the Supreme Court’s decision, it is likely that the number of BIPA cases filed will continue to increase. Therefore, employers should remain vigilant and ensure that they are in compliance with the BIPA’s requirements.

Employers with questions or concerns about any of these issues or topics are encouraged to reach out to the authors, your Seyfarth attorney, or any member of the Workplace Counseling & Solutions Team.

 

By Andrew S. Boutros, Christopher RobertsonJohn R. Schleppenbach, and Craig B. Simonsen

Seyfarth Synopsis:  The United States Department of Justice recently filed a seismic motion to dismiss in a series of healthcare fraud-related cases.  In doing so, the government questioned the whistleblowers’ theory of False Claims Act liability and stressed the expense to the government of monitoring the litigation and responding to discovery.  This is the latest step the DOJ has taken to reign in potentially unwarranted FCA suits in the wake of its so-called Granston Memo.

This past Monday, December 17, 2018, the United States Department of Justice (DOJ) took the significant step of filing a motion to dismiss eleven False Claims Act (FCA) suits brought by whistleblowers alleging that patient assistance services supplied by pharmaceutical companies are unlawful kickbacks.  This concrete and decisive action by the DOJ suggests it intends to strongly implement its recent policy memo targeting weak or unfounded FCA actions.

By way of brief background, the FCA, 31 U.S.C. §§ 3729 – 3733, provides civil penalties against any “person” who, in relevant part, “knowingly presents, or causes to be presented, to an officer or employee of the United States Government . . . a false or fraudulent claim for payment or approval.”  Although the U.S. Attorney General can bring suit under the FCA, the FCA permits private persons, known as “relators,” in what is known as a “qui tam” action, to bring suit on behalf of the government and collect as a reward a percentage of the recovery.  The recovery can include civil penalties of $5,500 to $11,000 for each violation, treble damages for the funds fraudulently obtained, plus attorneys’ fees and costs.  Thus, some firms specialize in investigating and bringing FCA claims in hopes of reaping these sizable rewards.

The relators in the eleven actions the DOJ seeks to dismiss are all backed by one such specialist firm, National Health Care Analysis Group, and all raise the same theory (which was recently successful in a suit by California regulators) that drug makers are in essence paying “kickbacks” when they assist prescribing doctors with prior authorizations and nurses with information to educate patients about how to use their drugs properly.  The DOJ’s dismissal motion was strongly critical of that theory, describing the provision of patient support services related to medication as “common industry practices” that are “appropriate and beneficial to federal health care programs and their beneficiaries.”  The DOJ also told the courts that, based on its investigation “the government has concluded that the relators’ allegations lack sufficient factual and legal support.”

In addition, the DOJ’s filing stressed the “substantial costs in monitoring the litigation and responding to discovery requests” that the DOJ would incur should these FCA suits go forward. It noted the six-year period covered by the complaints and the nearly 500,000 prescriptions written by more than 10,000 physicians during this time frame.  Ultimately, it concluded the allegations of the complaints were “unlikely to yield any recovery sufficient to justify the significant costs and burdens that the government will occur if the cases proceed.”

These arguments are consistent with the positions articulated in the DOJ’s January 10, 2018 memorandum on Factors for Evaluating Dismissal Pursuant to 31 U.S.C. §  3730(c)(2)(A) (Granston Memo), which directed federal attorneys to be more aggressive about ending FCA suits that lack substantial merit.  The Granston Memo states that “over the last several years, the Department has seen record increases in qui tam actions filed with annual totals approaching or exceeding 600 new matters.  Although the number of filings has increased substantially over time, the rate of intervention has remained relatively static.  Even in non-intervened cases, the government expends significant resources in monitoring these cases and sometimes must produce discovery or otherwise participate.”

This latest DOJ motion to dismiss does not represent the DOJ’s first action to implement the Granston Memo.  Earlier this month, the DOJ asked the United States Supreme Court to dismiss an appeal in an FCA case out of the Ninth Circuit because the DOJ was no longer interested in pursuing the case.  In that matter, too, the DOJ cited “burdensome discovery which would distract from the agency’s public-health responsibilities.”

In light of these developments, it would not be surprising to see additional motions to dismiss from the DOJ in FCA cases in 2019 and beyond.  More than ever, defense-oriented FCA practitioners must vigilantly look for opportunities to invoke the Granston Memo and its policy underpinnings in FCA suits—especially ones that seek to push the FCA envelope with novel, aggressive, or questionable theories of liability.

Those with questions about any of these issues or topics are encouraged to reach out to the authors, your Seyfarth attorney, or any member of the Seyfarth Shaw’s White Collar, Internal Investigations, and False Claims Team.

By Tracy M. Billows, Benjamin J. Conley, Erin Dougherty Foley, Sara Eber Fowler, Jason Priebe, Michael Rechtin, Suzanne L. Saxman, Ryan M. Tilot, Jordan P. Vick, and Kevin A. Woolf

Seyfarth Synopsis: Please join us at our Chicago Willis Tower office on Thursday, December 6th, for breakfast along with a Seyfarth Legal Forum and Continuing Legal Education (CLE): 2018 Highlights and a Look Ahead to 2019.

About the Program

Providing our clients with a multidisciplinary overview of Legal Hot Button issues and Best Practice:  Featuring:

  • Biometric Information Privacy Act: What a long, strange year it’s been (and there’s more on the way!)
  • Legalize it: will Illinois go from medical to recreational marijuana and what would that mean to the real estate industry?
  • Affordable Care Act Update & Enforcement Activities, 401(k) Student Loan Repayment Arrangements, Socially Responsible Investments, and HIPAA Privacy & Security Audits
  • Mergers and Acquisitions: Current State of the Market and Post-Merger Integration Strategies
  • The “Cloud”…is in a building?: Data Centers are the newest, and maybe most important, type of real estate
  • Latest Developments in Pregnancy Accommodation (Illinois’ New Lactation Law and Nationwide Trends)
  • Litigation Hot Topics for 2019, including: Developments in trade secret and non-compete law; New laws affecting threshold issues such as forum selection and choice of law; Frontloaded discovery in federal court: Mandatory Initial Discovery Pilot Programs; Best practices for protecting the attorney-client privilege for in-house counsel
  • Welcome to the Future: It arrived yesterday – The intersection of Technology and Legal Services
  • Bots, bits and bytes… Artificial Intelligence and its leading role in recent legal projects

The program will feature a panel of Seyfarth Chicago subject matter experts — with an eye toward preparing for the developments in the coming year. Our overview will be targeted at highlighting issues for the General Counsel, Chief Information Officer, Chief Human Resource Officer, and other members of their teams.

The program will consist of an engaging ninety minute presentation with speakers from each of Seyfarth Chicago’s practice groups: Benefits, Corporate, Labor & Employment, Litigation, and Real Estate, as well as an exciting presentation on the use of technology in law. Then, we will offer 30 minute break-out sessions on hot topics warranting a deeper dive that companies are facing when looking at their legal compliance needs. The break-out sessions will address Privacy/Data Security, Managing in the #metoo Environment, and Blockchain/Cryptocurrency in business.

The program is on Thursday, December 6, 2018, at 8:00 a.m. – 8:30 a.m., for breakfast and registration, 8:30 a.m. – 10:00 a.m., for the panel presentations, and 10:00 a.m. – 10:30 a.m., for the breakout sessions.  Our offices are at 233 S. Wacker Drive, Suite 8000, in Chicago, IL.

While there is no cost to attend, registration is required and space is limited.  If you have any questions, please contact Fiona Carlon at fcarlon@seyfarth.com and reference this event.

Also, for those that need the credits, note that Seyfarth Shaw LLP is an approved provider of Illinois CLE credit. This seminar is approved for 1.5 hours of CLE credit CA, IL, NY, NJ and TX. CLE Credit is pending for GA and VA. HR professionals: please note that the HR Certification Institute accepts CLE credit toward recertification.

By Mark Casciari and Meredith-Anne Berger

Seyfarth Synopsis:  The 2016 elections had the effect of hardening the Red-Blue divide in the country.  A number of Blue cities in Red States are enacting ordinances that implement the progressive political agenda, which of course includes pay equity.  Be prepared to see that the Red states in which they lie may attempt to preempt local ordinances.  Red State preemption of Blue city ordinances is yet another battle that is likely to be resolved in court.

The 2016 Presidential, state and local elections across the country reinforced the Red-Blue divide simmering for years.  As a consequence, many Red State legislatures have rushed to enact their agendas before Republican dominance wanes.  In reaction, Blue cities and counties in Red States have enacted their own progressive ordinances or rules.  One area of progressive activism is pay equity — the broad idea that employers need to do more to ensure equal pay for equal work.

Examples of Blue city/Red State progressive activism are plenty. For example, a Philadelphia ordinance bans inquiries into prospective employee salary histories.  Austin, Texas has enacted protections for prospective employees with criminal histories, in an effort to augment job earnings by enhancing equality among applicants.  St. Paul, MN, and Minneapolis, MN have recently passed employee-friendly paid sick leave laws.  It is reasonable to expect more Blue city/Red State activism in the pay equity and broader discrimination context in the Trump era.

There is, however, a movement afoot to counter Blue city and county legislation enacted to further progressive goals that conflict with the political agendas of the Red States in which the Blue cities lie. For example, Arkansas’s Act 137 prohibits a county, municipality, or any other political subdivision from adopting or enforcing any ordinance or rule that creates a “protected classification or prohibits discrimination on a basis not contained in state law.”  On February 23, 2017, the state’s highest court struck down a Fayetteville anti-discrimination ordinance that sought to extend Arkansas’s anti-bullying statute to prohibit discrimination in the workplace on the basis of sexual orientation and gender identity.  The court, however, did not address whether Act 137 is constitutional.  In North Carolina, the Public Facilities Privacy and Security Act (“HB2”) prohibits any city or municipality in the state from enacting a law that would prohibit discrimination in employment or in public accommodations on the basis of gender identity or sexual orientation.

Not to be outdone, on February 8, 2017, the Pennsylvania Senate passed S.B. 241, which seeks to preempt Philadelphia’s law prohibiting salary inquiries and further prohibitions on discrimination in pay on the basis of gender.  Proposed legislation in Minnesota, H.F. 600, seeks to preempt local laws which provide employees with paid or unpaid leave time and other employment protections.  Proposed HB 577 in Texas would preclude a city or county from adopting or enforcing ban the box legislation applicable to private employers.  Proposed legislation in Arizona would permit the State Legislature to rescind funding to local governments that passed legislation which, in the Attorney General’s view, violated state law or the state constitution.

This article does not address whether state preemption laws will be upheld after court challenge, but simply exposes that a Blue city/Red State preemption issue might arise in future pay equity litigation. Readers should be aware that a Blue city or county law mandating pay equity could be preempted by Red State law, and that such a State preemption statute may itself be subject to challenge in court.  This issue might be rendered moot, of course, if the Congress of the United States enacts further national pay equity standards, and in the course of doing so preempts all related state and local law.  ERISA includes a similar preemption provision in the private sector employee benefit plan context. See 29 U.S.C. § 1144 (a) (absent specified exceptions, ERISA preempts all state law, defined to include the law of its political subdivisions, merely “relating to” an employee benefit plan covered by ERISA).  But don’t expect the current administration in Washington to be in the mood to broaden existing preemption of the authority of the States.  A more sound expectation is further litigation in the Blue city/Red State context over Blue city ordinances addressing such progressive concerns as pay equity.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Labor & Employment or Workplace Policies and Handbooks Teams.