Tag Archives: Communications With Class

October 1, 2012 · 6:59 am

C.D.Cal.: Motion for Corrective Action Granted Where Defendant Provided Insufficient Info to Putative Class Members When Obtaining Releases

Gonzalez v. Preferred Freezer Services LBF, LLC

This case was before the court on the plaintiff’s motion for corrective action, under Federal Rules of Civil Procedure 23, on grounds that the defendant had improperly contacted potential plaintiffs to this putative class action in efforts ‘to obtain releases from its employees concerning the claims pled by [Gonzalez] in this action.’ The plaintiff sought an order requiring the defendant to release the names and contact information of individuals from whom the defendant had attempted to extract releases. The court granted the plaintiff’s motion, applying Rule 23′s protections to an FLSA case.

The court described the relevant facts/procedural history as follows:

Gonzalez brought a collective action on behalf of himself and other of Preferred Freezer’s employees for unpaid overtime pay under California law and the Fair Labor Standards Act, 29 U.S.C. § 216(b). (Mot.2.) In August 2012, Preferred Freezer unilaterally drafted a “Release Agreement” that it provided to its employees, who are potential plaintiffs to this putative class action. (Mot.6–7.) The Agreement explained that in exchange for a settlement payment “in full satisfaction of all claims that Employee has, had or could have had arising out of the lawsuit or in any way related thereto,” the employee waived any and all claims arising out of a “former employee['s]” wage-and-hour lawsuit or in any way related to the lawsuit. (Mot.7.) But the Release Agreement did not state when this unnamed lawsuit was filed, the name of the former employee, the names of the employee’s attorneys, the attorneys’ contact information, or the period of time covered by the release. (Id.)

The court explained that the plaintiff learned of the defendant’s actions that were the subject of the motion, when a putative class member who had been approached by the defendant contacted plaintiff’s counsel. After discussing the general concept that settlements are favored, the court explained how the manner in which the defendant obtained the general releases here was misleading:

The waiver Preferred Freezer tendered its employees was misleading in many ways. It did not include any information regarding this class action, except that a former employee had brought a lawsuit against Preferred Freezer. (Sinay Decl. Exs. A, B.) The waiver did not attach the Complaint, any information on when the case was filed, nor any information regarding the essence of the case. (Mot.7.) Preferred Freezer also did not include Gonzalez’s counsel’s contact information. (See Gamez Decl. Ex. 1.) Even when Preferred Freezer’s agents spoke to the potential plaintiffs, the agents never provided them with the name of the case. (Gamez Decl. ¶ 6.) Furthermore, Preferred Freezer’s counsel never contacted Gonzalez’s counsel to confer over possible communication to Preferred Freezer’s employees regarding the potential settlement. (Mot.6.) Thus, the waiver misleadingly failed to provide the potential plaintiffs with adequate notice of this case in order to make an informed decision regarding waiver of their rights.

While the facts surrounding the manner in which the defendant had obtained the releases were uncontested, the defendant argued that corrective action was inappropriate and that: (1) defendant’s first amendment right to communicate with the putative class should not be hindered; (2) putative class members of a 216(b) collective actions are not entitled to the same protections as those in a Rule 23 class action; (3) the DOL supervised the settlements at issue; and (4) they did provide enough information to the settling class members, so as to alleviate concerns that the releases were obtained based on misleading information.

Noting that the plaintiff was not seeking to invalidate the releases at this juncture, and was not seeking to stop the defendant from communicating with putative class members, the court granted the plaintiff’s motion. The court granted the plaintiff’s motion as follows:

In response to Preferred Freezer’s misleading contact with putative class members in this action, Gonzalez asks that the Court orders Preferred Freezer to provide names, addresses, and telephone numbers for each and every person contacted by Preferred Freezer regarding the waiver. (Mot.25.) Gonzalez also requests that any communication to potential plaintiffs should include all the important information relating to Gonzalez’s case. (Mot.24.) For the reasons discussed above, the Court finds this request reasonable and therefore GRANTS Gonzalez’s motion.

Preferred Freezer is therefore ORDERED to provide Gonzalez with the contact information of all of those prospective plaintiffs in this case with whom Preferred Freezer has had contact regarding settlement. Furthermore, any communication that either party has with putative plaintiffs must include the following information: (1) the name of this case; (2) the case number; (3) a summary of the basis of Gonzalez’s claims; (4) the name of Gonzalez’s attorneys and their contact information; and (5) a statement concerning the effect of executing Preferred Freezer’s released documents will have on its employees’ ability to participate in this lawsuit.

Click Gonzalez v. Preferred Freezer Services LBF, LLC to read the entire Order Granting Plaintiff’s Motion for an Order for Corrective Action.

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September 30, 2012 · 9:25 am

Respondent-Employer Enjoined From Requiring Current Employee Putative Class Members From Waiving Right to Participate in Class/Collective Action, Once Putative Class/Collective Action Pending

Herrington v. Waterstone Mortgage Corp.

In this case, the claimant-employees had initially filed their case as a class/collective action in federal court. Pursuant to arbitration agreements that the plaintiffs had signed during their employment, the defendant successfully moved to compel the plaintiffs to pursue their claims in arbitration. Because the arbitration agreement at issue called for arbitration pursuant to the American Arbitration Association’s (AAA) rules governing arbitration, the plaintiffs successfully argued that a Rule 23 type opt-out mechanism rather than 216(b)’s opt-in governed as the appropriate class mechanism. Twelve (12) days after the arbitrator’s holding that an opt-out class procedure would govern, the defendant began requiring all current employees to sign a new arbitration clause, which if enforced, would have precluded the current employees from participating in the putative class action, yet to be certified. Arguing that the respondent-employer’s unilateral effort to defeat putative class members’ participation in the arbitration required thorough remedial measures, the claimant-employees moved for a protective order and temporary restraining order to:

(1) Enjoin any further dissemination of the letter to current employees with the class-waiver form; (2) Enjoin any effort by the respondent-employer or its counsel to chill participation in the case, including prohibiting any further unauthorized communication with any class members concerning joining the case, except as approved by the arbitrator; (3) Enjoin retaliation by [Waterstone] against any individual participating in the case; (4) Direct that [Waterstone] (in a form and manner supervised by the Arbitrator or on consent of claimants’ counsel) promptly notify all class members who received Exhibits A and B of the impropriety of [Waterstone's] acts and the invalidity of the waivers it solicited; (5) Sanction [Waterstone] with monetary relief for its improper behavior [ ] so that [Waterstone] does not achieve any of the benefit of chilling individuals from participating in this case; (6) Reserve the opportunity for individuals to join the case post-judgment, should they opt-out now, given their employer’s clear statement of its desire that they not join this case; (7) Award Claimant’s costs and attorneys’ fees for the time spent on the motion; [and] (8) Award such further relief in the future, as may become necessary to remedy the ill effects of [Waterstone's] improper behavior.

In opposition, the respondent-employer argued that the motion should be denied because: (1) the arbitrator lacked jurisdiction over the issue presented, because the parties had not agreed to arbitrate the issue of the permissibility of the subsequent class-waivers; (2) it was procedurally improper, because a class or collective action had yet to be certified; and (3) the employees had not demonstrated the requisite irreparable harm to warrant the relief sought.

Initially, the arbitrator rejected the respondent-employer’s jurisdictional argument:

It is true that a class has not yet been certified. Indeed, the clause-construction award that contemplates a class arbitration may itself be vacated by the District Court. However, even if the motion to certify a class should be denied, or if the Court should vacate the clause-construction award, the arbitration may continue as a collective proceeding (opt in) as a result of Judge Crabb’s direction that Herrington “must be allowed to join other employees to her case.” (D. Ct. Decn. at 18).

The arbitrator similarly rejected the argument that the relief sought was premature:

Whether a proceeding continues as a class procedure or a collective procedure, it must be protected from coercive or misleading communications that are designed to, or have the effect of, persuading or intimidating potential claimants to withhold their participations. The law realistically recognizes that such improper communications may be just as effective pre-certification as post-certification. Therefore, it is within the jurisdiction – indeed, it is the duty – of the judge or arbitrator before whom such a proceeding is pending to protect the integrity of the proceeding and to require that all information conveyed by the parties to potential class members about the proceeding be accurate, not coercive, and not misleading.

Waterstone’s argument that control over communications cannot arise until a class is certified is simply wrong. The power (jurisdiction) to control the parties’ communications to class members or putative class members can arise at least as early as when the initial pleading is filed. See, e.g. Hoffman-LaRoche at 487 (“[I]t lies within the discretion of a district court to begin its involvement early at the point of the initial notice.”).

The arbitrator added:

Waterstone’s contention that it has “has never consented to arbitrate its management decisions as to the nature and form of employment agreements with employees who are not parties to this case” (Jurisd. Memo at 1) assumes that this arbitration is about what kind of dispute resolution provision going forward Waterstone may provide in its form employment agreement. The assumption is false. Herrington brought this arbitration to recover past minimum wages and overtime compensation allegedly due to her and to her fellow employees. Jurisdiction over that claim was established with the filing of the demand for arbitration, and it is the duty of the arbitrator to preserve and protect the integrity of the proceedings with respect to that claim. The entire dispute that is subject to this arbitration is therefore to be resolved under the dispute resolution provisions of the pre-Amendment employment agreement that governs Herrington’s claims.

Instead, the arbitrator held that once the proceeding had commenced, the employer-respondent could not require the potential class members to waive their rights to participate in the case, as members of the class:

However, whatever may be the legality or enforceability of either Option A or Option B in future disputes that might arise between Waterstone and its mortgage-loan employees, those amendments can have no impact on this Herrington arbitration or on the employee class’s rights or choices in it. Once Herrington commenced her arbitration under the original arbitration clause in the employment agreement, Waterstone could not change the nature or course of this pending arbitration by requiring the putative claimants in this proceeding to agree to an entirely different dispute-resolution regime. This arbitration must, therefore, continue under the Agreement that governed when it was commenced, the Agreement that Waterstone, itself, argued successfully to the District Court requires Herrington’s dispute to be arbitrated.

Thus, the arbitrator granted the claimant-employees’ their requested relief.

Click Herrington v. Waterstone Mortgage Corp. to read the entire Decision and Order on Claimant’s Application for Protective Order, Temporary Restraining Order and Preliminary Injunction.

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December 19, 2010 · 3:16 pm

S.D.Tex.: Defendants’ Motion For Protective Order, Seeking To Bar Plaintiffs’ Attorneys From Communicating With Putative Class Denied; No Evidence Of Coercive, Misleading, Or Improper Communications

McKnight v. D. Houston, Inc.

In this collective action under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq., Plaintiffs sued six strip clubs in Houston, along with the owners and operators.  The court conditionally certified a class previously.  Following the conditional certification, the defendants filed an expedited motion for a protective order, asking the court to forbid the plaintiffs and their attorneys from using the class members’ contact information “for any purpose other than the mailing of the court-approved notice,” or, alternatively, to require “specific approval from the court for any mailings, emails, phone calls or communications with potential opt-in plaintiffs other than the court-approved notice.” (Id. at 9). The defendants argued that without such an order, the plaintiffs will be able to recruit more plaintiffs under the guise of contacting fact witnesses, undermining the purpose of court-approved notice to potential class members.  Holding that the Defendants failed to satisfy their burden of proof to necessitate such a protective order, the court denied the Defendants’ motion.

The court reasoned:

“The defendants argue that communications ban is necessary to prevent solicitation of clients under the guise of contacting fact witnesses. In support, they cite portions of McKnight’s deposition testimony in which McKnight explains that she spoke to the individuals who are now her coplaintiffs about her plans to file a lawsuit and gave them her attorney’s contact information. They also point to inconsistencies between the practices alleged by the plaintiffs in their declarations and described in their depositions, and conclude that “[t]he dynamic between the unlawful solicitations to join the suit and the subsequent substantial inconsistencies between the declarations that were filed in support of the motion for notice to class members and the deposition testimony of the plaintiffs suggests some level of impropriety or inaccuracy with regard to the pre-suit solicitations and communications that occurred in this case.” (Docket Entry No. 47 at 5-6).

This evidence falls short of the “evidence of coercive, misleading, or improper communications” necessary to impose the type of order the defendants seek. See Jackson, 2009 WL 650181, at *2. There is no evidence that McKnight’s precertification communications with her coplaintiffs were misleading or coercive. There is also no evidence that the plaintiffs plan to engage in improper communications going forward. Gulf Oil cautioned against protective orders that make it “more difficult [for counsel] … to obtain information about the merits of the case from the persons they sought to represent.” 452 U.S. at 101. The record does not support a protective order to prevent misleading or otherwise abusive communications by plaintiffs and their counsel.

The defendants’ expedited motion for a protective order is denied on the present record.”

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