January 2018

In Santiago[1] v. Rich Products Corp., et al.[2], the Massachusetts Appeals Court held that a finding of spoliation requires both: (1) the negligent and intentional loss or destruction of evidence; and (2) the awareness of the spoliator at the time the evidence is lost or destroyed of the potential for the evidence to help resolve the dispute. The Santiago Court’s strict interpretation of the doctrine of spoliation follows the trend of Massachusetts litigation, shifting focus from the first element, the spoliator’s conduct to the second element, its mental state. The opinion also accentuates the fact that non-compliance with a document retention policy does not equate to per se spoliation.

 

The underlying dispute arose in 2006, when the plaintiff, Kelvin Santiago, then a 7-year-old first grader at Lowell public schools, experienced traumatic brain damage after choking on meatballs that were served to him during school lunch. The plaintiffs (Kelvin Santiago and his parents) sued the city of Lowell and the entity that produced and sold the meatballs, Rich Products, asserting negligence, breach of the implied warranty of merchantability, and Chapter 93A consumer protection claims, amongst others. Id. at 2. By way of background, in 2004, as part of the Federal government’s initiative to provide healthy lunches to students through the National School Lunch Program, Rich Products began providing and producing meatballs that met the healthy-lunch specification guidelines. To comply with standards promulgated by the United States Department of Agriculture, Rich Products used Profam 974, a soy protein isolate, to achieve the requisite “two ounces of protein per student [per lunch].” Santiago, No. 16-P-504 at 3. The plaintiffs’ counsel argued that the inclusion of Profam 974 rendered the product unreasonably dangerous, because the soy protein produced a meatball whose texture made it a choking hazard. Id. at 6

 

Upon enduring substantial discovery and motion hearings, in 2014, the Superior Court awarded the city of Lowell summary judgment, and a jury found that Rich Products was not responsible, on the basis that its negligence was not a “substantial contributing factor to the plaintiffs’ injuries.” Id. at 2-3. On appeal, the plaintiffs argued that the trial court erred by, among other things, denying the plaintiffs’ request for an adverse-inference instruction regarding Rich Products’ alleged spoliation of evidence. Id. On December 28, 2017, the Appeals Court “conclude[d] that the trial judge did not abuse his discretion in declining to give a spoliation instruction because the plaintiffs failed to establish the necessary factual predicate that Rich Products lost or destroyed the missing evidence when it knew or should have known of a potential lawsuit.” Id. (emphasis added).

 

Spoliation is the destruction of evidence, negligently or intentionally, when the litigant is aware or should be reasonably aware that the evidence is relevant to a potential action, whether or not the action has officially commenced. Id. at 7 (citing Mass. G. Evid. § 1102 (2017)). “The doctrine does not extend to a fault-free destruction or loss of physical evidence;’” however, the purpose of the doctrine is to force accountability of a “party who culpably destroys evidence,” while providing a remedy to the other party “where unfair prejudice results.” Santiago, No. 16-P-504 at 7 (quoting Scott v. Garfield, 454 Mass. 790, 798 (Mass. 2009)); Keene v. Brigham and Women’s Hosp., Inc., 439 Mass. 223, 234 (Mass. 2003)(quoting Kippenhan v. Chaulk Servs., Inc. 428 Mass. 124, 127 (Mass. 1998)); Mass. G. Evid. § 1102 (2017). The court applies the reasonable person standard to determine whether the loss of evidence constitutes spoliation, by asking “at the time of spoliation, [did the party realize] the possible importance of the evidence to the resolution of the potential dispute?” Santiago, No. 16-P-504 at 7 (citing Kippenhan at 127)(emphasis added). The party seeking sanctions has the burden of proving that the spoliating party had the requisite knowledge by “producing evidence sufficient to establish certain preliminary facts.” Id. at 7 (citing Scott at 799). Should the sanction seeking party provide enough evidence to determine spoliation has occurred, a judge has a myriad of options to remedy the situation, so long as the sanction addresses, “the precise unfairness that would otherwise result” in the least severe way necessary. Santiago, No. 16-P-504 at 9 (citing Westover v. Leiserv, Inc., 64 Mass. App. Ct. 109, 113 (Mass. App. Ct. 2005) (quoting Fletcher v. Dorchester Mut. Ins. Co., 437 Mass. 544, 550 (Mass. 2002))); Santiago, No. 16-P-504 at 9 (quoting Keene 439 Mass. at 235).

 

Regarding the allegations at issue, the plaintiffs’ counsel claimed that Rich Products engaged in sanctionable conduct with respect to their “(1) laboratory notebooks and production records from 2004 relating to the development of the formula for the meatballs and (2) the results of product-development and production testing from 2004.” Santiago, No. 16-P-504 at 5. The plaintiffs’ counsel said that this evidence would highlight to the jury the unreasonably dangerous texture that Profam 974 created within the meatballs. Id. at 6. The plaintiffs, however, were able to recreate meatballs using Rich Products’ recipe provided in answers to interrogatories, and obtained expert testimony that identified those meatballs as unreasonably dangerous, and opined that “both the size and texture of the meatball presented a choking risk to children.” Id. at 6. Moreover, while articulating the alleged dangers of the product, the plaintiffs’ counsel neglected to identify whether or not Rich Products “at the time of spoliation” knew or should have reasonably known “the potential importance of the evidence to the resolution of the potential dispute.” Id. at 7. Judge Shin reinforced the Superior Court’s position that simply pointing to a document retention policy does not equate to a culpable or negligent destruction of documents with knowledge that the documents could solve a potential dispute. Id. at 6. Because the plaintiffs’ counsel ultimately could not bear this burden of proving intentional or negligent acts with knowledge as to their significance, there was no actionable spoliation. Id. at 8 (citing Vigorito v. Ciulla Builders, Inc., 57 Mass. App. Ct. 446, 454-455 (Mass. App. Ct. 2003)). Nevertheless, the Superior Court Judge acted within his discretion to allow the plaintiffs’ counsel to “argue [] the lack of evidence,” which “allow[ed] [the plaintiff] to make use of the fact the documents were missing,” ultimately painting the picture for the jury at each juncture of the trial. Santiago, No. 16-P-504 at 8, 11.

 

Thus, the standard that Massachusetts courts demand for proving spoliation requires a showing of knowing action, or failure to act, before the court will punish a party for failing to preserve evidence. At the same time, if critical pieces of evidence are missing, Massachusetts have the authority to allow counsel an opportunity to present this point to the jury without the imposition of sanctions such as an adverse inference instruction.  Id. at 11

[1] Kelvin Santiago & Julia Rivera and Juan Santiago, individually and as next friends of Kelvin Santiago

[2] Kelvin Santiago & Others v. Rich Products Corp., Casa Di Bertacchi Corp., and the city of Lowell, No. 16-P-504 (Mass. App. Ct. Dec. 28, 2017)

 

 

On December 22, 2017 President Trump signed into law the Tax Cuts and Jobs Act (officially Public Law no. 115-97, named “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”). Recognized generally for changes to the individual income tax brackets, the corporate tax cuts, and the estate tax modification, a separate section, 13307, likely will have a significant impact on sexual harassment settlements.

 

Senator Bob Menendez (D- NJ) proposed the Weinstein tax exclusion (above) in direct response to the #MeToo movement after the sexual harassment revelations about Harvey Weinstein. The provision was added to the Tax Cuts and Jobs Act to restrict tax deductibility of sexual harassment settlements associated with nondisclosure agreements. Such agreements were reported in connection with Harvey Weinstein, Fox News, and other high profile cases.

Section 13307 modified the IRS Tax Code section 162 to eliminate the ability of businesses and defendants (and possibly plaintiffs) to deduct the costs associated with settlements of sexual harassment claims that are subject to nondisclosure agreements, including legal fees related to the settlements. Because most settlements related to sexual harassment have included confidentiality or nondisclosure language, the impact of this legislation will be significant for all parties involved, and will be reflected in advice from legal counsel. The provision applies to any payments made on or after December 22, 2017 and is not retroactive, except to the extent it affects payments left to be paid after December 22, 2017 on any prior settlement agreement.

The statutory language does not provide definitions for the terms “sexual harassment” or “sexual abuse.” The statutory language also does not clarify the meaning of “related to” for the purposes of settlement or legal fees. This ambiguity leaves several important open questions:

• An employment dispute that does not involve claims of sexual harassment but results in a nondisclosure agreement that includes broad releases may be problematic. If the scope of the releases includes sexual harassment claims, can that settlement be deducted by the business?

• What if a plaintiff has multiple claims, including but not limited to retaliation, gender discrimination, and a sexual harassment claim; what portions of a settlement payment will be deductible? Could effective contract drafting allocate most of the settlement consideration to the non-sexual harassment claims and thereby affect deductibility?

• In settling multiple claims, should counsel draft two separate agreements, one dealing only with the sexual harassment claim and the other agreement with all remaining claims, and allocating the larger portion of the settlement consideration to the nonsexual harassment claim, which is deductible?

• Does the statute exclude all legal fees associated with the claim from deduction, or just the portion of fees associated with the negotiation of the settlement and the drafting and execution of a settlement agreement?

Until more clarity is provided by administrative rules, legislative changes, or court opinions, lawyers will have an important role advising clients how to modify previous boilerplate nondisclosure settlement agreements Counsel also will be instrumental in structuring the negotiation of sexual harassment claims, as businesses and defendants weigh the potential benefit of keeping a sexual harassment claim confidential against the financial implication of losing the ability to deduct the settlement and legal fees.

The #MeToo movement has given a voice and a platform for sexual harassment victims. Because the number of sexual harassment claims, including class actions, is likely to increase, businesses will be motivated to increase their preventive efforts through education and training of their employees about sexual harassment. After the enactment of the Tax Cuts and Jobs Act, businesses and defendants also must be prepared to balance the cost of claims that can no longer be deducted against the value of confidentiality and settlement certainty.

The new tax provision is important, but also vague and subject to interpretation. In future issues, the Defense Litigation Insider will examine the effect of this legislation on the negotiation and drafting of settlement and nondisclosure agreements.

 

In a recent decision, the Massachusetts Supreme Judicial Court (SJC) clarified the scope of personal liability for investors and board members under the Commonwealth’s Wage Act, as codified at G.L. c. 149, §§148-150.  The SJC held that investors and board members could not be held personally liable solely by virtue of their investment activity or acts performed in their official capacity as board members.  While the case involved a nuanced set of facts aptly described as “unusual and removed from the core concerns of the Wage Act,” its holding is nonetheless significant, and provides guidance for personal liability under the Wage Act for individuals other than a company’s president or treasurer.

In Segal v. Genitrix, LLC, 478 Mass. 551 (2017), H. Fisk Johnson and Stephen Rose, two former board members of Genitrix, LLC, sought direct appellate review of an adverse jury verdict that found them personally liable for failing to pay wages owed to the company’s former president and CEO, Andrew Segal.  Johnson, Rose, and Segal founded the biotech company, originally a Maryland LLC, in 1997.  Johnson briefly served as a board member during Genitrix’s opening year, but continued to invest in the company until its dissolution in 2007.  Johnson designated Rose as his appointee to the board and advised Segal that Rose was to be his contact for any financial matters.

As a condition to Johnson’s initial investment, he required Segal to execute an employment agreement with Genitrix.  The agreement stipulated that Segal would receive a fixed salary in consideration for his service as the company’s president and CEO, including managing the day-to-day financial and administrative affairs of the company.  Segal, the company’s sole officer, supervised the laboratory, managed all human resource functions, including payroll, and was the only individual authorized to issue wage checks.

The company began to experience financial difficulties in 2006, which led to Segal’s recommendation that the company lay off its at-will employees in order to meet payroll obligations.  In turn, the two defendants invested additional money in the company; however, they earmarked the investment for specific purposes such as funding payroll and replacing lab equipment.  The company’s financial condition worsened in 2007, and Segal unilaterally decided to stop taking his salary.  By mid-2007, the company was unable to make payroll and its board voted to lay off the other remaining employee.  The defendants made a final investment to pay off that employee’s remaining salary obligations and then shuttered the company’s doors.

The company ultimately filed a petition for judicial dissolution.  During those proceedings, Segal filed an array of claims against the company, and also attempted unsuccessfully to block the dissolution of Genitrix, a Delaware LLC.  See Fisk Ventures, LLC v. Segal, et al., C.A. No. 3017-CC (Del. Ch. Jan. 13, 2009).However, Segal did not assert a claim under the Massachusetts Wage Act.  Notably, Segal continued in his role as president while the dissolution proceedings were ongoing, despite continuing to decline a salary.  Segal’s belief that he eventually would get paid for the work did not come to fruition, and he filed a Wage Act claim in 2009.

The defendants were awarded summary judgment on the grounds that they did not “have the management” of the company, as required by the Wage Act.  That victory was fleeting, as the Massachusetts Appeals Court  reversed summary judgment on the grounds that a genuine issue of material fact existed as to whether the defendants managed the company.

On remand, the case went to trial, where the judge instructed the jury, in part, that “a person qualifies as an agent having the management of such corporation if he…controls, directs, and participates to a substantial degree in formulating and determining policy of the corporation.”  The jury went on to find both defendants personally liable based upon the given instruction.  The defendants then moved for direct appellate review on the grounds that there was insufficient evidence at trial to find personal liability, and that the above-referenced jury instruction was erroneous.

In a straightforward reading of the Wage Act, the SJC noted that the omission of investors and board members from the statute was significant.  Thus, the defendants could be personally liable only if they were deemed “agents having management of the company.”  This was the first time the SJC had been tasked with interpreting that language.

In doing so, the Court looked at whether the defendants were agents as a result of their board participation, and whether the restrictions placed on new investments constituted “management” activities.

Segal argued that the defendants exercised sufficient agency authority through their investment influence and board voting rights.  The SJC rejected this argument, and concluded that while “boards are regularly required to make difficult decisions that have an impact on the company’s finances,” such decisions are not acts of individual board members as “agents.”  The SJC also disagreed with Segal’s argument that placing conditions and other restrictions on incoming investments constituted management of the company.  On that point, the SJC held “[i]nvestment restrictions limited to the use of new monies are not management direction and control over existing resources,” and “exercising one’s rights and leverage over infusions of new money are separate and distinct from being an agent have the management of the corporation.”  The SJC also noted that as the only officer of Genitrix, Segal was “the only person expressly identified by virtue of his title as responsible for Wage Act violations,” and that Segal “made the decision not to pay himself.”

Segal is significant as it limits the circumstances in which a corporate director, board member or investor can be found individually liable under the Wage Act.  While personal liability for directors and investors is not entirely foreclosed, it cannot result solely on account of an individual’s position as board member or investor.  According to the SJC, the Wage Act continues to impose personal liability on those assuming individual responsibility as an officer or agent of a company, but it “does not impose individual liability on board members, acting as board members, or outside investors overseeing their investments.”  Given the rapidly expanding startup industry in Massachusetts, Segal provides some comfort that board members and investors will not face exposure to the draconian consequences of the Wage Act, provided that they do not participate in the management of a company to a greater extent than the defendants in Segal.

On August 30, 2016, a Miami-Dade jury awarded Richard Batchelor and his wife more than $21 million after finding that his mesothelioma arose, in part, from asbestos exposure during overhaul work at a Florida Power & Light Co. (FP+L) power plant. On December 27, 2017, the Third District Court of Appeal erased the verdict against defendant Bechtel Corporation (Bechtel), finding that the jury should never have considered claims against that defendant because of plaintiffs’ insufficient evidence.  The appellate court also found reversible error in an adverse inference instruction, and concluded that Bechtel’s efforts to locate discoverable information were reasonable under the circumstances.

Between 1974 and 1980, Richard Batchelor worked for FP&L as an electrical technician at two power plants including the Turkey Point power plants. At that time, Turkey Point was a sprawling and complex facility – occupying over three thousand acres and containing 12 nuclear-fueled units and two oil and natural gas fueled units – and provided power for all of South Florida. On any given day, four hundred FP&L employees and numerous contractors worked at Turkey Point. Mr. Batchelor was responsible for repairing and maintaining gauges and equipment at the site, including four of the nuclear and gas units. Insulation, an indeterminate amount of which contained asbestos, covered the various pipes, wires, and equipment at the plant. Mr. Batchelor never removed insulation from any equipment and never worked on equipment while the insulation was being removed. Instead, insulation removal was performed by independent contractors who specialized in insulation removal, and other FP&L workers. Mr. Batchelor did work in the vicinity of other workers removing insulation, but it is unclear how close Mr. Batchelor worked to those removing asbestos, how often this occurred, or the duration of the occurrences. When asked by his attorney if the dust he breathed in was from insulation, Mr. Batchelor responded, “It could be from anywhere. It’s just dust.”

One of the contractors retained to provide ongoing maintenance services of the equipment on site was defendant Bechtel. The contracts provided that FP&L would issue work orders at its discretion to Bechtel, which would do the work requested on a cost-plus basis. FP&L decided whether FP&L or Bechtel would provide needed supplies, equipment, and ancillary services. During the relevant time period, Bechtel provided 1,050,070 man hours of services at Turkey Point.

FP&L periodically shut down the units for repair and maintenance. During these shutdowns, FP&L had Bechtel perform major overhauls on the units. FP&L also had another contractor, Foster Wheeler, perform maintenance on the unit’s giant boilers, which were lined with insulation. Although other contractors were present most of the time, Bechtel received work instructions only from FP&L.

In 2015, Mr. Batchelor was diagnosed with terminal mesothelioma caused by asbestos exposure. On January 2, 2016, he filed suit against twenty-six defendants, including Bechtel Corporation, for negligently causing his mesothelioma. Mr. Batchelor’s medical causation expert never examined Mr. Batchelor and never visited Turkey Point. He based his opinion solely on a review of Mr. Batchelor’s deposition and published medical studies.

Mr. Batchelor’s claim against defendant Bechtel was based on premises liability, and contended that Bechtel was liable for any asbestos exposure he sustained from any source at Turkey Point that was under Bechtel’s possession or control. More specifically, Mr. Batchelor alleged that Bechtel was liable for the dangers of asbestos dust created by Bechtel “or by others in the areas of Turkey Point that were being controlled by Bechtel while Bechtel performed its work at the time Mr. Batchelor was exposed.”

In early August 2016, Mr. Batchelor’s attorney deposed Bechtel’s corporate representatives. Immediately after the depositions, Mr. Batchelor moved for sanctions, arguing that Bechtel failed to adequately search for documents and information from thirty-six to forty-two years ago that might have been provided by retired former employees. In opposition, Bechtel argued that it had no obligation to find former employees from so long ago and that attempts to locate past employees in similar lawsuits had proved futile due to the passage of time. Ultimately, the trial court granted the motion for an adverse inference based on Bechtel’s failure to attempt to locate former employees.

Several weeks later, the jury entered a verdict for Mr. Batchelor for $15,381,724.12 and $6 million for his wife. It attributed fault as follows:  Foster Wheeler 5%, FP&L 35%, and Bechtel 60%. The Third District Court of Appeal considered two points on appeal:  (1) the trial court should have directed a verdict because there was insufficient proof of Bechtel’s possession and control of the premise, and (2) the trial court should have granted a new trial because the adverse inference jury instruction was reversible error.

 

Premises Liability

The primary focus of the Third District Court of Appeal’s opinion was on whether Mr. Batchelor met his burden in proving a premises liability claim. Interestingly, Mr. Batchelor chose not to sue Defendant Bechtel under a products liability theory for manufacturing products containing asbestos. Nor did Mr. Batchelor sue Bechtel for removing asbestos in a manner that negligently exposed Mr. Batchelor to a dangerous level of asbestos.

Mr. Batchelor’s premises liability theory was that Bechtel, as the party in control of the premises, had a duty to warn Mr. Batchelor of the dangers of asbestos created by FP&L and by FP&L’s other contractors. To prove this theory, Mr. Batchelor was obligated to show that Bechtel had a right to control access to or exclude others from the Turkey Point power plant. In support, Mr. Batchelor offered no direct evidence that FP&L surrendered, and Bechtel took possession of, all or any part of Turkey Point. Instead, Mr. Batchelor relied on the following points:

(1)        Bechtel was a huge contractor at Turkey Point during the relevant time period and provided more than one million man hours of services during that time;

(2)        The service contracts provided that FP&L would issue future work orders and Bechtel would fill the work orders on a cost-plus basis;

(3)        The service contracts required Bechtel to maintain liability insurance “with respect to the scope of the Bechtel Services;” and

(4)        FP&L directed Bechtel to perform maintenance on the power units when they were down.

The Third District Court of Appeal was not persuaded by Mr. Batchelor’s arguments. Although Bechtel provided significant hours of services during the relevant time period, the plant itself was also serviced by four hundred FP&L employees per day, plus contractors – rendering Bechtel’s presence a “fraction of the presence of FPL’s own work force…” Mr. Batchelor also could not produce any language in the service contracts discussing Bechtel’s assumption of possession or control of all or any part of the plant, and a contractual provision requiring insurance coverage was not found to support an inference that FP&L surrendered possession. Finally, Bechtel was not the only entity performing maintenance on the power units, and therefore did not have the authority to exclude other contractors or FP&L employees from the areas. The appellate court concluded, “In the absence of direct or circumstantial evidence sufficient to support a logical inference, the conclusion that Bechtel exercised control and possession is no more than conjecture, speculation, and surmise.” Due to the lack of evidence, the court reversed the trial court’s ruling and held that the trial court should have granted Bechtel’s motion for directed verdict.

 

The Adverse Inference Jury Instruction

In granting Mr. Batchelor’s motion for sanctions against Bechtel for failing to properly prepare its corporate representatives, the trial judge instructed the jury as follows:

If you find that Bechtel’s failure to produce persons employed at Turkey Point between 1974 and 1980 to testify regarding Mr. Batchelor’s work at Turkey Point is unreasonable, and that their testimony would have been relevant to Mr. Batchelor’s work activities, you are permitted to infer that the evidence would have been unfavorable to Bechtel.

The trial court’s rationale for the sanction was that Bechtel failed to attempt to locate retired employees from 1974 to 1980 by mailing postcards to the last-known addresses of employees.

The Third District Court of Appeal thoroughly disagreed with the trial court’s decision, citing Rule 1.310(b)(6) of the Florida Rules of Civil Procedure. Under that rule, a corporation can be required to produce a representative to testify “about matters known or reasonably available to the organization.” The Court of Appeal explained that this rule places a duty on the corporation to affirmatively prepare its representative “to the extent matters are reasonably available, whether from documents, past employees, or other sources.”      The appellate court found that it was unreasonable to expect Bechtel to locate retirees who had worked at the plant over thirty years ago and then interview them to prepare a corporate witness with no guarantee of success. “Absent a specific court order to do so, we would not interpret a party’s responsibilities to prepare a representative to extend so far, particularly here, where the deposition is noticed to take place only a few weeks before trial when there is reduced time for such a large effort.” Without such a court order, the appellate court found that the trial court harmfully erred in imposing the sanction of an adverse inference jury instruction.  The appellate court cautioned that such an instruction should be rarely given as it is an extreme sanction, “reserved for circumstances where the normal discovery procedures have gone seriously awry.”

 

Speculative Nature of Asbestos Claims

Batchelor v. Bechtel Corp. underscores the broader problems of proof that tend to be inherent in asbestos claims as a result of the creeping nature of asbestos-related diseases. Plaintiffs typically do not develop symptoms of an asbestos-related disease until ten to forty years after asbestos exposure. After the extensive passage of time, documentary evidence is difficult to obtain and witnesses are difficult to locate. More importantly, basic memories from so long ago are vague and highly prone to inaccuracies. This situation can make it very difficult for defendants to defend themselves, but very simple for plaintiffs to get their cases to a jury.

The generally asymmetric nature of asbestos litigation can be explained as follows. In nearly every asbestos lawsuit, the plaintiff sues scores of defendants, sometimes a hundred, alleging that they manufactured asbestos-related products that exposed the plaintiff to asbestos many years ago and caused asbestos-related disease. As long as the plaintiff testifies that he used a specific manufacturer’s product, even in conclusory fashion and without any documentary support, that manufacturer often is unable to escape summary judgment. In other words, although the plaintiff has a very limited memory of his exposure many years ago, and no documentary evidence that he was exposed to a specific manufacturer’s product, that the product contained asbestos, or that he was exposed to a particular amount of asbestos from that specific product, the plaintiff still can maintain an action against that manufacturer and force it to defend itself against millions of dollars in exposure. Although plaintiffs are entitled to compensation for asbestos-related diseases, defendants should not be forced to incur these expenses without greater certainty that they manufactured the products the plaintiff was exposed to and that those products likely caused the plaintiff’s asbestos-related disease.

A group of companies that advertised job opportunities through Facebook’s ad-serving platform discriminated against older members of the applicant pool, claims a proposed class action filed in the U.S. District Court for the Northern District of California. This filing suggests potential liability for any employer that posts jobs via ads that target recipients based on demographic metadata.

 

As Facebook’s roughly two-billion active users view, like, and share content, they give Facebook concrete information about their preferences and behaviors. Facebook’s ad platform leverages this data by allowing advertisers to reach the users most likely to find their ads relevant. Because Facebook also collects information on its users’ demographic factors, such as  age, race, and gender, critics note a potential for discriminatory ad targeting. In a December 20th filing, a proposed class of older job-seekers on Facebook argued that this discriminatory potential came to fruition when a group of employers (including Amazon, Cox, and T-Mobile) used an age filtering feature for their job postings to target younger cohorts and screen out older ones in violation of the Age Discrimination Employment Act (ADEA).

 

Largely in response to concerns about the opacity of Facebook’s ad-targeting, Facebook offers a feature on each ad that allows users to determine “Why am I seeing this ad?” Based on job postings like the one above, class members claim they were screened off from job postings that reached younger Facebook users. Since this filing, Facebook, which was not named a defendant, commented in response to this suit that its ads could be part of a broader media campaign by hiring employers, and that targeting is a permissible part of a diversified hiring strategy. Facebook further noted that its ads are no different from TV and magazine ads, which inherently reach different demographics by virtue of their viewer and subscriber bases.

 

Several important implications from this filing:

 

  • Targeting may not equal discrimination, but it can get you sued.

 

The defendant employers likely share Facebook’s view—that targeting is not per se discrimination. Whether or not this argument prevails, this filing shows that applicants scrutinize potential discrimination in posting criteria as well as in the hiring decision. The plaintiffs argue that Facebook ads are so ubiquitous and pervasive that being screened off from those ads is to be effectively eliminated from the pool. Courts will have to decide whether or not targeting gives rise to ADEA liability, but before the question can be settled, employers accused of targeting will be dragged into expensive, broad-ranging suits like this one if their postings facially preference a certain age.

 

  • This is bigger than Facebook postings.

 

Facebook is not the only platform with targeted ads. A 12/20/17 ProPublica and New York Times report highlighting potentially discriminatory employment ads found that Google’s AdSense and LinkedIn ads had the same age-filtering capability (LinkedIn since eliminated this function). Going forward, postings through these and other, smaller ad-serving platforms can expect the same scrutiny by potential plaintiffs and their lawyers. The proposed class presently includes the Communications Workers of America, an international union representing 700,000 workers in telecom, cable, IT, media, education, and public service sectors, but the groups affected by these targeted online ads putatively include job seekers and employers in every conceivable industry.

 

  • This age filter was just the one the plaintiffs could see—the next frontiers of litigation are the ones we can’t yet see.

 

This suit focuses on an overt age filter, one that is visible to the applicant-user. The direct connection between the targeting factor and the impermissible criteria (age) presents an ideal argument for the plaintiffs’ lawyers, i.e.: where the defendants chose to click on an age range to target, their intent to discriminate based on age can be inferred. The immediate result of this filing will likely be the removal of age-filtering options (following LinkedIn’s example), but this will not end the inquiry into targeted job postings. Ad-serving platforms have a wealth of data that gives them a subtler capacity to discriminate, and plaintiffs will dig deeper into the nuances of Facebook’s and other algorithms to uncover more sophisticated discrimination, like using permissible targeting factors as a proxy for impermissible ones.

 

The diversity of the data collected by Facebook creates the ability to use other factors as a proxy for age. For example, if a tech company sought to preference millennial applicants and exclude older ones, it might target users who liked, viewed, and shared content about fidget spinners, vape pens, and avocado toast (or any number of factors that correlate strongly with millennial status), rather than flagging its intent by selecting the 18-38 age range. The age-filtering effect on who receives the ads might be the same, but the intent would be harder to discern. Ads could use proxies to target factors other than age, such as race, gender, or sexual orientation, which by their nature would be more likely to use coded methods than overt ones. The basis for these “proxy-factor” claims requires an understanding of an ad-serving platform’s targeting algorithm. If this class action proceeds to discovery, the key struggle will be between the plaintiffs’ press to lay bare the criteria of this algorithm and Facebook’s push to protect its and its advertisers’ proprietary information. The stakes in this struggle are the viability of future claims along these lines.

 

In the meantime, employers posting jobs online should avoid applying overt age filters to targeted ads on platforms like Facebook. Other sites with embedded ads may use similar functionalities, so be sure to double check what you’ve selected before posting.