Biometric class actions have proliferated in recent years — and with more states eyeing comprehensive data privacy legislation, companies that use biometric data should plan for the surge to grow.

With rare exceptions, these cases end either in settlement or via a successful dispositive motion. In this post, we will discuss some of the trends we have observed from reviewing 15 settlements of class actions brought under Illinois’s Biometric Information Privacy Act (BIPA), 740 Ill. Comp. Stat. Ann. 40 et seq. (Illinois is currently the only state that authorizes a private right of action for violation of biometric information privacy laws). Part II will examine some successful (and unsuccessful) dispositive motions filed by companies facing BIPA claims.

Highlights of BIPA Settlements:

  • Average recovery of $440 per class member
  • Class sizes vary widely from 724 members to 15.37 million members
  • Slightly over half of the settlements feature injunctive relief
  • Majority of settlements utilized a claims process
  • Almost no settlements allowed unclaimed funds to revert to the defendant

The Big Question: How Much Money Are Companies Paying?

Damages in BIPA class actions add up quickly because the statute authorizes a penalty for each violation in the amount of $1,000 (for negligent violations) or $5,000 (for intentional violations), as well as attorneys’ fees and costs (740 Ill. Comp. Stat. Ann. 14/20). The availability of large statutory damages, plus the headlines about Facebook’s payment of $650 million to settle users’ claims that its facial recognition technology violated BIPA, is enough to make any user of biometric data nervous (see In re Facebook Biometric Info. Privacy Litig., No. 3:15-cv-03747 (N.D. Cal.)). But even though the gross amount of Facebook’s $650 million settlement should inspire some caution, it only tells part of the story. The other critical piece of information is the class size because this number will give much better information about the value of each class member’s claim. The Facebook class included about 15.37 million class members. The parties estimated that each class member stood to recover a maximum of $342.

Thus, while headlines emphasize the total amount of the Facebook settlement, the per-class-member recovery in that settlement is lower than the average recovery of around $440 per class member. Though this is the average, we observed a fairly large range of potential recoveries, from just $21 per class member in Phillips v. BioLife Plasma, LLC, No. 2020 CH 05758 (Ill. Cir. Ct.) (though this was for one of two subclasses; the members of the other subclass each received an estimated $205) to $1,000 per class member in Wickens v. Thyssenkrupp Crankshaft Co., LLC, No. 1:19-cv-06100 (N.D. Ill.).  A pattern emerges: on average, individual class members recovered more in smaller classes. For instance, in Wickens, there were only about 724 class members, far fewer than the roughly 15 million members in the Facebook class. One caution: Facebook may be an outlier in terms of size; the next largest class had roughly 1.11 million members (see Rosenbach v. Six Flags Entm’t Corp., No. 16 CH 13 (Ill. Cir. Ct.)).

Despite the variability in class sizes and recovery, attorneys’ fees constituted between 33% and 35% of the settlement fund in all cases but the Facebook class action (in which the court found that one-third of the $650 million fund was excessive and instead awarded $97.5 million). The fact that fee awards consistently amount to around one-third of the settlement fund suggests that attorneys’ fees may have been a driving factor in the cases with smaller class sizes but higher individual class member recoveries.

Finally, most of the settlements structured payment in similar ways. Twelve of the 15 settlements instituted a claims process for at least certain categories of class members, and 13 of the settlement funds were non-reversionary, which means all unclaimed settlement funds were either paid to a cy pres recipient or distributed to the class members who previously submitted claim forms. Further, all but one of these settlements required the defendant to pay the full amount of the settlement fund, rather than permitting the defendant to fund the settlement in phases and fund the next phase only if claims exceeded the amount of the prior phase. The Six Flags settlement did allow for a phased funding approach, but the settlement agreement noted that this approach was due to the severe economic hit Six Flags took during COVID-19. Thus, companies settling a BIPA class action should generally expect to pay the entire amount of the settlement fund, either to class members or to a cy pres recipient.

What Other Relief Is Included in the Settlements?

All of the settlements in our sample included monetary relief, but nine of the 15 settlements also contained prospective injunctive relief. The prospective relief in each settlement agreement looked similar, with defendants agreeing to (1) make improved disclosures regarding the collection and use of biometric data; (2) draft and provide written policies on the collection and retention procedures for biometric data; (3) obtain a written release to collect individuals’ biometric data; and (4) destroy biometric data in accordance with applicable law. The presence of prospective relief in a settlement agreement did not appear to have a significant impact on the monetary amount of the settlement — in other words, the presence of injunctive relief did not correlate with low recoveries per class member.

A future post will analyze some successful dispositive motions in BIPA cases to identify trends and emerging defenses.

Financial Negligence Claim Reversed in Mississippi Supreme CourtIn Gloria Baker, et al. v. Raymond James & Associates Inc., et al., the Mississippi Supreme Court on March 4 reinstated a trial court ruling that Mississippi’s latent-injury discovery-rule exception to the catch-all, three-year limitations period did not apply where the lay plaintiffs, though inexperienced and unsophisticated investors, received monthly account statements showing “substantial losses” on their managed retirement investments. Bradley was part of the team that assisted Raymond James in this signal victory.

The plaintiffs filed suit in 2017, alleging, among other things, a negligence claim against their financial advisor and the advisor’s then-employer Morgan Keegan (now Raymond James). The advisor invested the plaintiffs’ retirement assets from 2002 to 2013. During those years, the plaintiffs received monthly account statements showing substantial losses. The defendants moved for summary judgment based on the three-year statute of limitations, arguing the cause of action accrued at the latest in 2008, when each plaintiff had received written confirmation that one of each of their “investments had sustained a 90 percent loss.” The plaintiffs asserted that their losses were latent injuries. In Mississippi, a latent injury tolls the limitations period if the injury is inherently undiscoverable in nature or when it is unrealistic to expect a layman to perceive the injury. The trial court rejected the latent-injury theory and entered summary judgment in favor of Raymond James and the other defendants. The court concluded that “[t]o discover their injuries, Plaintiffs simply had to glance at their account statements, which would have alerted them to the substantial losses about which they now complain.” The court emphasized that it “does not require advanced degrees or financial backgrounds to realize that those statements showed investment activity inconsistent with their objectives.”

The Mississippi Court of Appeals reversed the trial court, finding that a genuine issue of material fact existed as to whether the plaintiffs’ injury was latent considering the complexity of financial investment, the plaintiffs’ financial inexperience, the fact that the plaintiffs at all times received a monthly retirement check, and the advisor’s reassurance when the plaintiffs questioned him about their losses. Judge David McCarty dissented, joined by Presiding Judge Jack Wilson and Judge Sean Tindell, and wrote “[i]f someone plunges a knife into your belly and you start to bleed, you know you have been injured. Each month, the retirees were jabbed by the clearly shown losses in their accounts… [T]hey knew… it was not getting better—no matter what [their advisor] told them.” Judge McCarty concluded, “the wound was apparent.”

After agreeing to hear the case, the Mississippi Supreme Court reversed the Court of Appeals and reinstated the trial court’s judgment. The court agreed with the reasoning in both the trial court’s ruling and Judge McCarty’s dissent. The court also distinguished Bennett v. Hill Boren P.C., 52 So. 3d 364 (Miss. 2011), in which the court found a latent injury in legal malpractice due to active concealment. The plaintiffs relied on Bennett to recast their negligence claim as a claim for “stockbroker malpractice,” a claim not recognized in Mississippi. Regardless of how the plaintiffs labeled their claim, the court held that the financial advisor’s repeated assurances that their investments were okay “is not—by itself—evidence of any active concealment” where their monthly account statements indicated that the financial advisor made “bad or risky investments… not in line with their investment growth objectives.”

The court’s decision is important for two key reasons. First, the decision reaffirms the importance of financial institutions providing clear, monthly account statements to their clients — a good paper trail is crucial to establishing a limitations defense, particularly when a plaintiff relies on alleged oral representations by a defendant, and can be an important part of any defense on the merits as well. Second, the decision acts as a barrier to countless stale financial-negligence claims that could have been resurrected had the Mississippi Court of Appeals’ decision stood.

Setting Boundaries for the Field of Discretion: Fifth Circuit Clarifies that Daubert Standard Applies to Expert Opinions at Class CertificationIn a decision that narrows the path to class certification in federal court, the Fifth Circuit has held that a plaintiff must clear the Daubert hurdle when expert evidence is relevant to the decision of a federal court to certify a class. The decision in Prantil v. Arkema Inc. cements the Fifth Circuit’s viewpoint that applying Daubert at the certification stage is required in order to ensure a proposed class’s conformity with Rule 23. The Fifth Circuit noted that this adoption is a natural extension of recent Supreme Court precedent in Wal-Mart Stores, Inc. v. Dukes and Comcast Corp. v. Behrend — but not all circuits necessarily agree on how to square these precedents with Daubert, creating a circuit split. We have previously discussed the implications of the ongoing circuit split on this blog in 2018.

Prantil involved the fallout of Hurricane Harvey: Record floods caused volatile chemicals to combust at a facility in Crosby, Texas, releasing toxic ash and smoke into the environment and triggering evacuations of nearby residents. Local residents sought redress from the physical and financial effects of the incident against the chemical facility’s owner, Arkema, and filed a putative class action. The district court credited three of the plaintiffs’ experts, excluded the plaintiffs’ damages expert, and ultimately granted the plaintiffs’ motion for class certification. In reaching its decision, the district court voiced uncertainty as to whether the Daubert analysis applied at the class certification stage. The defendants sought interlocutory review under Rule 23(f).

The Fifth Circuit reversed, focusing on the plaintiffs’ failure to submit “evidentiary proof” of their compliance with Rule 23. The court found that the class certification inquiry “must be made based on adequate admissible evidence to justify class certification,” and therefore if “an expert’s opinion would not be admissible at trial, it should not pave the way for certifying a proposed class.” The Fifth Circuit’s admonition wasn’t that the district court hadn’t performed any analysis at all, but that the district court’s opinion “reflect[ed] hesitation to apply Daubert’s reliability standard with full force.” This hesitation resulted in the district court not being “as searching in its assessment” of the expert evidence’s reliability as it would have been “outside the certification setting.” The Fifth Circuit emphasized that assessing the reliability of expert evidence cannot wait for trial — instead such an assessment is warranted and required at the class certification stage. Therefore, the court required the district court to “exercise its gate-keeping role” through utilizing the “full force” of Daubert. In short, given that a standard for admissibility for scientific evidence exists, the Fifth Circuit will require courts to apply — and parties to meet — that standard at the class certification stage.

Prantil agrees with a growing number of federal circuits — namely the Third, Seventh, and Eleventh — that have required a full Daubert analysis at the class certification stage. But other circuits disagree (i.e., the Ninth Circuit).

Requiring a full Daubert analysis has far-reaching implications. Expert testimony plays a critical role at the class certification stage in many putative class actions, and the class certification decision is often dispositive of the case as a practical matter. Trials in class actions are vanishingly rare, so class certification is often the only time for the district court to test the reliability of a plaintiff’s expert. Given the stakes, class certification should not rise or fall on junk science.

In due time, the Supreme Court will have to decide whether to embrace the Fifth Circuit’s rule. It has already signaled in dicta in Wal-Mart Stores, Inc. v. Dukes — dicta that the Fifth Circuit expressly incorporated into their opinion in Prantil — which way it leans: “The District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings. We doubt that is so….” What is more, the court’s decision in Comcast turned on the evidentiary value of expert testimony admitted by the district court. The momentum towards applying Daubert at class certification seems overwhelming. The Supreme Court has repeatedly stated that Rule 23 is not a mere pleading standard, and this anodyne statement carries with it a strong likelihood that Daubert is coming for class actions.

We close with a word of warning. Prantil may prove a double-edged sword: Just as plaintiffs will have to satisfy Daubert to use their experts at class certification, defendants will have to satisfy Daubert to resist those experts. Developing a full arsenal of rebuttal experts requires aggressively front-loading the development of class-certification defenses. Because many class certification defenses may overlap with the merits, instead of waiting for summary judgment, class certification will become the practical deadline to have experts retained, educated, and prepared. And, as a result, the fact discovery necessary for those experts’ opinions may not be able to wait until after class certification. Decisions about the scope and bifurcation of discovery must be made with Daubert in mind.