IN RE: Sprouts Farmers Market Incorporated Employee Data Security Breach Litigation
2:16-md-02731
D. Ariz.May 24, 2017Background
- Sprouts employees' personal information (including W-2s and SSNs) was disclosed in a phishing-related data breach, prompting consolidated MDL litigation alleging tort, contract, and statutory claims.
- Defendant Sprouts argues most claims are subject to individual arbitration agreements containing class waivers; Plaintiffs challenge enforceability.
- The Ninth Circuit in Morris v. Ernst & Young, LLP held certain class waivers unenforceable under the NLRA; the Supreme Court granted certiorari in that case while this MDL was pending.
- Sprouts moved to stay the MDL pending the Supreme Court’s decision in Morris, arguing the outcome will determine whether class litigation proceeds or arbitration is required.
- Plaintiffs opposed a stay, asserting continued harm from delay and arguing Sprouts waived arbitration by not timely moving to compel; they provided a declaration outlining ongoing damages (e.g., lost identity protection, delayed refunds).
- The Court weighed potential harm from delay, hardship to Sprouts if forced to litigate a case that may be compelled to arbitration, and judicial economy, and concluded a stay was appropriate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether to stay proceedings pending the Supreme Court’s decision in Morris | Delay causes continuing harm and Sprouts waived arbitration by missing the meet-and-confer compromise | Supreme Court decision is dispositive on class waivers; denying a stay risks wasted litigation if Morris is overturned | Granted stay pending Supreme Court decision in Morris |
| Whether Plaintiffs will suffer irreparable harm from a stay | Plaintiffs claim ongoing non-monetary harms (identity protection lapse, tax filing issues) | Monetary harms alone insufficient to defeat stay; Plaintiffs did not seek preliminary injunctive relief earlier | Court found insufficient showing of irreparable harm; factor does not strongly oppose a stay |
| Whether Defendant would be prejudiced without a stay | Plaintiffs argued waiver negates need for stay | Defendant would have to litigate a potentially moot class action if Morris overturns Ninth Circuit, causing substantial hardship | Court found potential hardship to Defendant weighed heavily in favor of a stay |
| Whether staying promotes judicial economy and orderly course of justice | Plaintiffs argued delay but did not contest simplification argument strongly | A stay could avoid wasteful class-certification and discovery work if arbitration becomes required | Court held stay would simplify issues and conserve judicial resources |
Key Cases Cited
- Lockyer v. Mirant Corp., 398 F.3d 1098 (9th Cir. 2005) (district court has discretion to stay proceedings and must weigh competing interests)
- Landis v. N. Am. Co., 299 U.S. 248 (U.S. 1936) (factors for exercising discretion to stay proceedings)
- CMAX, Inc. v. Hall, 300 F.2d 265 (9th Cir. 1962) (stay analysis includes potential for irreparable harm and orderly course of justice)
- Leyva v. Certified Grocers of Cal. Ltd., 593 F.2d 857 (9th Cir. 1979) (stay may be efficient when independent proceedings will affect the case)
- Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016) (Ninth Circuit decision addressing enforceability of class-action waivers under the NLRA)