By Kristina M. Launey & Minh N. Vu

Seyfarth Synopsis: Ninth Circuit overturns district court’s dismissal of website accessibility lawsuit on due process and primary jurisdiction grounds, remands case to proceed with discovery.

On January 15, 2019, the Ninth Circuit Court of Appeals issued the fifth federal appeals court ruling on the issue of website accessibility, and there is no doubt that it is a victory for plaintiffs and their lawyers.  However, there are some pro-defense nuances that are worth pointing out.

By way of background, the district court had concluded that the ADA does apply to Domino’s website and mobile app, but dismissed the lawsuit before discovery because:  (1) Holding Domino’s in violation of the ADA when there are no legal technical standards for public accommodations websites would be violation of due process; and (2) under the primary jurisdiction doctrine, courts should hold off on deciding cases where enforcement agencies with special expertise should weigh in first.

The Ninth Circuit  agreed with the district court that the ADA applies to Domino’s website and app.  In so doing, the court said that the ADA “applies to the services of a place of public accommodation, not services in a place of public accommodation.”  The Ninth Circuit did not agree with the district court on the due process point, however, finding that Domino’s has been on notice since 1996 of DOJ’s position that its website and app must provide effective communication.  (We note, however, that none of the DOJ documents cited by the court actually mention mobile apps.)  The Ninth Circuit also said the district court erred in applying the primary jurisdiction doctrine, noting that since the DOJ is not going to issue any regulations about websites and mobile apps, applying the doctrine would just “needlessly delay” the resolution of the claim, and the application of the ADA to the facts of the case “are well within the court’s competence.”  The Ninth Circuit’s rejection of these due process and primary jurisdiction arguments, which are often mounted by defendants in website accessibility cases, is not entirely surprising as many district courts have also reached the same conclusion, and the district court’s decision in this case was an outlier.

The Ninth Circuit concluded by making clear that it was not expressing any opinion about whether Domino’s website or mobile app comply with the ADA.  The court instructed the district court to proceed with discovery and then decide whether Domino’s website and app comply with the ADA’s effective communication and full and equal enjoyment mandates.

From the defense perspective, there are several useful points in the decision.

First, the Ninth Circuit reaffirmed its position that, to be covered by the ADA, a website or mobile app must have a nexus to a physical place of public accommodation. The court stated that this nexus was “critical” to its analysis in the Domino’s case where the “alleged inaccessibility of Domino’s website and app impedes access to the goods and services of its physical pizza franchises – which are places of public accommodation.”  The Ninth Circuit said in a footnote that it was not deciding whether “the ADA covers the websites or apps of a physical place of public accommodation where the inaccessibility does not impede access to the goods and services of a physical location.”

Second, the Ninth Circuit left open the possibility that a 24/7 toll-free phone line could be a way to provide access in lieu of an accessible app or website.  The court did not have to consider the question of whether a telephone hotline could be an adequate alternative to an accessible website or mobile app because the district court’s holding was not based on the phone line.  However, the Ninth Circuit said in a footnote that “the mere presence of a phone number, without discovery on its effectiveness, is insufficient to grant summary judgment in favor of Domino’s.”  This statement suggests that, with discovery on the effectiveness of the phone line, summary judgment for Domino’s could be a possibility.

Third, in response to Domino’s complaint that the DOJ has failed to provide clear direction as to what public accommodations must do to comply with the ADA with respect to their websites, the Ninth Circuit reiterated that “the ADA and its implementing regulations are intended to give public accommodations maximum flexibility in meeting the statute’s requirements.”

Fourth, the Ninth Circuit said that “due process constrains the remedies that may be imposed.”  Thus, defendants may be able to make the due process argument later in a case if a violation of the ADA is found and the court must fashion injunctive relief.

In sum, while this decision adds to the growing body of website accessibility case law that favors plaintiffs, there are some useful nuggets.  That said, we predict the number of website accessibility lawsuits in California federal courts will increase dramatically in 2019.  While this case was on appeal, plaintiffs largely opted to file their website accessibility cases in California state court but this decision clears the way for more federal filings.

 

By Robert Whitman

Seyfarth Synopsis: The Department of Labor has scrapped its 2010 Fact Sheet on internship status and adopted the more flexible and employer-friendly test devised by Second Circuit.

In a decision that surprised no one who has followed the litigation of wage hour claims by interns, the US Department of Labor has abandoned its ill-fated six-part test for intern status in for-profit companies and replaced it with a more nuanced set of factors first articulated by the Second Circuit in 2015. The move officially eliminates agency guidance that several appellate courts had explicitly rejected as inconsistent with the FLSA.

The DOL announced the move with little fanfare. In a brief statement posted on its website on January 5, it said:

On Dec. 19, 2017, the U.S. Court of Appeals for the Ninth Circuit became the fourth federal appellate court to expressly reject the U.S. Department of Labor’s six-part test for determining whether interns and students are employees under the Fair Labor Standards Act (FLSA).

The Department of Labor today clarified that going forward, the Department will conform to these appellate court rulings by using the same “primary beneficiary” test that these courts use to determine whether interns are employees under the FLSA. The Wage and Hour Division will update its enforcement policies to align with recent case law, eliminate unnecessary confusion among the regulated community, and provide the Division’s investigators with increased flexibility to holistically analyze internships on a case-by-case basis.

The DOL rolled out the six-part test in 2010 in a Fact Sheet issued by the Wage and Hour Division. The test provided that an unpaid intern at a for-profit company would be deemed an employee under the FLSA unless all six factors—requiring in essence that the internship mirror the type of instruction received in a classroom setting and that the employer “derive[] no immediate advantage from the activities of the intern”—were met. The upshot of the test was that if the company received any economic benefit from the intern’s services, the intern was an employee and therefore entitled to minimum wage, overtime, and other protections of the FLSA.

Spurred by the DOL’s guidance, plaintiffs filed a flurry of lawsuits, especially in the Southern and Eastern Districts of New York. But despite some initial success, their claims were not well received. The critical blow came in 2015 from the Second Circuit, which in Glatt v. Fox Searchlight Picture Searchlight emphatically rejected the DOL’s test, stating, “[W]e do not find it persuasive, and we will not defer to it.” Instead, it said, courts should examine the internship relationship as a whole and determine the “primary beneficiary.” It crafted its own list of seven non-exhaustive factors designed to answer that question. Other courts soon followed the Second Circuit’s lead, capped off by the Ninth Circuit’s ruling in late December.

For the new leadership at the DOL, that was the final blow. In the wake of the Ninth Circuit’s decision, the agency not only scrapped the six-factor test entirely, but adopted the seven-factor Glatt test verbatim in a new Fact Sheet.

While the DOL’s action marks the official end of the short-lived six factors, the history books will note that the Glatt decision itself was the more significant event in the brief shelf-life of internship litigation. As we have noted previously in this space, the Glatt court not only adopted a more employer-friendly test than the DOL and the plaintiffs’ bar had advocated; it also expressed grave doubts about whether lawsuits by interns would be suitable for class or collective action treatment. The DOL’s new Fact Sheet reiterates those doubts, stating, “Courts have described the ‘primary beneficiary test’ as a flexible test, and no single factor is determinative. Accordingly, whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.”

That aspect of the ruling, more than its resolution of the merits, was likely the beginning of the end for internship lawsuits. In the months and years since Glatt was decided, the number of internship lawsuits has dropped precipitously.

At this point, only the college student depicted recently in The Onion  seems to be holding out hope. But as we’ve advised many times, employers should not get complacent. Unpaid interns, no matter how willing they are to work for free, are not a substitute for paid employees and should not be treated as glorified volunteer coffee-fetchers. As the new DOL factors make clear, internship experiences still must be predominantly educational in character. If not, it will be the interns (and their lawyers) giving employers a harsh lesson in wage and hour compliance.

 

By Gerald L. Maatman, Jr., Pamela Q. Devata, Robert T. Szyba, and Ephraim J. Pierre

supremecourt-150x112Seyfarth Synopsis: In deciding Spokeo v. Robins, the U.S. Supreme Court reaffirmed that plaintiffs seeking to establish that they have standing to sue must show “an invasion of a legally protected interest” that is particularized and concrete — that is, the injury “must actually exist.” Bare procedural violations are not enough.

Today, the U.S. Supreme Court issued its long awaited decision in Spokeo, Inc. v. Robins, No. 13-1339 (U.S. 2016), which we have been watching closely for its possible dramatic implications on the future of workplace class action litigation.

In a 6 to 2 opinion authored by Justice Samuel A. Alito, Jr., the Supreme Court held that the Ninth Circuit’s injury-in-fact analysis under Article III was incomplete. According to the Supreme Court, of the two required elements of injury in fact, the Ninth Circuit addressed only “particularization,” but not “concreteness,” which requires a plaintiff to allege a “real” and not “abstract” injury. Nevertheless, the Supreme Court took no position on the correctness of the Ninth Circuit’s ultimate conclusion: whether Robins adequately alleged an injury in fact.

Based on its conclusion, the Supreme Court vacated the Ninth Circuit’s ruling and remanded for further consideration consistent with the Opinion. Justice Thomas concurred, while Justice Ginsburg (joined by Justice Sotomayor) dissented.

Given the stakes and the subject matter, the ruling is a “must read” for corporate counsel and all employers.

The Case’s Background

This ruling is likely to have substantial impact on class action litigation overall, as we have discussed in our prior posts here, here, and here.

In Spokeo, the issues focused on the Fair Credit Reporting Act (“FCRA”), which requires that consumer reporting agencies (“CRAs”) follow reasonable procedures to assure maximum possible accuracy of its consumer reports (15 U.S.C. § 1681e(b)), issue specific notices to providers and users of information (1681e(d)), and post toll-free phone numbers to allow consumers to request their consumer reports (1681b(e)).

The purported CRA in this case was Spokeo, Inc. (“Spokeo”), which operates a “people search engine” — it aggregates publicly available information about individuals from phone books, social networks, marketing surveys, real estate listings, business websites, and other sources, which it organizes into comprehensive, easy-to-read profiles. Notably, Spokeo specifically states that it “does not verify or evaluate each piece of data, and makes no warranties or guarantees about any of the information offered . . .,” and warns that the information is not to be used for any purpose addressed by the FCRA, such as determining eligibility for credit, insurance, employment, etc.

In July 2010, Plaintiff Thomas Robins filed a putative class action alleging that Spokeo violated the FCRA because it presented inaccurate information about him. He alleged that Spokeo reported that he had a greater level of education and more professional experience than he in fact had, that he was financially better off than he actually was, and that he was married (he was not) with children (he did not have any). But beyond identifying the inaccuracies, he did not allege any actual damages. Instead, he argued that Spokeo’s alleged FCRA violation was “willful” and therefore he sought statutory damages of between $100 and $1,000 for himself, as well as for each member of the purported nationwide class.

The district court dismissed the case, finding that “where no injury in fact is properly pled” a plaintiff does not have standing to sue. In February 2014, the U.S. Court of Appeals for the Ninth Circuit reversed, holding that the “violation of a statutory right is usually a sufficient injury in fact to confer standing” and that “a plaintiff can suffer a violation of the statutory right without suffering actual damages.”

In its petition for certiorari, Spokeo posed the following question to the Supreme Court: “Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.” Spokeo highlighted a circuit split, as the Fifth, Sixth, and Seventh Circuits previously lined up with the Ninth Circuit’s approach, while the Second, Third, and Fourth Circuits generally disagreed and required an actual, concrete injury.

After being granted certiorari, Spokeo argued that the Ninth Circuit’s holding was inconsistent with the Supreme Court’s precedents, the Constitution’s text and history, and principles of separation of powers. More specifically, Spokeo argued that Robin’s bare allegations of FCRA violations, without any accompanying concrete or particularized harm, were insufficient to establish an injury in fact, and thus failed to establish Article III standing.

Robins responded that the Supreme Court’s precedent established that Congress may create private rights of action to vindicate violations of statutory rights that are redressable through statutory damages.

The U.S. Solicitor General also weighed in, appearing as an amicus in support of Robins, and argued that the Supreme Court should focus on the specific alleged injury — the public dissemination of inaccurate personal information — and, specifically, the FCRA. The Government argued that the FCRA confers a legal right to avoid the dissemination of inaccurate personal information, which is sufficient to confer standing under Article III.

The Supreme Court’s Decision

Writing for the majority on the Supreme Court, Justice Alito held that Ninth Circuit failed to consider both aspects of the injury-in-fact requirement under Article III when analyzing Robin’s alleged injury, therefore its Article III standing analysis was incomplete. Slip. Op. at *8. The Supreme Court determined that to establish injury in fact under Article III, a plaintiff must show that he or she suffered “an invasion of a legally protected interest” that is both “concrete and particularized.” Slip. Op. at *7. For an injury to be “particularized,” it “must affect the plaintiff in a personal and individual way.” Id. “Concreteness,” the Supreme Court found “is quite different from particularization.” Id. at *8. A concrete injury must “actually exist” and must be “real” and not “abstract.” Id.

The Supreme Court further stated that concreteness includes both easy to recognize tangible injuries as well as intangible injuries. Id. at 8-9. The Supreme Court instructed that when considering intangible injuries, “both history and the judgment of Congress play important roles.” Id. In particular, Congress may identify intangible harms which meet Article III’s minimum requirements. Id. Nevertheless, the Supreme Court cautioned that plaintiffs do not “automatically” meet the injury-in-fact requirement where the violation of a statutory right provides a private right of action. Id. Thus “Robins could not, for example, allege a bare procedural violation divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” Id. The Supreme Court also added that the “risk of real harm” may also satisfy the concreteness requirement, where harms “may be difficult to prove or measure.” Id.

Viewing the FCRA in light of these principles, the Supreme Court recognized that while Congress “plainly sought to curb the dissemination of false information by adopting procedures designed to decrease that risk . . .[,] Robins cannot satisfy the demands of Article III by alleging a bare procedural violation.” For example, the Supreme Court noted it would be “difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm.” Id. at * 11.

Justice Thomas concurred, reviewing the historical development of the law of standing and its application to public and private rights of action, finding the standing requirement a key component to separation of powers.

Justice Ginsberg, joined by Justice Sotomayor, largely agreed with the majority, but nevertheless dissented. She departed from the majority’s reasoning on the issue of concreteness, but based on the injury alleged, not on the fact that concrete harm wasn’t required. Id. at *3 (Ginsberg, J., dissenting). Under her analysis, Justice Ginsberg would have found that the nature of Robin’s injury was sufficiently concrete because of his allegation that the misinformation caused by Spokeo “could affect his fortune in the job market.” Id. at *3-5 (Ginsberg, J., dissenting).

Implications For Employers

Spokeo can be interpreted as a compromise – with some useful language and reasoning for employers to use in future cases. While the Supreme Court avoided a broader question of Congress’s ability to create private rights of action and other weighty separation of powers issues, it announced the proper analytic framework for assessing the injury-in-fact requirement under Article III. The Supreme Court provided some good news for employers, consumer reporting agencies, and other corporate defendants, as well as potential plaintiffs with respect to class action litigation under a variety of federal statutes, including the FCRA. In particular, the Supreme Court was clear that alleged injuries must be both particular and concrete, meaning that injuries must be “real” and not “abstract.” Thus, a mere procedural violation without any connection to concrete harm cannot satisfy the injury-in-fact requirement of Article III.

However, the Supreme Court may not have shut the door on lawsuits alleging intangible injuries based on violations of statutory rights. While the Supreme Court’s opinion today may discourage some consumer, workplace, and other types of class actions seeking millions in statutory damages, potential litigants will likely have to be more creative in how they frame alleged injuries tied to violations of statutory rights.

Spokeo also transcends the employment context, as the constitutional requirement of Article III applies in all civil litigation. Plaintiffs seeking to file lawsuits in other regulated areas, such as under ERISA, the Americans with Disabilities Act, as well as a host of other statutes are likewise affected by today’s decision. Without particularized, concrete injury, federal jurisdiction is beyond the reach of plaintiffs seeking statutory damages for technical violations.

In our final installment of the blog series that previews employment cases being heard by the Supreme Court, the Zaborowski case will allow the Court to opine on the enforceability of arbitration agreements that may have questionable (or “unconscionable”) terms. Read on for more.

Once Again SCOTUS Takes on the Enforceability of Arbitration Agreements

 By Anthony Califano

On October 1, 2015, the U.S. Supreme Court agreed to hear MHN Government Services, Inc. v. Zaborowski, an appeal from a Ninth Circuit decision refusing to compel arbitration in a wage case.

The Holdings Below. Zaborowski contracted with MHN to provide counseling services to military personnel and their families.  At the beginning of their work relationship, Zaborowski signed an agreement to arbitrate claims against MHN.  That agreement contained a severability clause, which required the striking of any term in the agreement that a court deemed unenforceable while enforcing the remaining terms.  Claiming that MHN misclassified him and other consultants as “independent contractors,” rather than “employees,” Zaborowski filed suit in the Northern District of California seeking alleged overtime wages.  In response, MHN filed a motion to compel Zaborowski to arbitrate his claims.

In its ruling, the District Court held that the following terms in the arbitration agreement were unconscionable: (1) shortening the period for filing a claim; (2) giving MHN control over selection of an arbitrator; (3) awarding attorneys’ fees and costs to the prevailing or “substantially prevailing party”; (4) requiring Zaborowski to pay a $2,600 arbitration filing fee; and (5) waiving the potential recovery of punitive damages. Despite the severability clause and the “strong presumption in favor of arbitration” under the Federal Arbitration Act (“FAA”), the District Court refused to modify and enforce the arbitration agreement and instead nullified it.  The District Court reasoned that it could not fix the arbitration agreement “without being required to assume the role of contract author rather than interpreter.”  Under California state law, the District Court held that a trial court has the discretion to conclude that an arbitration agreement containing “multiple unlawful provisions” is “permeated by an unlawful purpose” and therefore unenforceable in its entirety.

The Ninth Circuit affirmed on appeal. Noting that it “may have reached a different conclusion,” the Ninth Circuit majority opinion nevertheless held that, under California law, the District Court did not abuse its discretion by refusing to sever the many unconscionable terms from the arbitration agreement and enforce the rest.

In a noteworthy dissent, Judge Gould disagreed, finding that the District Court should have severed the unconscionable terms and otherwise enforced the arbitration agreement. Relying on the Supreme Court’s 2011 decision in AT&T Mobility LLC v. Concepcion, Judge Gould opined that the FAA preempts California state law establishing that an arbitration agreement is unenforceable if it contains multiple unconscionable provisions.  In Judge Gould’s view, Concepcion created “a presumption in favor of severance” if an arbitration agreement can be enforced after severing the unconscionable terms.  To demonstrate that modification and enforcement should have occurred here, Judge Gould included in his dissent an actual redlined version of Zaborowski’s arbitration agreement, which provided a visual demonstration of the ease with which the allegedly unconscionable terms could have been stricken and the rest of the arbitration agreement enforced.

Why This Case Matters.  If the Supreme Court reverses the Ninth Circuit’s decision, companies may find it easier to enforce arbitration agreements containing provisions that are deemed unconscionable under state contract law.  A reversal of the Ninth Circuit’s decision would be consistent with Supreme Court precedent regarding the enforceability of arbitration agreements.  But, regardless of the outcome, this case is important because the Supreme Court’s decision may provide direction to trial courts across the country regarding the circumstances under which they should and should not enforce arbitration agreements.

What Employers Can Do To Be Proactive.  This case highlights to companies the importance of having arbitration agreements that can withstand judicial scrutiny if and when attacked.  Companies that are considering the implementation of arbitration agreements should do so with this in mind, and with an eye toward recent developments in this area of the law.  As for companies with existing arbitration agreements, it is never too late.  Companies can always evaluate the strengths and vulnerabilities of their arbitration agreements and, if appropriate, make changes that are not only consistent with developing law, but also business needs and goals.

Stay Tuned… This case is not yet scheduled for oral argument, but that scheduling is expected relatively soon. Keep an eye out here for follow-up blog posts containing insights from oral argument and the Supreme Court’s ultimate decision.

If you would like more information regarding this article, please contact the author or your Seyfarth attorney.