Updates and Legal Developments - Spring 2020

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CORONAVIRUS SPREAD CREATES UNCERTAINTY FOR BUSINESSES AND THEIR COUNSEL

AS THE CORONAVIRUS CONTINUES ITS SPREAD FROM China to Europe and the United States, the World Health Organization (WHO) is calling for action. “Now it’s the time to prepare,” Dr. Mike Ryan, director of emergencies program at WHO said at a February 24 press conference. “We’re in a phase of preparedness for a potential pandemic.”

While public health officials work on a medical response, businesses and their counsel in the United States are concerned about the legal implications of the outbreak.

Employers are concerned about implementing preventive measures to protect employees—and their output. Restrictions on international travel—especially to China—and quarantine periods for those returning from abroad are among the measures being considered by employers, along with increased availability of telecommuting, where possible. The issue of employees with underlying conditions is also a concern, and counsel should be consulted about the applicability of the Americans with Disabilities Act and other statutes.

Businesses also need to consider the impact of the virus on their stock and inventory. The availability of materials and labor could be restricted, and capacity and availability of established hubs and supply networks could be limited. Counsel should prepare for the possibility that contractual obligations will not be able to be met. The question of whether a global outbreak constitutes a force majeure event is an open issue.

The spread of the virus also has implications in the area of corporate governance, including SEC disclosure requirements, which can be complicated by the uncertainties surrounding the impact of the virus on earnings. Various policies, such as cybersecurity and data privacy policies, should be reviewed if employees are permitted increased remote access because of loosening of telecommuting rules. Corporate directors and officers should consult counsel to ensure that they are aware of enhanced governance obligations resulting from the spread of the virus.

The impact of the virus on the insurance industry could also be significant. Questions remain about business interruption coverage for policyholders forced to close because of the spread of the virus, liability for directors and officers, third-party bodily injury claims stemming from negligent exposure to the virus, and other issues.

School districts, colleges and universities, state and local governments, and even professional sports organizations are also likely to face legal issues related to the outbreak, particularly if public health professionals recommend restrictions on large gatherings.

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SUPREME COURT DENIES REVIEW OF RULING ALLOWING BIPA SUIT AGAINST FACEBOOK

THE U.S. SUPREME COURT HAS DENIED A PETITION BY Facebook, Inc. for review of a ruling allowing Facebook users to proceed with claims that its use of face-scanning technology constitutes a violation of an Illinois biometric privacy law. Facebook, Inc. v. Nimesh Patel, 2020 U.S. LEXIS 538 (Jan. 21, 2020).

The justices’ Jan. 21 order let stand an August ruling by the U.S. Court of Appeals for the Ninth Circuit, Patel v. Facebook, Inc., 932 F.3d 1264 (9th Cir. 2019), finding that a proposed class of Facebook users has alleged concrete injury sufficient to establish standing to assert claims for violation of the Illinois Biometric Information Privacy Act (BIPA) (740 Ill. Comp. Stat. Ann. 14/1, et seq.)

The BIPA, enacted in 2008, requires private entities to develop and make available to the public written policies establishing a retention schedule and guidelines for destruction of biometric identifiers. Collectors of biometric data must inform subjects that the data is being collected and stored, disclose the purpose and length of time for which the information is being collected and stored, and receive written consent for collection of the information. The statute created a private cause of action for “any person aggrieved by a violation” of the Act, but the term “aggrieved” is not defined in the statute. In January 2019, the Illinois Supreme Court held that a plaintiff need not show actual harm in order to maintain a cause of action under the statute. Rosenberg v. Six Flags Entm’t Corp., 129 N.E.3d 1197 (Ill. 2019).

The plaintiffs alleged in a suit filed in the U.S. District Court for the Northern District of California that Facebook violated the BIPA through its collection, use, and storage of biometric identifiers from their photos without their consent to facilitate its deployment of technology that allows users to tag one another in photos appearing on the Facebook site. The plaintiffs moved for class certification; the district court granted the motion and denied a motion by Facebook for dismissal, rejecting Facebook’s contention that the plaintiffs failed to allege a concrete injury and therefore lack standing under Article III of the U.S. Constitution. Facebook appealed.

Affirming the lower court, the Ninth Circuit held first that the class plaintiffs have alleged a concrete harm.

“Facebook’s alleged collection, use, and storage of plaintiffs’ face templates here is the very substantive harm targeted by BIPA,” the panel said. “Because we conclude that BIPA protects the plaintiffs’ concrete privacy interests and violations of the procedures in BIPA actually harm or pose a material risk of harm to those privacy interests, the plaintiffs have alleged a concrete and particularized harm, sufficient to confer Article III standing.”

Nor did the lower court err in certifying the plaintiff class, the Ninth Circuit panel said, rejecting Facebook’s contention that the Illinois legislature did not intend that the BIPA have extraterritorial effect and that therefore, class certification is improper. The issue of extraterritoriality can be addressed on a class-wide basis at the outset, the panel said, and if future circumstances “lead to the conclusion that extraterritoriality must be evaluated on an individual basis, the district court can decertify the class.”

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SUPREME COURT TAKES ON ISSUE OF CAUSATION IN AGE DISCRIMINATION CASES

AFTER HEARING ARGUMENTS IN A CASE ALLEGING AGE discrimination under the federal Age Discrimination in Employment Act (ADEA), the U.S. Supreme Court has taken the relatively rare step of ordering additional briefing by the parties on the issue of causation. Babb v. Wilkie, 139 S. Ct. 2775 (2019).

Plaintiff Noris Babb, a clinical pharmacist at the U.S. Veterans Administration (VA), alleged that she was denied training and transfer opportunities, was stripped of a special designation, and received reduced holiday pay on the basis of her age and gender. She filed suit in the U.S. District Court for the Southern District of Florida, asserting causes of action under the ADEA and Title VII of the Civil Rights Act of 1964.

The trial court entered summary judgment for the VA. Babb v. McDonald, 2016 U.S. Dist. LEXIS 111895 (M.D. Fla. Aug. 23, 2016). On appeal, the U.S. Court of Appeals for the Eleventh Circuit affirmed as to all but one Title VII claim, citing its own precedent in finding that Babb failed to show that but for her age and gender, the discrimination would not have occurred. Babb v. Sec’y, Dep’t of Veterans Affairs, 743 Fed. Appx. 280 (11th Cir. 2018).

The Supreme Court granted Babb’s petition for review in June 2019, limiting its consideration to whether a plaintiff seeking relief under the ADEA must prove that age was a but-for cause of the challenged action. After hearing arguments, the justices gave the parties six days to brief the question of what, if any, relief a federal employee can obtain under laws other than the ADEA in the absence of but-for causation.

In her supplemental brief, Babb told the court that to adopt the but-for causation test “would undermine federal-sector protections against age discrimination, leaving victims without prospective judicial or administrative relief unless they can prove that the outcome of the challenged personnel action would necessarily have been different but for their age.”

In its brief, the VA cited “a web of mechanisms for identifying and redressing age-related policies, practices, actions, or statements, regardless of whether a particular federal employee or applicant can show a but-for relationship between that conduct and an adverse personnel action.”

The Supreme Court is expected to issue a decision in the case by the end of its current term.

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SUPREME COURT AGREES TO REVIEW ACA CONTRACEPTION EXEMPTION ISSUE

THE U.S. SUPREME COURT WILL HEAR ARGUMENTS LATER this year on the constitutionality of proposed regulations that would expand the category of employers who can refuse to offer contraceptive coverage to employees under the Affordable Care Act (ACA) on religious or moral grounds. Little Sisters of the Poor Saints Peter and Paul Home v. Pennsylvania, 205 L. Ed. 2d 519 (Jan. 17, 2020) and Trump v. Pennsylvania, 205 L. Ed. 2d 519 (Jan. 17, 2020).

The justices granted petitions by the Little Sisters of the Poor and the Trump Administration for review of a ruling by the U.S. Court of Appeals for the Third Circuit upholding a nationwide injunction against enforcement of the two regulations. Pennsylvania v. President United States, 930 F.3d 453 (3rd Cir. 2019).

The regulations, issued by the U.S. Departments of Health and Human Services, Labor, and the Treasury, and finalized in November 2018, stem from an executive order issued in May 2017 by President Donald J. Trump directing federal agencies to consider issuing amended regulations to address “conscience-based objections” to a provision in the Patient Protection and Affordable Care Act (ACA) (Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010)) requiring employers to provide no-cost birth control coverage to employees. “Promoting Free Speech and Religious Liberty,” Exec. Order No. 13798, 82 Fed. Reg. 21,675 (May 4, 2017).

The Commonwealth of Pennsylvania and the State of New Jersey challenged the rules and moved for preliminary injunctive relief. U.S. Judge Wendy Beetlestone of the Eastern District of Pennsylvania granted the motion. On appeal, the Third Circuit affirmed.

In a similar case, the U.S. Court of Appeals for the Ninth Circuit in October upheld a January 2019 ruling by a federal judge in Oakland, California, enjoining enforcement of the same regulations in 13 plaintiff states (California, Connecticut, Delaware, Hawaii, Illinois, Maryland, Minnesota, New York, North Carolina, Rhode Island, Vermont, Virginia, and Washington) and the District of Columbia. California v. U.S. HHS, 941 F.3d 410 (9th Cir. 2019).

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