In another blow to plaintiffs suing under New Jersey’s Truth-in-Consumer Contract, Warranty, and Notice Act (“TCCWNA”), the United States District Court for the District of New Jersey in Martinez-Santiago v. Public Storage, 2019 WL 1418118 (D.N.J. March 29, 2019), decertified a class of 160,000 members alleging that lease agreements with the Defendant Public Storage violated TCCWNA. Following the New Jersey Supreme Court’s decision last year finding that a consumer who is a party to a contract that fails to comply with New Jersey law, but who does not suffer any adverse consequences from the noncompliance, has failed to state a TCCWNA claim, United States District Judge Jerome Simandle decertified the class. The decision was based on an analysis of the Rule 23 requirements, where the Court held that the requirements of “typicality,” “predominance,” and “numerosity” under Rule 23 could not be met.
With respect to the typicality requirement, the Court found that the named plaintiff was one of “relatively few” customers who actually suffered an adverse consequence due to the form lease contract entered into with Public Storage. Since the vast majority of class members did not suffer an adverse consequence, the claims of the named plaintiff were not typical of the class members, and therefore the typicality requirement was not met.
The Court also found that the “predominance” requirement could not be met because questions of fact common to class members no longer predominated over questions affecting only individual claims. Finally, because discovery revealed that only 29 class members might be able to assert a viable claim under TCCWNA, the “numerosity” requirement of Rule 23 likewise could not be met.
The decision of the Court in Martinez-Santiago left only the named plaintiff with potentially viable claims, thereby continuing to chip away at the prospect of successful class action suits against corporate entities, and large attorneys’ fee awards to class action counsel, in suits where the class cannot meet the requirements of Federal Rule of Civil Procedure 23.
Earlier this month, a three-judge panel for the Appellate Division of the Superior Court of New Jersey affirmed a 2018 trial court decision granting summary judgment against a self-described obese former bus driver for defendant Community Bus Lines, Inc. (“Community”), and dismissing the driver’s claim for violation of the New Jersey Law Against Discrimination (“NJ LAD”). In doing so, the appellate court held that “obesity alone is not protected under the NJ LAD as a disability unless it has an underlying medical cause.” Because plaintiff, in part, failed to present any direct or circumstantial evidence that defendants perceived the driver as disabled due to a medical condition that caused him to be overweight, the appellate court found his claim was without merit.
The plaintiff in this matter worked as a bus driver for Community for 10 years during which time he weighed between 500 and 600 pounds. To maintain his status as an active bus driver, he was required to undergo a medical examination every two years and obtain medical certification verifying his fitness to drive. In 2015, a doctor certified by the United States Department of Transportation (“DOT”) conducted plaintiff’s examination and temporarily disqualified him from driving a bus pending further testing. The plaintiff never followed through to complete the required additional testing and was therefore placed “out of service.” Despite his failure to schedule the follow-up testing, plaintiff’s supervisor referred him for a second opinion to another doctor, who confirmed the prior conclusions and found that further testing was needed before a medical certification could be issued. Neither doctor who examined plaintiff determined that he was disabled but only that further testing was required before he could be certified. Plaintiff again did not pursue the required testing and remained on leave.
Trial Court’s Decision and Appeal
Plaintiff ultimately sued Community and other individual defendants. The trial court issued a comprehensive decision rejecting plaintiff’s claim that his obesity constituted a disability under the NJ LAD, or that defendants had subjected him to a hostile work environment based upon his weight. In so doing, the judge concluded that “there is no protected class under the NJ LAD based solely on one’s weight” and that a plaintiff’s obesity will only constitute a disability under the NJ LAD if the plaintiff demonstrates that this condition is “caused by bodily injury, birth defect[,] or illness.” Plaintiff did not establish that his condition was caused by bodily injury, birth defect, or illness. The judge also found that defendants never perceived plaintiff as “disabled.” Instead, according to the trial court’s opinion, the evidence showed that Community presented plaintiff with several awards, that plaintiff drove a regular route, and that Community attempted to assist him in fulfilling his DOT medical requirements by arranging for him to see another doctor for a second opinion after he failed his first examination. The trial judge also found no merit to plaintiff’s assertion that he was subject to a hostile work environment given that plaintiff himself made jokes and comments regarding his weight and size and that any comments made by his co-workers were not severe or pervasive enough to alter any of the conditions of plaintiff’s employment.
On appeal, the Appellate Division affirmed the trial court’s decision, finding that plaintiff failed to make the threshold showing that he had a disease or condition recognized as a disability under the NJ LAD because plaintiff’s “obesity was not a disability caused by a bodily injury, birth defect, or illness.” The panel further found that plaintiff failed to establish that defendants viewed him as anything other than obese (which in and of itself is not a protected class under the NJ LAD) or that defendants otherwise perceived him as being disabled.
This Decision Is Not without Limit
Fortunately for the employer in this case, plaintiff had failed to produce any direct or circumstantial evidence, through expert medical testimony or otherwise, that defendants perceived him to be disabled due to a medical condition that caused him to be overweight. Indeed, plaintiff testified that he had never been diagnosed with any medical condition that caused him to gain weight or been prescribed a medication which caused weight gain. It was only until after plaintiff filed his lawsuit and submitted to an independent medical examination that he was diagnosed with conditions that might have helped demonstrate his claims.
While the decision is clear that obesity alone is not a disability under New Jersey state law, had the plaintiff introduced direct or circumstantial evidence that his obesity had an underlying medical basis, the result likely would have been much different for the employer. As such, employers should be aware that this state law decision is not without its limits and that an employer’s ability to obtain a similar result on summary judgment will be highly dependent on the facts of the case. It is also important for employers to remember that this is a state law decision, and that under the Americans with Disabilities Act, courts have found that morbid obesity qualifies as a disability. Further, while New Jersey often tries to be California’s little sister in terms of employee-friendliness, this decision seems to be a departure from that trend.
Overall, this decision serves as an important reminder that what constitutes a disability—whether under state or federal law—is ever evolving and employers should take caution when making employment decisions concerning obese employees.
In a case alleging violations of federal securities laws by Cigna Corporation and certain of its officers, the Second Circuit Court of Appeals affirmed the dismissal of the complaint on the basis that the statements made by the defendants were simple, generic assertions about its regulatory policies and procedures upon which no reasonable investor would reasonably rely, and were therefore not materially misleading. Singh v. Cigna Corp., No. 17-3484-cv, (2d Cir. Mar. 5, 2019). Following Cigna’s acquisition of HealthSpring, a regional Medicare insurer, Cigna issued several public statements, including 10-K filings, concerning its commitment to regulatory compliance given the significant regulatory responsibilities involved in Medicare coverage. In its 2013 Form 10-K filed on February 27, 2014, Cigna said it had “established policies and procedures to comply with applicable requirements,” and that it “expect[ed] to continue to allocate significant resources” to compliance efforts. Id. at *5. In December 2014, Cigna published a pamphlet titled “Code of Ethics and Principles of Conduct,” which affirmed the importance of compliance and integrity:
[I]t’s important for every employee. . .to handle, maintain, and report on [Cigna’s financial] information in compliance with all laws and regulations. . .
[W]e have a responsibility to act with integrity in all we do, including any and all dealings with government officials.
Id. at **4-5. In its 2014 Form 10-K, Cigna stated that it would “continue to allocate significant resources” to compliance. Id. at *6. The 10-K included a discussion of the difficulty of compliance in the regulatory environment given the “uncertainty surrounding legislation and implementation of national healthcare reform.” Id.
A 2015 audit of Cigna’s Medicare operations by the Centers for Medicare and Medicaid Services (“CMS”) revealed numerous regulatory violations. Cigna filed a Form 8-K disclosing the CMS audit conclusions and accompanying sanctions. Within several days, Cigna’s stock price fell substantially.
A Cigna investor, the plaintiff Patel, filed a putative class action alleging securities fraud violations under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. The United States District Court for the District of Connecticut dismissed the complaint, the amended complaint, and a second amended complaint, due to plaintiff’s failure to allege sufficiently the elements of a material, false statement, as well as scienter.
On appeal, the Second Circuit affirmed, finding that the statements at issue were not material. The Second Circuit held that no reasonable stockholder would consider the statements “important in deciding whether to buy or sell shares of stock.” Id. at **10-11 (citing Operating Local 649 Annuity Tr. Fund v. Smith Barney Fund Mgmt. LLC, 595 F. 3d 86, 92-93 (2d Cir. 2010)). The statements were therefore not material misstatements. The Second Circuit noted that to be actionable under Section 10(b) of the 1934 Act and under Rule 10b-5, the statements “must, in the view of a reasonable investor, have ‘significantly altered the ‘total mix’ of information made available’,” and that the statement “must also be ‘mislead[ing] evaluated not only by ‘literal truth,’ but by ‘context and manner of presentation’.” Id. at *10.
As for the statements in the Cigna Code of Ethics, the Second Circuit found that they were a “textbook example of ‘puffery’”—i.e., “too general to cause a reasonable investor to rely upon them.” Id. at *11 (citing City of Pontiac Policemen’s & Firemen’s Ret. Sys. v. UBS AG, 752 F.3d 173, 183 (2d Cir. 2014)). With respect to the 10-K statements, the Second Circuit likewise found that no reasonable investor would rely on the statements as “representations of satisfactory compliance.” Id. at **11-12. It concluded that “[b]ecause the challenged statements are tentative and generic, and because they emphasize the complex, evolving regulatory environment that Cigna faced . . . Plaintiffs have failed to plausibly allege that a reasonable investor would view these statements as having significantly altered the total mix of information made available.” Id. at *14.
Although this decision evaluated Cigna’s statements in the context of securities fraud allegations, it highlights the distinction between statements that are generic and not materially misleading, and statements which constitute actionable fraud. Allegations of securities fraud based on generic statements—like Cigna’s statements here—only serve to further dilute the information companies provide in their public statements. The over-litigation of securities fraud claims thus leads to less disclosure to investors—which is exactly the opposite effect the securities laws were designed to achieve.
The bill (NJ A3975), revamping the New Jersey Family Leave Act (“NJFLA”) and Family Leave Insurance (“FLI”), was passed in both houses of the New Jersey Legislature on January 31, 2019. Governor Murphy is expected to sign the bill today, with some changes effective immediately.
As a reminder, NJFLA provides job-protected leave for workers at large employers to care for family members. On the other hand, FLI provides wage-replacement benefits to workers during a leave used to care for a family member. FLI applies regardless of the size of the employer and is funded by employee payroll deductions.
Summary of the most significant changes:
Definition of family member expanded from children, parents, spouses, and civil union partners to also include siblings, grandparents, grandchildren, parents-in-law, domestic partners, “any other individual related by blood to the employee,” and even close friends who are “the equivalent of” family.
Leave can be taken to assist a family member who is a victim of domestic or sexual violence.
Job protections expanded to cover workers at employers with at least 30 employees, rather than the current minimum of 50 employees.
Effective June 30, 2019.
Paid Time Off
Consecutive leave doubled from 6 weeks to 12 weeks.
Intermittent leave increased from 42 days to 56 days.
Effective July 1, 2020.
Wage replacement levels increased from up to 66.7 percent to up to 85 percent of a worker’s average weekly earnings.
Cap on wage replacement amount estimated to increase from $650 to $860 per week.
Effective July 1, 2020.
As violations of these laws carry significant penalties in New Jersey, you should contact a member of Blank Rome’s labor & employment practice group if you have any questions about compliance with New Jersey’s leave laws or any other leave issues.
As we reported last week in Blank Rome Workplace, New Jersey employers need to get ready for minimum wage increasing to $15 per hour. The bill, which passed on party lines last Thursday, was signed into law today by Governor Murphy. It provides the following timetable to raise the minimum wage:
$15 per hour by 2024, for most minimum wage earners;
$15 per hour by 2026, for minimum wage earners at seasonal businesses and small businesses;
$12.50 per hour by 2024, for agricultural minimum wage earners; and
$5.13 per hour by 2022, for tipped earners.
Of immediate attention to employers are the first increases on the road to $15:
Regular Schedule—Applicable to minimum wage workers unless an exception applies
Currently: $8.85 per hour
July 1, 2019: $10.00 per hour
January 1, 2020: $11.00 per hour
Seasonal Workers and Small Business Schedule—Applicable to seasonal workers (employed between May 1 and September 30) and employees at small businesses (business with five or fewer employees)
Currently: $8.85 per hour
January 1, 2020: $10.30 per hour
Agricultural Schedule—Applicable to employees engaged on a piece-rate or regular hourly rate basis to labor on a farm
Currently: $8.85 per hour
January 1, 2020: $10.30 per hour
Tipped Schedule—Applicable to employees who customarily and regularly receive gratuities or tips
Currently: $2.13 per hour
July 1, 2019: $2.63 per hour
January 1, 2020: $3.13 per hour
As minimum wage violations carry significant penalties in New Jersey, you should contact a member of Blank Rome’s labor & employment practice group if you have any questions about compliance with New Jersey’s minimum wage increase or any other wage and hour issues.
On January 10, 2018, the New Jersey Supreme Court decided a case involving the enforceability of mandatory arbitration agreements in consumer contracts. In Kernahan v. Home Warranty Administrator of Florida, the Court held that a mandatory arbitration agreement in a home warranty contract was unenforceable because it lacked mutual assent.
The consumer sued her home warranty administrator and the home warranty administrator moved to dismiss, citing the mandatory arbitration provision in the parties’ contract. The trial court denied that motion and held the arbitration provision was unenforceable. The Appellate Division affirmed the trial court. The New Jersey Supreme Court affirmed the Appellate Division and held that the agreement was too contradictory and confusing to create mutual assent.
The legal framework is nothing new. Under the New Jersey Arbitration Act, N.J.S.A. § 2A:23B-1 et seq., arbitration agreements are entitled to the “equal-treatment principle,” which requires courts to interpret arbitration agreements like any other contract. Thus, traditional contract law requires that the parties to a contract manifest mutual assent to the agreement. Without mutual assent, there is no “meeting of the minds” required to create a contract. In other words, an arbitration agreement is enforceable only if the parties manifested an agreement to arbitrate.
Applying this framework, the Court noted three “shortcomings” with the arbitration clause:
“the inconspicuous location of the agreement to arbitrate under a section labeled ‘MEDIATION’”;
“its small-font text and confusing ordering of sentences”; and
“the invocation of the Commercial Mediation Rules.”
For example, despite the nominal reference to “mediation” (a nonbinding dispute resolution mechanism), the agreement proposed a two-step resolution process culminating in arbitration (a binding dispute resolution mechanism). Moreover, the two-step process was broken up by language purporting to waive a party’s right to file a class action. In addition, the provision was written in less than 10-point font and inconsistently referred to “awards,” on one hand, and “Commercial Mediation Rules,” on the other. Taken together, the Court concluded that “more [must] be done in the setting of consumer contracts to make them understandable for a lay person.”
Although the Court ruled on one arbitration agreement in one consumer contract, the issues in Kernahan v. Home Warranty Administrator of Florida are not going away any time soon. Therefore, counsel should review arbitration agreements in light of this decision to ensure those agreements are prominently displayed and worded without ambiguity.
As the year comes to a close, we want to wish our readers a joyful holiday season and a prosperous new year. We’d also like to take a moment to look back on the banner year our office has had and thank you for being a part of its success.
Our Princeton office rang in 2018 with a transition into its new offices located at 300 Carnegie Center, and has continued to establish itself throughout the year as a litigation leader in the Garden State, receiving the following industry recognitions in honor of our accomplishments:
New Jersey’s minimum wage will increase by 25 cents, from $8.60 to $8.85 per hour, effective January 1, 2019. For non-exempt employees making the minimum wage, employers will be required to pay an overtime rate of $13.28 for every hour worked over 40 in a work week, to comply with the State’s minimum wage requirements.
Employers should be aware that one of Governor Phil Murphy’s top legislative priorities is to increase the minimum wage to $15 per hour. Although the Legislature passed a $15-an-hour minimum wage bill in 2016, which was vetoed by then-Governor Chris Christie, neither Governor Murphy nor the Legislature has communicated a path forward to get another bill on the table.
As wage payment violations carry significant penalties in New Jersey, you should contact a member of Blank Rome’s labor & employment practice group if you have any questions about compliance with New Jersey’s minimum wage increase or any other wage and hour issues.
In an earlier Blank Rome Workplace post, we provided a preview of the New Jersey Paid Sick Leave Act. The Act goes into effect on October 29, 2018. Last week, the Department of Labor and Workplace Development, the state agency responsible for interpreting the Act, published a “Notice of Employee Rights” under the Act and a copy of that Notice/Poster is available here. The Notice must be posted by employers in conspicuous locations in every worksite in New Jersey and must be distributed to all New Jersey employees by November 29 and at the time of hiring for all new employees hired after October 29.
The Act imposes significant obligations on employers in New Jersey. You can contact a member of Blank Rome’s labor & employment practice group if you have any questions about what needs to be in your policies.
Blank Rome’s Appellate Litigation practice is pleased to announce that the team has collaborated with Thomson Reuters Practical Law to develop practice note resources on civil appeals in the U.S. Court of Appeals for the Third Circuit, which are available for our clients and readers using the links below. Thomson Reuters’ members are also able to download these resources through our Firm’s published Contributor Page.
We invite you to review our practice note resources, and hope you find them both interesting and informative.
A Practice Note explaining how oral argument is conducted in civil appeals to the U.S. Court of Appeals for the Third Circuit. This Note also explains how the Third Circuit disposes of appeals and the process for seeking rehearing or rehearing en banc.
A Practice Note explaining motion practice in civil appeals to the U.S. Court of Appeals for the Third Circuit from a federal district court’s order or judgment. This Note explains how to draft, serve, and file motions, motion responses, and motion replies, and discusses certain common types of motions, including motions to expedite, motions for summary action, and motions for reconsideration. This Note also explains how to voluntary discontinue an appeal.
A Practice Note explaining how to prepare and submit the appellee’s brief and the appellant’s reply brief in civil appeals to the U.S. Court of Appeals for the Third Circuit from a federal district court’s order or judgment. This Note also explains how to brief cross-appeals, and how to submit supplemental authorities using so-called Rule 28(j) letters.
A Practice Note explaining how to prepare and submit the appellant’s brief and appendix in civil appeals to the U.S. Court of Appeals for the Third Circuit from a federal district court’s order or judgment. This Note explains briefing schedules and the content, formatting, service, and filing requirements for the appellant’s brief and appendix.
A Practice Note explaining how to prepare and submit amicus curiae briefs (also known as “friend of the court” briefs) in civil appeals to the U.S. Court of Appeals for the Third Circuit from a federal district court’s order or judgment. This Note explains how to obtain permission to appear as an amicus and the content, formatting, service, and filing requirements for amicus briefs.
A Practice Note explaining the process for starting a civil appeal to the U.S. Court of Appeals for the Third Circuit from a federal district court’s order or judgment. This Note covers preliminary considerations, taking an appeal as of right, petitioning for permission to appeal, cost bonds, and stays pending appeal.
A Practice Note explaining the process between initiation and briefing in a civil appeal to the U.S. Court of Appeals for the Third Circuit from a federal district court’s order or judgment. This Note discusses using the Third Circuit’s case management/electronic case filing system, ordering transcripts, preparing the record on appeal, and filing notices of appearance. It also explains the Third Circuit’s mediation program.