Tag Archives: Collective Action

D.Minn.: Where Agreement Silent As to Collective Action, Case May Proceed on Collective Basis in Arbitration

Mork v. Loram Maintenance of Way, Inc.

This case was before the court on the defendant’s motion to compel arbitration on an individual basis.  While, the parties were in agreement that the case should be remanded to arbitration, the salient issue before the court was whether the arbitration agreement- silent on the issue of collective/class proceedings- allowed for collective treatment of the case.  The court held that the parties had agreed to collective treatment of claims by the agreement’s silence.  Thus, the case was remanded to arbitration, but to be treated as a collective action.

Initially the court held that, based on the absence of clear authority one way or another from the Supreme Court, the court had the authority to decide whether the case could proceed on a collective basis.  Having made this decision, it proceeded into its analysis.

Discussing the standard it would apply, the court explained:

“The scope of an arbitration agreement is determined with reference to the agreement of the parties as evidenced by the terms of “the arbitration agreement itself or [based on] some background principle of contract law that would affect its interpretation.” See AT & T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1750 (2011). The Court must “give effect to the contractual rights and expectations of the parties.” Stolt–Nielsen, 130 S.Ct. at 1774 (citation omitted); see Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 626 (1985) (“as with any other contract, the parties’ intentions control”). Imposition of a particular type of arbitration cannot be based solely “on policy judgments.” Concepcion, 131 S.Ct. at 1750. Like any contract dispute, however, ambiguities in the agreement must be construed against the drafter. See, e.g., Advantage Consulting Group, Ltd. v. ADT Sec. Sys., Inc., 306 F.3d 582, 588 (8th Cir.2002).

In facing the question of whether to compel collective versus individual arbitration, the Court must therefore determine what the parties agreed to in the Arbitration Clause. A mere agreement to arbitrate, without more, does not imply agreement to collective arbitration. Cf. Stolt–Nielsen, 130 S.Ct. at 1775. This approach is consistent with Eighth Circuit precedent in the context of class arbitrations, Dominium Austin Partners, L.L.C. v. Emerson, 248 F.3d 720, 728–29 (8th Cir.2001), and consolidation of individual arbitrations, Baesler v. Cont’l Grain Co., 900 F.2d 1193, 1195 (8th Cir.1990). In Emerson and Baesler, the Eighth Circuit held that an arbitration agreement must provide for the type of arbitration which is sought to be compelled by the Court.

Loram urges a restrictive reading of Baesler, Emerson, and Stolt–Nielsen which would require explicit reference to, and acceptance of, collective arbitration in order for Mork’s claim to proceed on a collective basis. Those cases do not stand for such a strict standard. In Stolt–Nielsen, the Supreme Court’s statement that an intention to authorize class arbitration cannot be “infer[red] solely from the fact of the parties’ agreement to arbitrate,” Stolt–Nielsen, 130 S.Ct. at 1775 (emphasis added), indicates that such an intention may be inferred and need not be explicitly stated.  The majority in Stolt–Nielsen therefore “[did] not insist on express consent to class arbitration.” Id. at 1783 (Ginsburg, J., dissenting). Accordingly, “Stolt–Nielsen does not foreclose the possibility that parties may reach an ‘implicit’—rather than express—‘agreement to authorize class-action arbitration.’ “ Jock v. Sterling Jewelers Inc., 646 F.3d 113, 123 (2d Cir.2011); see Jones v. St. Paul Cos ., Inc., 495 F.3d 888, 893 (8th Cir.2007) (“[F]ederal courts are bound by the Supreme Court’s considered dicta almost as firmly as by the Court’s outright holdings, particularly when … [the dicta] is of recent vintage and not enfeebled by any [later] statement.”) (internal quotation marks and citations omitted).

In sum, the question before the Court is not whether the Arbitration Clause used the precise words “collective arbitration.” Rather, the Court must determine whether the Arbitration Clause evinces sufficient indicia of agreement between the parties that a claim within its scope may proceed on a collective basis. In doing so, the Court must keep in mind that Loram drafted the language of the Arbitration Clause and, therefore, that ambiguities must be construed against it. Advantage Consulting, 306 F.3d at 588.

The Court notes that the test from Stolt–Nielsen stated here may be more stringent that the appropriate test for contracts of adhesion. See Stolt–Nielsen, 130 S.Ct. at 1783 (Ginsburg, J., dissenting) (“[T]he Court apparently spares from its affirmative-authorization requirement contracts of adhesion presented on a take-it-or-leave-it basis.”). Because the Court concludes that the Arbitration Clause does affirmatively authorize collective arbitration, there is no need to address whether the CAA was a contract of adhesion and therefore subject to a less stringent standard. The Court notes, however, that the parties here, unlike those in Stolt–Nielsen, are not both “sophisticated business entities” with comparable bargaining power, see id. at 1775, and the CAA appears to have been a “take-it-or-leave-it” boilerplate contract.”

The court then applied its standard and held that the silence of the parties on the collective issue demonstrated the indicia that the parties agreed to collective arbitration:

“While the parties distinguish between “express” and “implied” agreement to collective arbitration, as discussed above, the relevant question is whether there exists sufficient indicia that the parties agreed to undertake collective arbitration in the event of an employment dispute. While the Arbitration Clause does not refer explicitly to collective claims, the Court concludes that it does authorize such claims to proceed before an arbitrator.

To begin, the Arbitration Clause applies to “claims or disputes of any nature arising out of or relating to the employment relationship” and “statutory claims … arising out of or resulting from [Mork’s] employment with Loram.” (CAA ¶ 8 (emphasis added).) Mork’s claim that he and similarly situated coworkers were deprived of overtime pay is undisputedly related to “the employment relationship” and his FLSA claim is “statutory.” An action arising from FLSA violations “may be maintained against any employer … in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated.29 U.S.C. § 216(b) (emphasis added). Thus, Mork has a statutory right to bring a FLSA claim on behalf of himself and similarly situated Field Application Technicians, and such a claim arises out of his employment relationship with Loram.

Loram contends that Mork’s ability to bring a claim on behalf of similarly situated employees is foreclosed because the Arbitration Clause’s references to potential arbitral parties include only Loram and Mork. For example, the Arbitration Clause provides that the arbitrator will have “exclusive authority to resolve any dispute or claim relating to, arising out of, or resulting from my employment with Loram” and the “statutory claims” covered by the Arbitration Clause are those “arising out of or resulting from my employment with Loram or the formation or the termination of my employment with Loram.” (CAA ¶ 8 (emphasis added).) These statements, Loram argues, show that the Arbitration Clause does not authorize collective arbitrations.

The Court is not persuaded that the Arbitration Clause’s particular reference to disputes between Mork and Loram must be read to preclude a collective claim. Mork’s FLSA claim is no less a claim “arising out of [his] employment with Loram” because it implicates similarly situated employees. The FLSA claim remains “his.” Viewed in even the most charitable light, Loram’s argument only creates some amount of ambiguity in the Arbitration Clause—ambiguity that must be resolved in Mork’s favor. Advantage Consulting, 306 F.3d at 588.

The conclusion that the Arbitration Clause permits collective arbitration is also supported by the contrast between its broad delegation of “any claims and disputes” to arbitration and its exclusion of only “claims or disputes [arising out of the CAA], or the breach, termination or invalidity thereof.” (CAA ¶ 8.) By negative implication, collective arbitration—a type of arbitration not expressly excluded—can be presumed to be covered by the wide ranging terms of the Arbitration Clause, particularly in light of the factors already discussed.

The Court further notes that the Arbitration Clause provides that arbitration be conducted in accordance with model rules provided by the American Arbitration Association (“AAA”) “in force at the time of the claim or dispute” and that the AAA “shall administer any such arbitration.” (CAA ¶ 8.) The AAA’s “Policy on Class Arbitrations” states that the AAA will “administer demands for class arbitration … if (1) the underlying agreement specifies that disputes arising out of the parties’ agreement shall be resolved by arbitration in accordance with any of the Association’s rules, and (2) the agreement is silent with respect to class claims, consolidation or joinder of claims.” See American Arbitration Association, Policy on Class Arbitrations, July 14, 2005, available at http://www.adr.org/sp.asp?id=25967. Even as interpreted by Loram, the Arbitration Clause in this case satisfies both criteria.

While this AAA policy was promulgated after the execution of the Arbitration Clause, the parties here agreed to be bound by the AAA rules in force “at the time of the claim or dispute.” (CAA ¶ 8.) The parties thus intended to be bound by future iterations of those rules. Loram’s decision to follow and abide by AAA rules therefore lends further support to the Court’s conclusion that the Arbitration Clause authorizes collective arbitration.

It is important to note that Mork has not moved the Court to consolidate otherwise independent actions into a single proceeding as was the case in Baesler, 900 F.3d at 1194–95. Rather, Mork seeks to proceed with a single, statutorily prescribed collective claim. Consolidation is a method by which a Court may efficiently resolve otherwise legally independent claims which happen to share a common question of law or fact. See Fed.R.Civ.P. 42(a). A FLSA collective action, in contrast, is a mechanism in which one claim can vindicate the rights of many. If Mork were seeking consolidated treatment of independent claims brought by employees, the Court would hesitate in considering those claims as “arising out of or resulting from [Mork’s] employment with Loram.” (See CAA ¶ 8.)

The Court also notes that some of the concerns raised by the Supreme Court about class arbitration are not present in the sort of collective arbitration sought by Mork. For one, a FLSA collective action is unlike a class action under Rule 23 of the Federal Rules of Civil Procedure because similarly situated employees must always “opt-in” to a FLSA action. See 29 U.S.C. § 216(b). Worries about an arbitrator “adjudicat[ing] the rights of absent parties” without affording them the full panoply of protections provided in court are therefore greatly diminished. See Stolt–Nielsen, 130 S.Ct. at 1776.

Finally, while fully cognizant that policy judgments may not be dispositive in this legal analysis, see Concepcion, 131 S.Ct. at 1750, the Court would be remiss if it did not briefly address the consequences of adopting a rule that an arbitration agreement cannot allow for collective or class arbitration except where the agreement explicitly uses and ratifies those precise terms. Such a rule would lead to great uncertainty, calling into question the countless arbitration agreements that have been executed in the shadow of a less stringent rule. Moreover, the adoption of such a rule would likely prevent the vindication of workers’ basic rights under the FLSA. See Sutherland v. Ernst & Young LLP, 768 F.Supp.2d 547, 553–54 (S.D.N.Y.2011).”

Click Mork v. Loram Maintenance of Way, Inc. to read the entire Memorandum of Law and Order.

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S.D.Ohio: 21 Late Opt-ins May Be Properly Added Despite Lack of Good Cause Showing

Heaps v. Safelite Solutions, LLC

This case was before the court on the defendant’s motion to strike the consents of opt-in plaintiffs filed after the court-imposed deadline (45 days from mailing of notice), and plaintiff’s cross-motion for order allowing late opt–ins.  Citing judicial economy and the remedial principles underlying the FLSA, the court denied the defendant’s motion to strike and granted plaintiff’s cross-motion, allowing the opt-in plaintiffs to remain in the case.  Significantly, the court granted plaintiff’s motion without requiring a showing of good cause as to why the opt-ins filed their consents up to 2 months beyond the deadline imposed by the court.

Permitting the late opt-ins to remain in the case, the court reasoned:

“The FLSA provides the procedure for potential plaintiffs to opt-in to a collective action but does not specify when the potential plaintiff must opt-in. See 29 U.S.C. §§ 216(b), 255, 256. Consequently, deadlines to opt-in are established by the trial court. The FLSA also does not “provide a standard under which a court should consider whether to include opt-in plaintiffs whose consent forms are filed after the court-imposed deadline has passed.” Ruggles v. Wellpoint, Inc., 687 F.Supp.2d 30, 37 (N.D.N.Y.2009).

Although the caselaw on this issue is wide-ranging, courts have generally decided the question by balancing various combinations of the following factors: (1) whether ‘good cause’ exists for the late submissions; (2) prejudice to the defendant; (3) how long after the deadline passed the consent forms were filed; (4) judicial economy; and (5) the remedial purposes of the FLSA.  Id. (citing Ayers v. SGS Control Servs., Inc., 2007 WL 3171342, at *4–5 (S.D.N.Y. Oct.9, 2007) (requiring that late opt-in plaintiffs show good cause for their untimely consent filings), Robinson–Smith v. Gov’t Empl. Ins. Co., 424 F.Supp.2d 117, 123–24 (D.D.C.2006) (considering the potential prejudice to the defendant and the purposes of the FLSA), Raper v. State of Iowa, 165 F.R.D. 89, 92 (S.D.Iowa 1996) (considering potential prejudice to the defendant and judicial economy), Monroe v. United Air Lines, Inc., 94 F.R.D. 304, 305 (N.D.Ill.1982) (considering how long after the deadline the consent forms were filed); but see Reyes v. Texas Ezpawn, L.P., 459 F.Supp.2d 546, 566–67 (S.D.Tex.2006) (dismissing plaintiffs who filed consent forms after the opt-in period without any discussion of the above factors)).

Balancing all of the above factors, the Court finds that the 21 opt-in plaintiffs may be properly added despite their failure to submit consent notices prior to the Court’s deadline. Although Plaintiffs have offered no good cause for their failure to timely file these consent forms, all of the other factors weigh in their favor. See id. (permitting late consent opt-in plaintiffs to join collective class even though the plaintiffs offered no good cause for their failure to timely file, but all other factors weighed in their favor); In Re Wells Fargo Home Mortgage Overtime Pay Litigation, No. MDL 06–01770 MHP, 2008 WL 4712769 at *2 (N.D.Cal. Oct.23, 2008) (rejecting a “rigid application of a ‘good cause’ standard” because it “does not fully respond to the various factors with which the court must concern itself” such as judicial economy and prejudice to the defendant) (citing Raper, 165 F.R.D. at 89).

Given that over 200 persons have consented to opt-in, the inclusion of these 21 plaintiffs, approximately 10% increase in the size of the potential class, will not overly burden or prejudice Defendants. See Abubakar v. Co. of Solano, No. Civ. S–06–2268, 2008 WL 550117 at *2 (E.D.Cal. Feb.27, 2008) (holding a 15% increase in liability, 23 plaintiffs added to a class of 155, was not prejudicial). Also, all of these consent notices were filed with the Court within a few months after the deadline and the majority of them within one month, not presenting any unfair surprise or requiring that Defendants take any additional steps to defend this action. See Raper, 165 F.R.D. at 92 (finding no prejudice to the defendant by allowance of the addition of plaintiffs even after liability had been determined). Thus, Defendant has not been prejudiced by a significant delay and the addition of these opt-in plaintiffs should not hamper the discovery process already underway.

In terms of judicial economy, were the Court to deny the admission of these plaintiffs, they would still be able to file separate claims for relief against Defendant, who would still face the prospect of defending against their individual FLSA claims. See Ruggles, 687 F.Supp.2d at 37 (citing 29 U.S.C. § 256(b)). Indeed, Plaintiffs suggest that they would file separate actions and then request consolidation with the instant action. (ECF No. 85 at 6) (the untimely plaintiffs “only option will be to file identical, individual claims with the Court” and this Court would be permitted to consolidate those individual lawsuits under Fed.R.Civ.P. 42(a) “because the cases will all ‘involve a common question of law or fact’ ”). “Obviously, there is little economy in spawning identical FLSA lawsuits that themselves might be properly joined with this lawsuit in the future.” Ruggles, 687 F.Supp.2d at 38 (citing Abubakar, 2008 WL 550117 at *2) (noting the futility in requiring late opt-in plaintiffs to file separately given the foreseeability of a consolidation order pursuant to Fed.R.Civ.P. 42(a)).

Finally, this Court agrees with other courts’ holdings that with respect to the FLSA, “[a] generous reading, in favor of those whom congress intended to benefit from the law, is also appropriate when considering issues of time limits and deadlines.” Kelley v. Alamo, 964 F.2d 747, 750 (8th Cir.1992) (citation omitted); see also Ruggles, 687 F.Supp.2d at 38 (agreeing with a generous reading of the FLSA in favor of those whom congress intended to benefit from the statute in late opt-in circumstance); In re Wells Fargo Home Mortg. Overtime Pay Litigation, 2008 WL 4712769 at *2 (same); Schaefer–LaRose v. Eli Lilly & Co., No. 1:07–cv–1133–SEB–TAB, 2008 WL 5384340, at *2 (S.D.Ind. Dec.17, 2008) (same).”

Click Heaps v. Safelite Solutions, LLC to read the entire Opinion and Order.

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N.D.Cal.: Defendant’s Motion to Compel Depositions of 3 Named Plaintiffs and 25 Opt-ins in Venue Where Case Pending Denied Due to Financial Concerns

Gee v. Suntrust Mortg., Inc.

This case was before the court on the defendant’s motion to compel the three named plaintiffs and twenty-five opt-in plaintiffs who live in twenty-five different cities across the country to appear for depositions in San Francisco or in three other cities of its choice.  The defendant argued that the deponents were required to appear in San Francisco, which is where the FLSA putative collective action was filed, because they have not established good cause for appearing elsewhere.  Prior to its motion, the defendant offered to take the depositions either in San Francisco or in three other cities it claims would be more convenient to the deponents.  The plaintiffs had offered to produce the deponents in 14 different cities, or alternatively suggested that the depositions be taken by video conference.  Plaintiffs opposed the motion, arguing that traveling to any of the cities selected by the defendant would be financially burdensome for them, and that requiring them to do so despite this burden would contradict the purpose of joining a collective action brought under the FLSA. Holding that the financial concerns expressed by the plaintiffs constituted good cause for excusing the deponents from traveling to the cities selected by the defendant for the depositions, the court denied the defendant’s motion.

Addressing the parties contentions, the court reasoned:

“One of the chief advantages of opting into a collective action, such as the one brought by Plaintiffs, is that it “lower[s] individual costs to vindicate rights by the pooling of resources.” Hoffmann–La Roche Inc. v. Sperling, 493 U.S. 165, 179, 110 S.Ct. 482, 107 L.Ed.2d 480 (1989). Here, this advantage would be significantly reduced or even eliminated if the proposed deponents are required to travel hundreds of miles for their depositions. See, e.g., Bransfield v. Source Broadband Services, LLC, 255 F.R.D. 447, 450 (W.D.Tenn.2008) (rejecting defendants’ argument that opt-in plaintiffs in FLSA collective action must be required to appear for depositions in the forum where action was filed because doing so “would cancel much of the benefit gained by joining in the collective action” and because “the forum was chosen for [the opt-in plaintiffs]”). The Court is not persuaded by Suntrust’s interpretation of the case law cited by Plaintiffs, but even when taking its interpretation at face value, this case meets the criteria for excusing the deponents from appearing in the cities selected by Suntrust, as Suntrust has made no showing that the issues to be covered in the depositions are sufficiently complex to require in-person depositions.

Likewise, Suntrust’s argument that conducting the depositions via videoconference would be detrimental to its ability to question and observe the deponents is unconvincing. Parties routinely conduct depositions via videoconference, and courts encourage the same, because doing so minimizes travel costs and “permits the jury to make credibility evaluations not available when a transcript is read by another.” Fanelli v. Centenary College, 211 F.R.D. 268, 270 (D.N.J.2002) (citations omitted); see also Guillen v. Bank of America Corp., No. 10–cv–05825, 2011 WL 3939690, at *1 (N.D.Cal. August 31, 2011) (“A desire to save money constitutes good cause to depose out-of-state witnesses via telephone or remote means”). Accordingly, Suntrust’s motion is denied.”

Click Gee v. Suntrust Mortg., Inc. to read the entire Order Denying Motion to Compel.

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W.D.Pa.: Following Denial of Class Cert as Incompatible With 216(b) Collective Action, Plaintiffs’ Motion to Dismiss State Law Claims to Re-File in State Court Granted

Bell v. Citizens Financial Group, Inc.

Although all circuit courts that have taken up the issue have held that so-called hybrid wage and hour cases- comprised of both opt-in collective actions (FLSA) and opt-out class action (state wage and hour law)- are permissible, some courts within the Third Circuit continue to hold otherwise.  As a result, not surprisingly, defendant-employers in such cases continue fighting the class action components of such cases on “inherent incompatibility” grounds.  Such was the case here, where the court had previously conditionally certified the FLSA claims, but denied plaintiffs related motion for class certification of Pennsylvania Minimum Wage Act (“PMWA”) claims on compatibility grounds.  However, in what may become a frequently cited case going forward, the plaintiffs took the logical next step and asked the court to dismiss the PMWA claims so they could re-file them in state court alone, where there would be no issue of compatibility.  Not surprisingly, the defendants then threw up their arms, essentially arguing that the plaintiffs should not be able to bring their class claims in federal court and therefore not be able to proceed as a class in any venue.  The court rejected the defendants argument, permitting the voluntary dismissal of the state law claims to be pursued separately in state court.

After reviewing the applicable standards under Rule 41, the court granted plaintiffs’ motion for voluntary dismissal of the PMWA claims.  The court reasoned:

“Here, defendants have already filed an answer and do not stipulate to the dismissal. Therefore, the court must weigh the equities and decide whether to enter an order of dismissal. Defendants do not assert, and the court cannot ascertain, that they would suffer any plain legal prejudice as a result of dismissal of Watson’s claims. Watson’s intent to re-file a PMWA claim in state court is not plain prejudice. Pouls, 1993 WL 308645, at *1.

Upon weighing the factors set forth in Pouls, we conclude that it is appropriate to grant Watson’s motion to voluntarily dismiss her case. Defendants are not prejudiced by their efforts and expenses in this litigation, because other opt-in plaintiffs remain and the instant suit will continue. Defendants have failed to identify any efforts or expenses unique to Watson. Similarly, the progression of the litigation and Watson’s diligence in moving for dismissal are not determinative factors, due to the ongoing nature of the collective action suit. Consideration of the final factor, the duplicative or excessive expense of subsequent litigation, yields some possibility of prejudice to defendants. If Watson does file a PMWA case in state court and if defendants successfully remove it to federal court, defendants might incur some duplicative expenses in future federal court litigation on issues of claim incompatibility. However, at this time, such expenses are highly speculative. Therefore, we do not find plain prejudice to defendants based on duplicative expenses.

Accordingly, because there is no plain legal prejudice and because the equities weigh in favor of dismissal, we will grant plaintiff Watson’s motion to dismiss her claims without prejudice to her right to refile these claims in state court. An appropriate order follows.”

With the issue of permissibility of so-called hybrids up at the Third Circuit right now it will be interesting to see if this decision gains legs in its trial courts.  For now however it is safe to say that defendants in so-called hybrid cases should be careful what they wish for in seeking dismissal of state classes, because two is not always better than one.

Click Bell v. Citizens Financial Group, Inc. to read the entire Memorandum and Order.

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E.D.Pa.: Dukes Does Not Affect Court’s Analysis On 216(b) Conditional Cert Motion; Defendant’s Motion to Reconsider Denied

Spellman v. American Eagle Exp., Inc.

In one of the first decisions, post-Dukes, to clarify what affect the Supreme Court’s recent decision will have on conditional certification of FLSA cases, the answer appears to be not much.

In Dukes, the Supreme Court held that the trial court had inappropriately certified a class of over a million women employed by Wal-mart, based on claims of gender bias.  The Supreme Court reasoned that the plaintiffs had not met their burden to demonstrate the requisite commonality required by FRCP 23.  In the wake of Dukes, there was much speculation as to whether courts would extend the reasoning in Dukes to cases seeking conditional certification of collective actions under 216(b) of the FLSA.  In one of the first decisions rendered on this issue, the answer appears to be a resounding no.

This case was before the court on the defendant’s motion seeking reconsideration of the court’s prior order conditionally certifying a class of drivers employed by defendant.  Plaintiffs alleged that defendant, a trucking company, improperly misclassified all of its drivers as independent contractors, when they were really employees.  Holding that plaintiffs had met their lenient burden of proof as so-called stage one, the court conditionally certified a nationwide class of drivers, all of whom had been classified as independent contractors.  Following the Duke’s decision, the defendant sought reconsideration of the order conditionally certifying the class.  Denying the motion, the court explained that the differences between FRCP 23, the class action provision under which Dukes was decided and 216(b), the opt-in provision for FLSA collective actions render Dukes inapplicable in the context of an FLSA collective action.  As such, the court denied defendant’s motion.

The court reasoned:

“The instant case is a collective action brought pursuant to the FLSA, 29 U.S.C. § 216(b). Unlike Rule 23 class actions. the FLSA requires collective action members to affirmatively opt in to the case. See § 216(b). To determine whether the proposed group of plaintiffs is “similarly situated,” and therefore qualified to proceed as a conditional collective action, a district court applies a two-step test. See Smith v. Sovereign Bancorp, Inc., No. 03–2420, 2003 U.S. Dist. LEXIS 21010 (E.D.Pa. Nov. 13, 2003). In the first step, which is assessed early in the litigation process, the plaintiff at most must make only a “modest factual showing” that the similarly situated requirement is satisfied. See Bosley v. Chubb Corp., No. 04–4598, 2005 U.S. Dist. LEXIS 10974, at *7–9 (E.D.Pa. Jun. 3, 2005). The Plaintiffs have made this modest factual showing, and this Court’s analysis is not affected by Dukes. The second step of the collective action certification process will be conducted at the close of class-related discovery, at which time this Court will conduct “a specific factual analysis of each employee’s claim to ensure that each proposed plaintiff is an appropriate party.” Harris v. Healthcare Servs. Grp., Inc., No. 06–2903, 2007 U.S. Dist. LEXIS 55221, at *2 (E.D.Pa. Jul. 31, 2007). At this second stage, AEX may argue that Dukes‘s analysis of what constitutes a “common question” is persuasive to this Court’s analysis of whether an FLSA collective action should be certified. In the interim, AEX’s motion for reconsideration is denied.”

Click Spellman v. American Eagle Exp., Inc. to read the entire Order.

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Filed under Class Certification, Collective Actions, Independent Contractor vs Employee

3d Cir.: Defendant May Not “Pick Off” a Putative Collective Action by Tendering Full Relief to Named-Plaintiff at Outset

Symczyk v. Genesis Healthcare Corp.

In an issue that has now been addressed by several circuits in recent years, the Third Circuit was presented with the question of whether a defendant-employer in an FLSA case may “pick off” a putative collective action (prior to conditional certification), where it tenders full relief to the named-Plaintiff.  Consistent with other circuits to have taken up this issue, the Third Circuit held that a defendant may not do so and that such an offer of judgment (OJ) does not moot a putative collective action.  As such, the court reversed the decision below, dismissing the case on mootness grounds.

In dismissing the case initially, the trial court below reasoned, “[Plaintiff] does not contend that other individuals have joined her collective action. Thus, this case, like each of the district court cases cited by Defendants, which concluded that a Rule 68 offer of judgment mooted the underlying FLSA collective action, involves a single named plaintiff. In addition, Symczyk does not contest Defendants’ assertion that the 68 offer of judgment fully satisfied her claims….”

After discussing the application of full tender relief offers in the Rule 23 context, the court concluded that the same reasoning precludes picking off the named-plaintiff in a representative action brought pursuant to 216(b).  Instead, the court held that a motion for conditional certification in an FLSA case made within a reasonable time “relates back” to the time of the filing of the Complaint and thus such a representative action may proceed, notwithstanding to purportedly “full tender” offer to the named-plaintiff.  The court explained:

“Although the opt-in mechanism transforms the manner in which a named plaintiff acquires a personal stake in representing the interests of others, it does not present a compelling justification for limiting the relation back doctrine to the Rule 23 setting. The considerations that caution against allowing a defendant’s use of Rule 68 to impede the advancement of a representative action are equally weighty in either context. Rule 23 permits plaintiffs “to pool claims which would be uneconomical to litigate individually.” Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 809, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985). Similarly, § 216(b) affords plaintiffs “the advantage of lower individual costs to vindicate rights by the pooling of resources.” Hoffmann–La Roche, 493 U.S. at 170. Rule 23 promotes “efficiency and economy of litigation.” Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 349, 103 S.Ct. 2392, 76 L.Ed.2d 628 (1983). Similarly, “Congress’ purpose in authorizing § 216(b) class actions was to avoid multiple lawsuits where numerous employees have allegedly been harmed by a claimed violation or violations of the FLSA by a particular employer.” Prickett v. DeKalb Cnty., 349 F.3d 1294, 1297 (11th Cir.2003).

When Rule 68 morphs into a tool for the strategic curtailment of representative actions, it facilitates an outcome antithetical to the purposes behind § 216(b). Symczyk’s claim-like that of the plaintiff in Weiss—was “acutely susceptible to mootness” while the action was in its early stages and the court had yet to determine whether to facilitate notice to prospective plaintiffs. See Weiss, 385 F.3d at 347 (internal quotation marks omitted). When the certification process has yet to unfold, application of the relation back doctrine prevents defendants from using Rule 68 to “undercut the viability” of either’ type of representative action. See id. at 344.

Additionally, the relation back doctrine helps safeguard against the erosion of FLSA claims by operation of the Act’s statute of limitations. To qualify for relief under the FLSA, a party plaintiff must “commence” his cause of action before the statute of limitations applying to his individual claim has lapsed. Sperling v. Hoffmann–La Roche, Inc., 24 F.3d 463, 469 (3d Cir.1994).  For a named plaintiff, the action commences on the date the complaint is filed. 29 U.S.C. § 256(a). For an opt-in plaintiff, however, the action commences only upon filing of a written consent. Id. § 256(b). This represents a departure from Rule 23, in which the filing of a complaint tolls the statute of limitations “as to all asserted members of the class” even if the putative class member is not cognizant of the suit’s existence. See Crown, Cork & Seal Co. 462 U.S. at 350 (internal quotation marks omitted). Protracted disputes over the propriety of dismissal in light of Rule 68 offers may deprive potential opt-ins whose claims are in jeopardy of expiring of the opportunity to toll the limitations period—and preserve their entitlements to recovery—by filing consents within the prescribed window.

In sum, we believe the relation back doctrine helps ensure the use of Rule 68 does not prevent a collective action from playing out according to the directives of § 216(b) and the procedures authorized by the Supreme Court in Hoffmann–La Roche and further refined by courts applying this statute. Depriving the parties and the court of a reasonable opportunity to deliberate on the merits of collective action “conditional certification” frustrates the objectives served by § 216(b). Cf. Sandoz, 553 F.3d at 921 (explaining “there must be some time for a[n FLSA] plaintiff to move to certify a collective action before a defendant can moot the claim through an offer of judgment”). Absent undue delay, when an FLSA plaintiff moves for “certification” of a collective action, the appropriate course—particularly when a defendant makes a Rule 68 offer to the plaintiff that would have the possible effect of mooting the claim for collective relief asserted under § 216(b)—is for the district court to relate the motion back to the filing of the initial complaint.

Upon remand, should Symczyk move for “conditional certification,” the court’ shall consider whether such motion was made without undue delay, and, if it so finds, shall relate the motion back to December 4, 2009the date on which Symczyk filed her initial complaint. If (1) Symczyk may yet timely seek “conditional certification” of her collective action, (2) the court permits the case to move forward as a collective action (by virtue of Symczyk’s satisfaction of the “modest factual showing” standard), and (3) at least one other similarly situated employee opts in, then defendants’ Rule 68 offer of judgment would no longer fully satisfy the claims of everyone in the collective action, and the proffered rationale behind dismissing the complaint on jurisdictional grounds would no longer be applicable. If, however, the court finds Symczyk’s motion to certify would be untimely, or otherwise denies the motion on its merits, then defendants’ Rule 68 offer to Symczyk—in full satisfaction of her individual claim—would moot the action.

For the foregoing reasons, we will reverse the judgment of the District Court and remand for proceedings consistent with this opinion.”

Thus, while ultimately the OJ might have the effect of mooting the case, it could not do so prior to a reasonable opportunity to plaintiff of seeking conditional certification of same.

Click Symczyk v. Genesis Healthcare Corp. to read the entire decision.

1 Comment

Filed under Collective Actions, Offer of Judgment

E.D.Pa.: Defendant’s Attempt to Obtain Class Waivers From Absent Class Members While Motion for Conditional Certification Pending Impermissible; Corrective Measures Ordered

Williams v. Securitas Sec. Services USA, Inc.

Before the court was the emergency motion of plaintiffs for a protective order and corrective mailing to address defendant’s improper communications with absent class members.  While plaintiffs motion for conditional certification was pending before the court (but before it had been resolved), the defendant sought to obtain class waivers of the claims in the case from its current employees, by sending each an alternative dispute resolution agreement.  The court held that such attempts by the defendant amounted to an obstruction of the court’s role in managing the collective action, granted plaintiffs motion and ordered related corrective action by defendant.

The motion alleged that defendant distributed to all its employees, including its Pennsylvania employees, a document entitled “Securitas Security Services USA, Inc. Dispute Resolution Agreement” (hereinafter “the Agreement”). The body of the Agreement consists of ten paragraphs on four type-written, single-spaced pages and is written in a small font. A fifth page provides a place for the employee to acknowledge receipt of the document.  In relevant part:

“The Agreement purports to require all Securitas employees to submit “any dispute arising out of or related to Employee’s employment with [Securitas] … or termination of employment” to a binding arbitration conducted pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq. It states in small boldface letters that “this Agreement requires all such disputes to be resolved only by an arbitrator through final and binding arbitration and not by way of court or jury trial.” The Agreement specifies that any dispute arising from federal “wage-hour law” and the FLSA must be arbitrated. The Agreement states, again in small bold font, “there will be no right or authority for any dispute to be brought, heard or arbitrated as a class, collective or representative action (“Class Action Waiver”).”

Paragraph 7 of the Agreement says that although the Agreement is meant to apply “broadly,” if an employee is “a named party plaintiff, or ha[s] joined as a party plaintiff this Agreement shall not apply to those Actions, and you may continue to participate in them without regard to this Agreement,” but “shall apply to all Actions in which you are not a plaintiff or part of a certified class.” The Agreement then lists five representative or class action lawsuits in which Securitas is a named defendant, including this lawsuit, “Frankie Williams and Kimberly Ord, filed 12/10/2010, USDC, Eastern District of Pennsylvania Case No. 2:10–CV–07181–HB.” The term “Actions” is defined as “litigation on behalf of [Securitas] employees in which those employees desire to represent claims of other employees in class, collective or other representative actions.” Thus, the term “Actions” does not appear to be limited only to the five lawsuits enumerated later in paragraph 7. The nature of the Williams action is not explained.

The Agreement further states that if the employee would like to participate in one of the “Actions,” he or she “may opt out of this Agreement by following the procedure set forth in Section 9, below.”  To opt out of the Agreement, the employee must call a toll-free telephone number within 30 days of the date the employee received the Agreement. According to the Agreement, “Should an Employee not opt out of this Agreement within 30 days of the Employee’s receipt of this Agreement, continuing the Employee’s employment constitutes mutual acceptance of the terms of this Agreement by the Employee and [Securitas].” The Agreement declares that not opting out means an employee forfeits the right to participate in any collective or representative action. Securitas adds that it will not retaliate against any employee for opting out of the Agreement or for asserting claims according to its terms.

The fifth page of the Agreement states as follows:

ACKNOWLEDGMENT OF RECEIPT OF THE SECURITAS SECURITY SERVICES USA, INC. DISPUTE RESOLUTION AGREEMENT

BY SIGNING BELOW, I AM ACKNOWLEDGING RECEIPT OF THE SECURITAS SECURITY SERVICES USA, INC. DISPUTE RESOLUTION AGREEMENT, EFFECTIVE IMMEDIATELY.

Below this text is a place for the employee to sign and date the Agreement. There is also a place for a witness to sign his or her name.”

The court rejected defendant’s attempts to stretch the holding of the Supreme Court’s recent holding in AT&T Mobility LLC v. Concepcion, stating:

“Under Hoffman–La Roche, this court has a responsibility to prevent confusion and unfairness concerning this action in which plaintiffs seek to have the matter proceed as a collective action and to insure that all parties act fairly while the court decides whether and how this action will move forward under the FLSA. In the meantime, to prevent confusion and unfairness, we will order Securitas to rescind the Agreement with respect to its Pennsylvania employees as it relates to this litigation. We will require Securitas to set forth the nature of this action and advise its Pennsylvania employees that the Agreement is not binding with regard to those employees’ right to participate in this lawsuit, notwithstanding the fact that the employee may have signed the Agreement or failed timely to opt out.

Securitas contends that any interference by this court with its efforts to compel arbitration of disputes with its employees will be contrary to the Supreme Court’s recent decision in AT&T Mobility LLC v. Concepcion, –––U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011). We disagree. In Concepcion, the Supreme Court held that, generally, states may not adopt rules of contract interpretation that undermine the “overarching purpose” of the FAA, which “is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings.” Id. at 1748. There, the Court considered California contract law, which deemed unconscionable certain contracts that disallowed class arbitration. The Court found the law impermissibly stood “as an obstacle to the accomplishment of the FAA’s objectives.”

Securitas’ reliance on Concepcion is inapposite because plaintiffs’ motion for a protective order does not rely on any state-law ground to invalidate the Agreement. Here the issue is quite different. This court has found the Agreement to be a confusing and unfair communication with the class of possible plaintiffs in this action under the FLSA.

Securitas argues that invalidating the Agreement merely because this class action lawsuits is pending is equivalent to preventing it from adopting any arbitration policy at all. Whatever right Securitas may have to ask its employees to agree to arbitrate, its current effort, which specifically references this lawsuit, is confusing and misleading and clearly designed to thwart unfairly the right of its employees to make an informed choice as to whether to participate in this collective action under the FLSA. Since the Agreement by its terms will directly affect this lawsuit, this court has authority to prevent abuse and to enter appropriate orders governing the conduct of counsel and the parties. Hoffman–La Roche, 493 U.S. at 171–72. Securitas did not act fairly when it gave notice through the Agreement to potential class members concerning this lawsuit.

Defendant’s proposal to resolve the plaintiffs’ pending motion for conditional class certification before resolving issues related to the Agreement is insufficient to prevent potential plaintiffs from misapprehending their rights. The confusing nature of the Agreement may cause Securitas employees to misunderstand the nature of their rights to participate in this litigation while the court determines whether to conditionally certify a class, damage not easily undone. Similarly, Securitas’s proposal to allow its Pennsylvania employees a second 30–day opt out period if the court conditionally certifies a class is also insufficient because it is for the court, not Securitas, to determine the amount of time employees shall have to consider their right to join this action. Immediate action by this court is necessary.

Securitas shall be required to implement the corrective measures described in the accompanying order.”

In the accompanying Order, the court required that the defendant submit a proposed corrective notice to the plaintiffs within 48 hours which, among other things, stated the the dispute resolution agreement was not binding on with regard to participation in the case (i.e. they would not be precluded from joining this class if they signed the agreement at issue).

Click Williams v. Securitas Security Services USA, Inc. to read the entire Memorandum Opinion and here to read the accompanying Order.

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Filed under Class Waivers, Collective Actions