Tag Archives: FLSA

11th Cir.: Employer That Knew or Had Reason to Know Employee Underreported Hours Could Not Assert Equitable Defenses Based on Employee’s Conduct in Underreporting Hours

Bailey v. TitleMax of Georgia, Inc.

This case was before the Eleventh Circuit on the plaintiff’s appeal of an order from the trial court granting the defendant-employer summary judgment. Specifically, the court below held that the plaintiff-employee was barred by equitable doctrines from maintaining his claims under the FLSA, because he had underreported his hours, notwithstanding the defendant’s knowledge of the actual hours worked. Reversing the trial court’s order, the Eleventh Circuit held that “[w]here, as here, an employer knew or had reason to know that its employee underreported his hours, it cannot invoke equitable defenses based on that underreporting to bar the employee’s FLSA claim.”

The court described the relevant facts and procedural history below as follows:

Santonias Bailey was an employee of TitleMax of Georgia who worked overtime hours for which he was not paid. At the direction of his supervisor, who told him that TitleMax did not pay overtime, he regularly worked off the clock. The same supervisor also repeatedly edited Mr. Bailey’s time records to report fewer hours than he worked. Mr. Bailey eventually brought suit under the Fair Labor Standards Act, which requires employers to pay their employees for overtime.

This appeal presents the question of whether TitleMax may defeat Mr. Bailey’s FLSA claim by deflecting the blame for the unpaid overtime onto him. TitleMax insists that Mr. Bailey is responsible for any unpaid overtime, because he could have complained about his supervisor, but did not. Neither did he follow TitleMax’s policies for ensuring accurate time records. In legal terms, the question is this: if an employer knew its employee underreported his hours, can it still assert equitable defenses based on the employee’s own conduct in underreporting as a total bar to the employee’s FLSA claim? We have heard oral argument, read the parties’ briefs, and examined the record in considering the question. Our answer is no. Because the District Court answered yes, we reverse its grant of summary judgment for TitleMax.

Mr. Bailey worked at a TitleMax store in Jonesboro, Georgia for about a year. We assume, as the District Court did, that Mr. Bailey worked overtime hours for which he was not paid. He was not paid because his time records were not accurate. They reflected an artificially low number of hours worked. This inaccuracy came from two sources: first, Mr. Bailey underreported his own hours by working off the clock. Second, Mr. Bailey’s supervisor changed his time records to decrease the number of hours he reported.

Mr. Bailey’s supervisor told him that TitleMax “does not allow overtime pay,” and that “[t]here [would] be days that [they] [would] be working off the clock.” To that end, Mr. Bailey would, “for the most part,” clock in and out when his supervisor told him to, even though that sometimes did not match up with the hours he actually worked. For example, on some Saturdays, he would work from 8:30 A.M. to 5:30 P.M. But his supervisor would tell him: “your hours are … high, so make sure that you clock in at 9:00 and clock out at 4:00.” And so he would, logging only seven hours despite working nine.

Second, Mr. Bailey’s supervisor herself edited Mr. Bailey’s time records. To take two examples: on September 9, 2011, Mr. Bailey clocked in at 10:57 A.M. and clocked out at 7:17 P.M., without recording any lunch break. His supervisor later changed his clock-out time to 7:00 P.M. and added a lunch break from 1:00 P.M. to 2:00 P.M. And on September 12, his supervisor edited Mr. Bailey’s clock-out time, changing it from 8:03 P.M. to 7:03 P.M. After he resigned from TitleMax, Mr. Bailey filed suit. He claims that TitleMax violated the FLSA by failing to pay overtime as the statute requires.

For its part, TitleMax emphasizes that Mr. Bailey’s conduct violated its policies. When he worked off the clock, he violated a policy requiring accurate reporting of hours. Also, by neither objecting to his supervisor changing his time records nor reporting inaccuracies in his records, Mr. Bailey violated a policy requiring regular verification of time. Finally, by not reporting any of this, he violated a policy instructing employees who had a problem at work to notify a supervisor, or if the supervisor was part of the problem, to inform a higher-level manager or call an anonymous employee hotline. Mr. Bailey was aware of each of these company policies.

In the face of Mr. Bailey’s law suit, TitleMax moved for summary judgment. It pointed to Mr. Bailey’s violation of its policies and argued that he was responsible for any unpaid overtime. It said that because Mr. Bailey bore responsibility, two equitable defenses—unclean hands and in pari delicto—barred his claim. The District Court agreed, and granted summary judgment. This appeal followed.

Discussing the FLSA’s remedial purpose and prior case law from the Eleventh Circuit, the court explained:

This Court has, in the decades since O’Neil, echoed the same principle: the goal of the FLSA is to counteract the inequality of bargaining power between employees and employers. See, e.g., Walthour v. Chipio Windshield Repair, LLC, 745 F.3d 1326, 1332 (11th Cir.2014) (quoting O’Neil ); Hogan v. Allstate Ins. Co., 361 F.3d 621, 625 (11th Cir.2004) (same); Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350, 1352 (11th Cir.1982) (“Recognizing that there are often great inequalities in bargaining power between employers and employees, Congress made the FLSA’s provisions mandatory.”); Mayhue’s Super Liquor Stores, Inc. v. Hodgson, 464 F.2d 1196, 1197 n. 1 (5th Cir.1972) (quoting O’Neil ).

In the broadest sense, this principle has guided the rulings of this Circuit, and it compels our holding here. If an employer knew or had reason to know that its employee underreported his hours, it cannot escape FLSA liability by asserting equitable defenses based on that underreporting. To hold otherwise would allow an employer to wield its superior bargaining power to pressure or even compel its employees to underreport their work hours, thus neutering the FLSA’s purposeful reallocation of that power.

After noting that the plaintiff had proffered evidence to meet his prima facie burden in this FLSA case, it then evaluated the defendant’s equitable defenses at issue: It insists that, while Mr. Bailey may have established the elements of his claim, TitleMax is nevertheless entitled to summary judgment unclean hands and in pari delicto:

These two defenses are similar. See Greene v. Gen. Foods Corp., 517 F.2d 635, 646–47 (5th Cir.1975) (discussing in pari delicto and other “closely related equitable defenses such as … unclean hands”). Broadly speaking, proof of either of these defenses may operate to bar a plaintiff’s claim in an appropriate case if he bears responsibility for his own injury. Each gives force to the well-worn maxim: “[h]e who comes into equity must come with clean hands.” See Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 241, 54 S.Ct. 146, 146, 78 L.Ed. 293 (1933).

To assert an unclean hands defense, a defendant must show that (1) the plaintiff’s wrongdoing is directly related to the claim, and (2) the defendant was personally injured by the wrongdoing. See Calloway v. Partners Nat’l Health Plans, 986 F.2d 446, 450–51 (11th Cir.1993). Similarly, to assert an in pari delicto defense, a defendant must show that “the plaintiff bears at least substantially equal responsibility for the violations he seeks to redress.” Lamonica v. Safe Hurricane Shutters, Inc., 711 F.3d 1299, 1308 (11th Cir.2013). To invoke in pari delicto to bar a claim brought under a federal statute, the defendant must also show a second element: that barring the suit would not “substantially interfere” with the policy goals of the statute. Id.

The District Court accepted TitleMax’s argument that one or both of these defenses may bar an employee’s FLSA claim, even when the employer knew that the employee was underreporting his hours. In doing so, the District Court did not correctly apply the statute.

Our conclusion in this regard is consistent with two cases previously decided in this Circuit. In Allen and Brennan, we faced similar facts and rejected arguments similar to those made by TitleMax. In both of those cases, employers nominally required employees to accurately report their hours. See Allen, 495 F.3d at 1314; Brennan, 482 F.2d at 827. Despite those requirements, supervisors encouraged employees to underreport, and they did. See Allen, 495 F.3d at 1318 (supervisor told employee “that she could not continue to be paid overtime”); Brennan, 482 F.2d at 827 (supervisors exerted “pressure” and “insisted that reported overtime hours be kept to a stated minimum level”).

Facing FLSA claims, the employers argued they could not be responsible for unpaid overtime because they had neither actual nor constructive knowledge that the employees had worked unpaid overtime. Allen, 495 F.3d at 1318; Brennan, 482 F.2d at 827. This court rejected the argument in both cases, and imputed knowledge to the employers. Allen, 495 F.3d at 1318–19; Brennan, 482 F.2d at 827. The Brennan panel concluded that the supervisors had at least constructive knowledge of unpaid overtime because “they had the opportunity to get truthful overtime reports but opted to encourage artificially low reporting instead.” 482 F.2d at 828. And the Allen panel decided that a supervisor had knowledge based on even more tenuous facts: she “was aware that [the employee] was working overtime hours” and was also “aware that [the employee] had been told that she could not be paid overtime.” 495 F.3d at 1318. Both panels ruled that knowledge on the part of supervisors could be imputed to the employers. See id. at 1319 (“[O]ur predecessor court stated that when an employer’s actions squelch truthful reports of overtime worked, or where the employer encourages artificially low reporting, it cannot disclaim knowledge.” (quoting Brennan, 482 F.2d at 828)).

Ultimately, the court held that the facts here were vitually identical to the prior cases in which it had held that equitable defenses similar to those advanced by the defendant here could not nullify an employee’s claim under the FLSA:

The facts of Mr. Bailey’s case are substantially the same. TitleMax instructed its employees to accurately record their hours and to report problems with their records. Mr. Bailey worked off the clock at the behest (demand) of his supervisor, in violation of those policies. No one disputes that his supervisor knew he was working off the clock. The supervisor’s knowledge may be imputed to TitleMax, making it liable for the FLSA violation. This is the holding of Allen and Brennan. It is true that TitleMax presents its argument in different terms than the employers in Allen and Brennan. TitleMax does not claim that the supervisor did not know that Mr. Bailey was underreporting his hours. See Allen, 495 F.3d at 1318 (“The [employer] claims that even if unpaid hours can be shown, Plaintiffs cannot demonstrate that their supervisors knew that they were working overtime without pay.”); Brennan, 482 F.2d at 827 (“[The employer]’ s principal argument is that it cannot have violated the FLSA because it had no knowledge of the unreported overtime.”). Nor could it. Instead, TitleMax says that Mr. Bailey’s misconduct allows it to assert an equitable defense. Specifically, TitleMax argues that Mr. Bailey’s own misconduct makes Allen and Brennan inapposite. But we see this distinction as one without a difference. TitleMax seeks to skirt the clear holdings of Allen and Brennan by making the same argument under a different name. Whether we consider the employee’s actions in analyzing the knowledge prong of the FLSA or as an equitable defense, the question is the same: is an employee deprived of his FLSA claim because he underreported his time, even if knowledge of the underreporting is imputed to the employer? Allen and Brennan say no. TitleMax asks us to contravene those holdings under a different theory. We cannot oblige.

TitleMax has identified no case in which this Court approved the use of equitable defenses as a total bar to an employee’s FLSA claim when the employer knew the employee underreported his hours. Neither has TitleMax identified any such case from the United States Supreme Court or any of our sister Circuits. We are aware, of course, that the absence of evidence is not necessarily evidence of absence. But the FLSA has been on the books a long time.

Finally, the court discussed the deterrent effect of the FLSA, in the context of a Supreme Court case under the ADEA, and explained that to permit the equitable defenses at bar would negate the FLSA’s deterrent effect:

Like the ADEA, the FLSA has a deterrent purpose. See O’Neil, 324 U.S. at 709–10, 65 S.Ct. at 903 (“To permit an employer to secure a release from the worker … will tend to nullify the deterrent effect which Congress plainly intended that [the FLSA] should have.”); Nall v. Mal–Motels, Inc., 723 F.3d 1304, 1307 (11th Cir.2013) (“Allowing the employer to escape liquidated damages by simply giving an employee the wages she was entitled to earn in the first place—or in some cases, less than that—would undermine the deterrent effect of the [FLSA’s] statutory provisions.”). Cf. McKennon, 513 U.S. at 357, 115 S.Ct. at 884 (“The ADEA … contains a vital element found in both Title VII and the Fair Labor Standards Act: It grants an injured employee a right of action to obtain the authorized relief. The private litigant who seeks redress for his or her injuries vindicates both the deterrence and the compensation objectives of the ADEA.” (citation omitted)).

Barring FLSA actions for wage and overtime violations where the employer is aware that an employee is underreporting hours would undermine the Act’s deterrent purpose. In this case, the District Court applied equitable defenses based on Mr. Bailey’s misconduct to totally and entirely bar his FLSA claim. When it did that, it went beyond what the Supreme Court approved in McKennon, thereby interfering with the FLSA’s statutory scheme.

Click Bailey v. TitleMax of Georgia, Inc. to read the entire Decision.

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Courts Reject Defendants’ Attempts to Require Opt-ins to Provide Detailed Factual Information in Order to Join Collective Actions

Aware that the more information putative class members are required to provide, the less likely they are to opt in to the case by submitting a consent to join, it is not unusual for FLSA defendants to request that putative class members provide information above and beyond the simple consent to join required by 216(b) as a prerequisite to joining a case. Two recent opinions joined the majority of courts and rejected such requests, in recognition of the chilling effect they can have on employee participation.

N.D. Cal.: Defendant’s Request to Require Class Members to Provide Dates of Employment Rejected

Ash v. Bayside Solutions, Inc.

In the first case, the defendants asserted that any employee who wished to opt-in should be required to provide his or her dates of employment. Rejecting this request, the court reasoned:

Bayside argues that opt-in plaintiffs should be required to provide their actual dates of employment on the opt-in form included with the proposed notice. Plaintiffs respond that Bayside will provide this information when it produces a list of potential collective action members and there is no reason for potential plaintiffs themselves to provide it. I agree with plaintiffs and DENY this request. See, e.g., Flores v. Velocity Exp., Inc., No. 12–cv–05790–JST, 2013 WL 2468362, at *9 (N.D. Cal. June 7, 2013) (“the Court sees no reason why Velocity’s former and current delivery drivers should identify their dates of service on their opt-in forms. As set forth above, Velocity will be producing this information to Plaintiffs”).

Click Ash v. Bayside Solutions, Inc. to read the entire Order.

E.D.Tenn.: Defendant’s Request That Notice Package Include Detailed Questionnaire Rejected

Pierce v. Wyndham Vacation Resorts, Inc.

In the second case, the defendant went even further, and requested that each employee who elected to opt-in be required to fill out an entire questionnaire. Again, the court rejected this request and explained:

Generally, an initial mailing regarding an FLSA collective action includes: (1) a notice, advising the potential litigant of his or her ability to join the suit and (2) an opt-in form, which the potential litigant can use to join the suit. Wyndham has proposed that in this case a third document be included in the mailing: a six-page questionnaire, which from its introductory language appears to be mandatory.

The court explained the parties’ respective positions as follows:

Wyndham acknowledges that such questionnaires are not common-place, but Wyndham maintains that they have been used by courts in other cases. Wyndham argues that the use of the questionnaire may streamline litigation and enable it to craft its decertification motion.

The Plaintiffs have responded by asserting that the relief requested by Wyndham is extraordinary and amounts to permitting discovery prior to a potential litigant becoming a party to this suit. The Plaintiffs maintain that the requirement that the opt-in plaintiffs complete the questionnaire, without consultation of counsel, prior to joining the suit would discourage participation and be inconsistent with 29 U.S.C. § 216 and the Federal Rules of Civil Procedure.

Rejecting the defendant’s request to include the detailed questionnaire in the notice package, the court explained:

The Court has thoroughly considered the parties’ positions and the applicable case law on this issue. At the hearing, Wyndham’s counsel relied heavily upon Rosenberg v. University of Cincinnati, 118 F.R.D. 591 (S.D.Ohio 1987), which he argued supported Wyndham’s position that obtaining discovery before a litigant opts in is acceptable. Initially, the Court finds that Wyndham’s reliance on an almost thirty-year-old case indicates that the use of the questionnaires is not as common place as Wyndham would have the Court believe. Second, the Court finds that Rosenberg devoted almost no discussion to the issue before the Court. The court in Rosenberg addressed the defendant’s motion to decertify a class of female faculty members. Id. at 591–96. The only mention of a questionnaire in Rosenberg is in the court’s description of the case’s procedural posture and its rulings, id. at 491–92, and where the court explained the procedure for decertifying the class, stating:

In the present case, on Defendants’ motion (Doc. # 60), notice of the class action was sent to women employed in faculty positions at the University of Cincinnati at any time between July 15, 1974 and December 15, 1977 by the Plaintiff. See Doc. # 66. Answered questionnaires which accompanied that notice were to be returned to the Clerk of Courts. See Entry of April 23, 1981 (Doc. # 65). Accordingly, because members of the former class who returned the questionnaires received notice of the initial class certification and may have relied upon being included in that class, the Court hereby orders that the Clerk of Courts send the notice of the decertification of this class action attached hereto to all individuals who returned the questionnaire by ordinary mail.  Id. at 596–97. This Court cannot find that this factual statement about a questionnaire having been sent, without any discussion of the particular circumstances of the case and the basis for sending the questionnaire, is persuasive authority in the instant case.

Instead, the Court finds the well-reasoned opinion in McCarthy v. Paine Webber Group, Inc., 164 F.R.D. 309 (D.Conn.1995), which directly addresses whether a questionnaire could be sent to potential class members, to be persuasive on this issue. The court in McCarthy reasoned that requiring potential class members to complete a form during the initial notice stage was contrary to Rule 23 of the Federal Rules of Civil Procedure. Id. at 313. This Court finds that the questionnaire proposed here would constitute an equally unacceptable condition precedent to joining the collective action, which is not consistent with 29 U.S.C. § 216.

The Court finds that the questions proposed by Wyndham are inappropriate. For example, Wyndham asks the opt-in plaintiffs to state every date on which the person failed to clock-in on time and the amount of time that was worked but underreported. Similarly, the questionnaire calls upon the opt-in plaintiffs to state every time that they were underpaid, who underpaid them, and the amount by which they were underpaid. Ordering an opt-in plaintiff to answer such questions without counsel and prior to joining this suit would be contrary to Rule 26 of the Federal Rules of Civil Procedure and unfair to the litigant. Moreover, questions like whether the person is currently employed by Wyndham and their prior positions with Wyndham can easily be answered by Wyndham itself once the opt-in form is received, without need for the opt-in plaintiff to provide such information through a questionnaire. Finally, the Court finds that the twenty questions, with multiple sub-parts, proposed by Wyndham are unduly burdensome given that discovery has not yet commenced in this case.

The Court also finds that the questionnaire takes an unacceptably harsh tone in threatening that incorrect or incomplete answers may constitute perjury or have a preclusive effect. The questionnaire states: “Please answer the following questions fully and completely to the best of your knowledge. If a full and complete answer will not fit in the space provided, you must be sure to add additional pages, as necessary, to ensure a full and complete answer.” [Doc. 89–1 at 8]. The questionnaire concludes by stating, “Pursuant to 28 U.S.C. § 1746, I hereby declare under penalty of perjury that the foregoing is true and correct.” [Id. at 13]. The Court finds that these warnings and the threat of penalty of perjury are unacceptable in this case, where Wyndham proposes that these questions be answered without the benefit of advice of counsel and prior to complying with Rule 26 of the Federal Rules of Civil Procedure. At the hearing, counsel for Wyndham could not cite the Court to any case law supporting the service of such a questionnaire with threat of penalty of perjury.

For these reasons, the court denied the defendant’s request in this regard.

Click Pierce v. Wyndham Vacation Resorts, Inc. to read the entire Memorandum and Order.

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N.D.Ga.: Defendant Barred from Unilateral Meetings With Putative Class Members Outside of Formal Discovery Process, Absent Detailed Disclosures to Alleviate Concerns re Chilled Participation and/or Retaliation

Wilson v. Regions Financial Corporation 

This case was before the court for consideration of the parties’ Joint Statement regarding restrictions on communications with putative class members, as required by L.R. 23.1(C)(2) of the Northern District of Georgia.

The specific issue raised by the parties’ Joint Submission was explained as follows:

In the Joint Statement, Plaintiffs raise a concern that Defendants will question putative class members about a policy requiring employees to lodge contemporaneous internal complaints about incorrect pay (“Complaint Policy”). Plaintiffs fear that if representatives of Defendants raise the Complaint Policy in communications with putative plaintiffs, the putative plaintiffs will believe that their failure to have lodged a contemporaneous complaint about incorrect pay may have been a violation of company policy that could result in their termination from employment. In its portion of the Joint Statement, Defendants do not deny an intention to make such inquiries of employees.

Initially the court discussed the basic applicable law:

[A]n order limiting communication between parties and potential class members should be based on a clear record and specific findings that reflect a weighing of a need for limitation and the potential interference with the rights of the parties. Only such a determination can insure that the court is furthering, rather than hindering, the policies embodied in the Federal Rules of Civil Procedure, especially Rule 23.

Gulf Oil Co. v. Bernard, 452 U.S. 89, 101–102, 101 S.Ct. 2193, 68 L.Ed.2d 693 (1981). “Unsupervised, unilateral communications with the plaintiff class sabotage the goal of informed consent by urging exclusion on the basis of a one-sided presentation of the facts, without opportunity for rebuttal. The damages from misstatements could well be irreparable.” Kleiner v. First Nat’l Bank of Atlanta, 751 F.2d 1193, 1203 (11th Cir.1985).

Based on its conclusion that there were inherent risks in the anticipated questioning by the defendants, the court held that the defendants were barred from communicating with former employee putative class members regarding the subject matter of the case, outside of the regular discovery process in the case and without the consent of plaintiff’s counsel. While the court permitted defendants’ counsel to speak with current employees who were putative class members, it set forth detailed prerequisites prior to any such communications, in order to safeguard against defenadnts’ improperly influencing putative class members from exercising their rights under the FLSA:

The Court finds that the risks inherent in the anticipated questioning by Defendants warrant the following limitations on Defendants’ communications with potential class members.

There shall be no communications with any named Plaintiff or with any current or future opt-in Plaintiffs outside the formal discovery process or without the consent of the named Plaintiff’s counsel of record, except-as to any currently employed present or future opt-in Plaintiff-for routine business matters unrelated to this action.

With respect to any presentation of information, including any views or opinions, to any “putative class members” by the Defendants—whether acting through management, counsel, other employees, or any other agent of any kind—that relates to the allegations and claims in this action, whether for the purpose of gathering information in a one-on-one or group basis to defend this action or to address any employee complaints regarding past, current or future compensation practices, such communication shall commence with the following statements:

(a) The person(s) present on the Defendants’ behalf is a Defendant employee or agent acting at the direction of Defendants’ management;

(b) The person(s) present on the Defendants’ behalf is there to address a lawsuit filed against the Defendants, as well as employee complaints, involving allegations that the Defendants failed to pay employees all the wages and overtime they had earned and were entitled to receive;

(c) The lawsuit is a class-action—which means the individual may receive money as a result of the lawsuit;

(d) The allegations of wrongdoing (accurately stated), accompanied by a copy of the Third Amended Complaint;

(e) The “putative class member” is under no obligation to stay, or listen, or speak, or respond;

(f) No record of anyone who does not stay, speak, or respond is being made and no record of who does not stay, speak, or respond will be made at any future time;

(g) No adverse action will be taken if the “putative class member” chooses not to stay, speak, or respond;

(h) No adverse action will be taken if the “putative class member” says, in substance, they believe they not were not properly compensated or did not receive all compensation owed to them, whether or not they complained to anyone about any compensation issues; and

(i) The “putative class member” is free to leave at any time, including at this point.

Click Wilson v. Regions Financial Corporation to read the entire Order Regarding Communications With Putative Class Members.

While the procedural posture of this case was somewhat unique, in that the Northern District of Georgia has a detailed/explicit rule regarding pre-certification communications (and there was a Rule 23 class claim in addition to the FLSA collective action claim), this decision will likely serve as a blueprint for many courts going forward, given the chilling effect unilateral meetings with current and former employees can have, as many courts have previously noted.

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Filed under Class Certification, Collective Actions, Pre-Certification Communications, Retaliation

Courts Reach Different Conclusions Regarding Whether FLSA Plaintiffs Should Be Allowed to Proceed Anonymously Under Pseudonyms

Although the issue comes up from time to time, there are few decisions discussing whether FLSA plaintiffs and opt-in plaintiffs may proceed with their claims anonymously notwithstanding the federal rules of civil procedure’s requirement that each party identify itself and the FLSA’s requirement under 29 U.S.C. § 216(b) that any person wishing to participate in a collective action file a consent to join.  As discussed here, two recent decisions took up this issue and reached different results, with one court in California permitting exotic dancers to proceed under pseudonyms, while a court in New York denied a similar motion on behalf of “white collar” worker at Bloomberg.

N.D.Cal.: Exotic Dancer Met Burden to Proceed Anonymously

Jane Roes 1-2 v. SFBSC Management, LLC

In the first case, the plaintiffs, a putative class of exotic dancers, requested that they be able to proceed under pseudonyms and the court granted their motion. The plaintiffs ask the court to do two things: First, to allow them to proceed under “Jane Roe” pseudonyms; and, second, to allow future plaintiffs to join this suit by filing their FLSA consents under seal. (ECF No. 17 at 1.) (Plaintiffs in FLSA collective suits must affirmatively “opt in” by filing consent forms. 29 U.S.C. § 216(b).). Noting that filing consents under seal was unnecessary in light of the order allowing each of the plaintiffs to use pseudonyms the court denied the second branch of plaintiffs’ motion.

The court applied a balancing test to reach its holding:

The plaintiffs express a legitimate concern for their privacy and, more compelling for the anonymity analysis, an understandable fear of social stigmatization. The Ninth Circuit has recognized that courts grant anonymity where it is needed to “preserve privacy in a matter of sensitive and highly personal nature.” Advanced Textile, 214 F.3d at 1068 (quoting James v. Jacobson, 6 F.3d 233, 238 (4th Cir.1993)). “In this circuit,” consequently, “we allow parties to use pseudonyms” where this is “necessary” to “protect a person from … ridicule or personal embarrassment.” Advanced Textile, 214 F.3d at 1067–68 (emphasis added).

Arguing against pseudonymity, SFBSC points to 4 Exotic Dancers v. Spearmint Rhino, No. 08–4038, 2009 WL 250054 (C.D.Cal. Jan. 29, 2009). (See ECF No. 19 at 4–5.) The plaintiffs in that case—who, as the case’s name suggests, were also exotic dancers—were denied anonymity where, in SFBSC’s view, they gave the “same reasons” for withholding their real names as the present plaintiffs. (Id. at 4.) SFBSC calls 4 Exotic Dancers “indistinguishable” from this case. (Id.)

The court does not agree that 4 Exotic Dancers compels the denial of anonymity here. That decision does not reflect how this district has understood the law of anonymity. The court in 4 Exotic Dancers cited a decision of this district, Doe v. Rostker, 89 F.R.D. 158 (N.D.Cal.1981), for the proposition that “some embarrassment or economic harm is not enough” to justify anonymity. See
4 Exotic Dancers, 2009 WL 250054, at *3 (citing Rostker, 89 F.R.D. at 162). SFBSC cites Rostker for the same idea. (ECF No. 19 at 3.) But Rostker itself distinguishes those insufficient fears (“some embarrassment or economic harm”) from the following, which justify anonymity:

A plaintiff should be permitted to proceed anonymously in cases where a substantial privacy interest is involved. The most compelling situations involve matters which are highly sensitive, such as social stigmatization …. That the plaintiff may suffer some embarrassment or economic harm is not enough. Rostker, 89 F.R.D. at 162 (emphases added). This district has thus considered “social stigmatization” among the “most compelling” reasons for permitting anonymity. This is consistent with the Ninth Circuit’s instruction in Advanced Textile that anonymity is permitted where the subject matter of a case is “sensitive and highly personal,” and where disclosing a party’s identity threatens to subject them to “harassment, … ridicule or personal embarrassment.” See Advanced Textile, 214 F.3d at 1067–68.

The plaintiffs have identified an adequate threat of personal embarrassment and social stigmatization that, under Advanced Textile, militates for allowing them to proceed under Jane Roe pseudonyms. To the extent that 4 Exotic Dancers points to a different conclusion, the court respectfully disagrees with that decision.

This case moreover falls into what may be roughly called the area of human sexuality. As SFBSC recognizes (see ECF No. 19 at 4–5), courts have often allowed parties to use pseudonyms when a case involves topics in this “sensitive and highly personal” area. The most famous case of this sort—which, however, did not address the question of pseudonymity—is certainly Roe v. Wade, 410 U.S. 113, 93 S.Ct. 705, 35 L.Ed.2d 147 (1973). But there are many others. E.g., United States v. Doe, 488 F.3d 1154, 1155 n. 1 (9th Cir.2007) (allowing defendant convicted of producing child pornography to use pseudonym); Doe v. Megless, 654 F.3d 404, 408 (3rd Cir.2011) (“Examples of areas where courts have allowed pseudonyms include … abortion, … transexuality … and homosexuality.”) (quotation omitted) (cited by SFBSC at ECF No. 19 at 4–5); John Doe 140 v. Archdiocese of Portland, 249 F.R.D. 358, 361 (D.Or.2008) (plaintiff alleging that he was sexually abused as minor allowed to proceed anonymously); Doe v. United Serv. Life Ins. Co., 123 F.R.D. 437 (S.D.N.Y.1988) (sexual orientation); Doe v. Deschamps, 64 F.R.D. 652 (D.Mont.1974) (abortion; collecting older cases).

The court does not mean to equate the various specific topics that these cases subtend. A broad brush will do: For purposes of the anonymity discussion, it is enough to observe that courts have regularly responded to the especially sensitive nature of this area and have been willing to grant parties anonymity. The same judicial instinct should apply here. SFBSC’s contention that the business of nude and semi-nude dancing “simply does not fall within” the field of “sexuality” (ECF No. 19 at 5) is unconvincing.

The court also reasoned that each of the dancers faced a real potential harm, should they be compelled to disclose their actual identities:

The court must also consider the plaintiffs’ claim that disclosing their identities would subject them to potential harm, both physical and with regard to their careers. (See ECF No. 17 at 3–4.) The Ninth Circuit has again provided guidance: “[I]n cases where, as here, pseudonyms are used to shield the anonymous party from retaliation, the district court should determine the need for anonymity by evaluating the following factors: (1) the severity of the threatened harm, (2) the reasonableness of the anonymous party’s fears; and (3) the anonymous party’s vulnerability to such retaliation.” Advanced Textile, 214 F.3d at 1068. The plaintiffs “are not required to prove that the defendants intend to carry out the threatened retaliation. What is relevant is that plaintiffs were threatened, and that a reasonable person would believe that the threat might actually be carried out.” Id. at 1071. While this language specifically addresses career retaliation by an employer defendant, its terms and concerns usefully frame the general question of whether a plaintiff seeking anonymity faces any harm. The latter is, again, a recognized basis for granting anonymity. E.g., id. at 1068 (anonymity is allowed where identification “creates a risk of … physical or mental harm”); Doe, 655 F.2d at 922 n. 1 (using pseudonyms where informant “faced a serious risk of bodily harm”).

The plaintiffs express reasonable concerns that disclosing their identities would threaten them with both career and possibly physical harm. (ECF No. 17 at 3–4.) For such “privacy and personal[-]safety reasons,” they explain, at SFBSC’s nightclubs, “it is customary for the exotic dancers to use … stage names.” (Id. at 3.) SFBSC does not deny this: either the practice or its rationale. Finally, SFBSC has “agree[d] that that the public disclosure of an exotic dancer’s true identity presents substantial risk of harm.” (ECF No. 26 at 12 (emphasis added).) This consideration favors allowing the plaintiffs to proceed pseudonymously.

Finally, the court concluded that any potential prejudice to the defendants and right to judicial access was outweighed by the potential harm the plaintiffs faced. Thus, the court granted the plaintiffs’ motion.

Click Jane Roes 1-2 v. SFBSC Management, LLC to read the entire Order on Anonymity & Sealing.

S.D.N.Y.: White Collar Worker Suing Bloomberg Failed to Meet Burden to Proceed Anonymously

Michael v. Bloomberg L.P.

In the second case, the plaintiff was willing to provide his real name to Bloomberg, but refused to do so absent an agreement from Bloomberg to keep his name confidential. Thus, by his motion, the plaintiff requested that the court permit the plaintiff to proceed pseudonymously, and plaintiff additionally asked that; (1) plaintiff’s identity be filed under seal with the court; (2) plaintiff’s name, address, and other identifying information be supplied to Bloomberg; and (3) Bloomberg be directed not to disclose plaintiff’s identity or make negative public remarks concerning plaintiff. Holding that the plaintiff had failed to meet his burden of proof to warrant the requested relief, the court denied plaintiff’s motion.

In opposition, Bloomberg argued that plaintiff’s privacy concerns were too vague and that plaintiff’s request was contrary to the written notice requirement of 216(b) of the FLSA. The court agreed and reasoned:

Bloomberg has the better of the argument. Under Rule 10(a) of the Federal Rules of Civil Procedure, a complaint must “name all the parties.” Fed.R.Civ.P. 10(a). “This requirement, though seemingly pedestrian, serves the vital purpose of facilitating public scrutiny of judicial proceedings and therefore cannot be set aside lightly.” Sealed Plaintiff v. Sealed Defendant, 537 F.3d 185, 188–89 (2d Cir. 2008) (internal quotations omitted). The use of pseudonyms “runs afoul of the public’s common law right of access to judicial proceedings, a right that is supported by the First Amendment.” Doe v. Del Rio, 241 F.R.D. 154, 156 (S.D.N.Y.2006) (internal quotations omitted); see also Doe I v. Four Bros. Pizza, No. 13 CV 1505 VB, 2013 WL 6083414, at *9–10 (S.D.N.Y. Nov. 19, 2013) (rejecting FLSA plaintiffs’ request for anonymity despite threat of retaliation from employer).

The court applied a similar balancing of interests test as the court in the Jane Roe case, but reached the opposite conclusion on the facts before it:

The Court has balanced plaintiff’s possible interest in anonymity against the potential prejudice to defendants and the public’s interest in disclosure, and concludes that the factors weigh in favor of denying plaintiff’s motion. There is no issue here of physical retaliation or mental harm against plaintiff. Nor is this the type of unusual case involving matters of a highly sensitive or personal nature—i.e., claims involving sexual orientation, pregnancy, or minor children—in which courts have justified anonymous plaintiffs proceeding pseudonymously. To depart in this case from the general requirement of disclosure would be to hold that nearly any plaintiff bringing a lawsuit against an employer would have a basis to proceed pseudonymously. The court declines to reach such a holding.

The court also rejected plaintiff’s middle ground position that he be permitted to disclose his identity to Bloomberg, under the condition that they maintain same confidentiality, in the name of judicial access.

Click Michael v. Bloomberg L.P. to read the entire Opinion.

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S.D.N.Y.: Where Defendant Asserted “Good Faith” Defense, It Waived Attorney Client Privilege, Despite Lack of “Reliance on Counsel” Defense

Scott v. Chipotle Mexican Grill, Inc.

This case was before the court on the defendant’s motion for a protective order under Federal Rule of Civil Procedure 26(c) to prohibit plaintiffs from discovery of defendant’s attorney-client communications regarding the decision to classify certain employees as “executives” and thus exempt from overtime pay. As part of its affirmative defenses, the defendant invoked 29 U.S.C. § 259 to claim that it relied on administrative authority in classifying the plaintiffs and is thus free from liability (the “Eleventh Affirmative Defense”), and 29 U.S.C. § 260 for the proposition that it did not act willfully and thus should not be subjected to FLSA’s liquidated damages provision (the “Twelfth Affirmative Defense”). Specifically, the defendant claimed to have relied on state and federal regulations, “but not upon advice of counsel.” Rejecting the defendant’s contention that it preserved the attorney-client privilege notwithstanding its assertion of “good faith,” the court held that attorney-client communications regarding the exempt nature (or lack thereof) of the position at issue were discoverable. After a discussion of the “at-issue” waiver of the attorney-client privilege, in cases where a party places its knowledge (or lack thereof) and good faith at issue, and a discussion of the general principles behind the FLSA’s good faith defense, the court determined that the defendant in this FLSA case had waived the attorney-client privilege by placing its mental state at issue here by claiming a good faith defense:

Chipotle affirmatively invokes § 259 in its Eleventh Affirmative Defense [stating “Pursuant to 29 U.S.C. § 259 and other applicable law, Chipotle’s alleged failure to pay Plaintiffs or any putative class or collective member any of the wages on which Plaintiffs’ claims are based, if at all, was in conformity with and in reliance on an administrative regulation, order, ruling, approval, interpretation, administrative practice, and/or enforcement policy of the United States Department of Labor and any Department of Labor in any of the states in which Plaintiffs allege claims under state law, but not upon advice of counsel.”]. Though it does not specifically name § 260 in its Twelfth Affirmative Defense, Chipotle claims an affirmative defense to FLSA’s liquidated damages, which is necessarily governed by § 260, and therefore its Twelfth Affirmative Defense falls under that provision. See Northrop v. Hoffman of Simsbury, Inc., 134 F .3d 41, 45–46 (2d Cir.1997) (a party need not cite a specific statute in order to invoke it in a pleading).

Despite defendant’s attempt to plead around an “advice of counsel” defense, the court held that they could not, because it was clear that defendant did have the advice of counsel on the very issues for which it claimed good faith, regardless of whether they claimed reliance on same or not:

Yet despite the good faith requirements of both statutory defenses, Chipotle attempts to plead around them by avoiding mention of the advice of counsel, except to disclaim it in the Eleventh Affirmative Defense. Chipotle claims to have invoked only the portions of §§ 259–60 relating to reliance on administrative guidance, rather than any standard of good faith. See Def’s. Br. at 1–2 (“Chipotle does not assert a generalized ‘good faith’ defense … Chipotle set out its affirmative defense, as it is entitled to, in such a way as to remove its ‘state of mind’ from being at issue….”); Answer to Second Am. Compl. at 23. Such artful pleading cannot negate an element of a statutory defense, especially here, where it is evident that Chipotle did in fact have the advice of counsel on the very topic at issue. A defendant may not succeed on an affirmative defense by pleading only some of the necessary elements. As explained supra, Chipotle has invoked two affirmative defenses that require showings of good faith. Here, plaintiffs have shown that Chipotle did in fact have the advice of counsel regarding the classification of apprentices. And knowing whether Chipotle had been advised not to classify the apprentices as exempt is necessary to evaluate the validity of the Eleventh and Twelfth Affirmative Defenses. Thus, the advice of Chipotle’s counsel regarding that classification is plainly “at issue” within the meaning of Bilzerian. Because at-issue waiver is to be “decided by the courts on a case-by-case basis, and depends primarily on the specific context in which the privilege is asserted,” In re Grand Jury Proceedings, 219 F.3d at 183, the Court will examine the specific factual context of this case. Given the substantial similarities between the good faith defenses in §§ 259–60, this analysis will encompass both the Eleventh and Twelfth Affirmative Defenses. At the deposition of David Gottlieb, Chipotle’s corporate representative and Director of Compliance and Field People Support, the witness testified that Chipotle consulted with attorneys in making the classification decision. When asked about the existence of communications regarding the apprentice classification, Mr. Gottlieb admitted that “there were communications. They were in the context of communications and discussions with our lawyers.” Gottlieb Dep. 65:2–4. In fact, Mr. Gottlieb testified that he had “no recollection” of ever communicating with anyone at Chipotle regarding the apprentice classification other than in the presence of his attorneys. Id. at 65:11–15.F In addition, during Mr. Gottlieb’s deposition, Chipotle repeatedly objected on attorney-client grounds and instructed Mr. Gottlieb not to answer questions related to Chipotle’s decision to classify the apprentice position as exempt. For example, Chipotle asserted the attorney-client privilege and directed Mr. Gottlieb not to answer questions about whether Mr. Gottlieb participated in any evaluations regarding the exempt classification position. There are numerous other such examples from the transcript of Mr. Gottlieb’s deposition. See, e.g., Gottlieb Dep. 42:6–16 (refusing to answer question on the research behind the classification after being advised not to disclose any attorney-client communications); id. at 61:18–62:2 (same); id. at 87:14–88:1 (acknowledging counsel were consulted on decision to reclassify apprentices in California). In addition, Chipotle’s privilege log confirms that it received legal advice concerning the apprentice exemption decision. See Ex. D (Def’s Second Am. Privilege Log), No. 2 (February 18, 2011 email from outside counsel to Mr. Gottlieb on the subject of “Legal advice regarding Chipotle’s Apprentice Position.”) Finally, Chipotle’s discovery responses indicate reliance on advice of counsel. Chipotle asserted attorney-client privilege in response to plaintiffs’ document requests and interrogatories that sought information on the decision to classify apprentices as exempt. See, e.g., Ex. C (Def.’s Resps. Pls.’ Fourth Req. Produc. Docs.), No. 28 (asserting privilege in response to request for documents relied upon by Chipotle as basis for decision to classify apprentices as exempt), No. 31 (same for request for documents relied upon by Chipotle as basis for its good faith defenses), No. 32 (same for documents pertaining to or evidencing Chipotle’s decision to classify apprentices as nonexempt under FLSA, NYLL, and Missouri Labor Law) & No. 33 (same for documents related to Chipotle’s contention that apprentices are exempt under administrative or executive exemption).

In light of the clear record demonstrating defendant received legal advice on the very issue on which they claimed good faith, the court held that they could not shield communications with their attorneys about the issue from disclosure:

This evidence overwhelmingly demonstrates that Chipotle did receive legal advice on the apprentice classification decision. And Chipotle does not dispute that it did. Instead, it argues that it is entitled to define its affirmative defense narrowly and in such a way as to remove its state of mind from being at issue. In this regard, Chipotle contends that this case is distinguishable from Wang v. The Hearst Corp., where the same legal question was presented, and the district court found an at-issue waiver of the attorney-client privilege. 12 Civ. 0793(HB), 2012 WL 6621717 (S.D.N.Y. Dec. 19, 2012). In Wang, a sophisticated corporate defendant asserted a § 260 defense to allegations of FLSA wage and hour violations, but invoked attorney-client privilege to block the plaintiff’s discovery of the defendant’s in-house counsel e-mails, claiming that its defense “would ‘not rely, directly or indirectly, on legal advice for its good-faith defense in this case’ and that it had offered to so stipulate.” Id. at *1 (internal citations omitted). A witness from the defendant’s human resources department, however, had indicated in a deposition that questions regarding the collection of school credit letters for unpaid interns (who were allegedly misclassified as such) would be better posed to the legal department. Id. at *2. The court soundly rejected the defendant’s attempt to plead around the requirements of § 260, which it found “amount[ed] to little more than semantics without any concrete examples provided by Defendants. On the other hand, [it found] it difficult to imagine that a good faith defense regarding the FLSA raised by a corporation as large and as sophisticated as Hearst would not involve the advice of its legal department.” Id. Chipotle attempts to distinguish Wang on two grounds: there, (1) the defendant’s affirmative defense explicitly invoked good faith, and (2) testimony was introduced that the legal department, not the human resources department, had responsibility for making the classification decisions at issue. These are not distinctions. As discussed above, Chipotle’s affirmative defenses carry a good faith component even if none is so stated. And Mr. Gottlieb, himself an attorney and responsible for Chipotle’s wage and hour determinations, testified that he was unaware of any communications regarding the apprentice determination that did not involve attorneys, and otherwise refused to answer relevant questions on attorney-client privilege grounds. All told, there is far more evidence here than in Wang that the defendant had, and perhaps ignored, the advice of counsel in classifying its employees as exempt. Given the circumstances in this particular case, “legal advice that [the defendant] received may well demonstrate the falsity of its claim of good faith belief,” Leviton, 2010 WL 4983183, at *3, putting Chipotle’s state of mind at issue. The plaintiffs are therefore “entitled to know if [the defendant] ignored counsel’s advice.” Arista Records, 2011 WL 1642434, at *3 (internal citations and quotation marks omitted).

The court also rejected defendant’s public policy argument which it urged supported upholding the attorney-client privilege, even where a defendant impermissibly sought to use it simultaneously as a shield and a sword:

Chipotle contends that even if Second Circuit case law favors a waiver in this case, such waiver should be overcome by policy considerations. It claims that, should the Court find a waiver here, “every employer in every FLSA case will have to choose between revealing such communications or forfeiting statutory defenses. This is akin to imposing, as a matter of law, an expanded limitations period and 100% liquidated damages risk on every employer in every FLSA case.” Def’s. Reply at 6. Such concerns are misplaced and overstated. First, as stated by both the Supreme Court and the Court of Appeals, liquidated damages are in fact the norm in FLSA cases. This is not a byproduct of a broad reading of the at-issue waiver doctrine. Rather, this is because, by act of the legislature, “the liquidated damage provision is not penal in its nature but constitutes compensation for the retention of a workman’s pay which might result in damages too obscure and difficult of proof for estimate other than by liquidated damages.” Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 707 (1945) (citations omitted); see also Herman, 172 F.3d at 142; Reich, 121 F.3d at 71; Brock v. Wilamowsky, 833 F.2d 11, 19 (2d Cir.1987) ( “ ‘[d]ouble damages are the norm, single damages the exception ….‘ “ (quoting Walton v. United Consumers Club, Inc., 786 F.2d 303, 310 (7th Cir.1986))). It is for this very reason, protection of workers as directed by Congress, that defendants face a high bar to mounting a good faith defense to FLSA wage and hour claims. Second, defendants in such situations are not at all required to waive attorney-client privilege to defend against liability. For instance, defendants may assert defenses on bases other than good faith. See Crawford v. Coram Fire Dist., 12 Civ. 3850(DRH)(WDW), 2014 WL 1686203 (E.D.N.Y. Apr. 29, 2014) (upholding denial of discovery of privileged communications where defendant had separate basis for defense that did not rely on good faith); Leviton, 2010 WL 4983183, at *5 (plaintiff did not waive privilege by filing claim where waiver would be useful but not essential to defendants’ defense). In the case at hand, Chipotle has pled a panoply of defenses aside from the two affirmative defenses at issue. If it does not wish to waive its privilege, it may seek leave to amend its answer under Fed.R.Civ.P. 16(b) so that it can forego its good faith defenses and rely instead on its remaining 30 affirmative defenses. See Bilzerian, 926 F.2d at 1293–94 (defendant need not assert good faith defense, but if he does, he waives attorney-client privilege); Answer to Second Am. Compl. at 21–26 (listing Chipotle’s affirmative defenses). Finally, Chipotle claims that a finding of at-issue waiver will discourage companies from seeking advice from counsel. Chipotle predicts that companies will instead be “incentivized to make important decisions concerning critical issues such as employee pay on their own lest they be forced to reveal their confidential and privileged communications.” Def’s. Br. at 2. The Court sees things differently. To the extent Chipotle is found to be liable for overtime violations (a question that is far from answered), and to the extent Chipotle’s counsel advised it against the classification decision it wrongly made, the decision on this motion will only serve to encourage companies to receive competent legal advice and follow it.

Thus, the court held that the defendant had waived the attorney-client privilege by placing its mental state at issue and pleading a good faith defense. Click Scott v. Chipotle Mexican Grill, Inc. to read the entire Opinion & Order.

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2d. Cir.: Individualized Damages Determinations Alone Cannot Preclude Class Certification Under Rule 23’s Predominance Inquiry

Roach v. T.L. Cannon Corp.

This case presented the question of whether the Supreme Court’s decision in Comcast Corp. v. Behrend, ––– U.S. ––––, 133 S.Ct. 1426, 185 L.Ed.2d 515 (2013), overruled the well-established law in the Second Circuit that class certification pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure cannot be denied merely because damages have to be ascertained on an individual basis. The court below had held that Comcast permits certification under Rule 23(b)(3) only when damages are measurable on a classwide basis, and denied the plaintiffs’ motion for class certification. The Second Circuit disagreed, and held that Comcast does not mandate that certification pursuant to Rule 23(b)(3) requires a finding that damages are capable of measurement on a classwide basis, in the context of this wage and hour case.

The court began by summarizing Second Circuit case law prior to the Comcast decision, and explaining that Comcast did not overrule the line of cases that had long held that individualized damages will not preclude class certification generally:

Prior to the Supreme Court’s decision in Comcast, it was “well-established” in this Circuit that “the fact that damages may have to be ascertained on an individual basis is not sufficient to defeat class certification” under Rule 23(b)(3). Seijas v. Republic of Argentina, 606 F.3d 53, 58 (2d Cir.2010); see McLaughlin v. Am. Tobacco Co., 522 F.3d 215, 231 (2d Cir.2008), abrogated in part on other grounds by Bridge v. Phx. Bond & Indem. Co., 553 U.S. 639, 128 S.Ct. 2131, 170 L.Ed.2d 1012 (2008); see also Dukes, 131 S.Ct. at 2558 (“[I]ndividualized monetary claims belong in Rule 23(b)(3).”). “[T]he fact that damages may have to be ascertained on an individual basis” was simply one “factor that we [had to] consider in deciding whether issues susceptible to generalized proof ‘outweigh’ individual issues” when certifying the case as a whole. McLaughlin, 522 F.3d at 231.

We do not read Comcast as overruling these decisions.

The court then discussed and distinguished Comcast:

In Comcast, the plaintiffs filed a class-action antitrust suit claiming that Comcast’s acquisition of competitor cable television providers in sixteen counties clustered around Philadelphia violated the Sherman Act. 133 S.Ct. at 1430. Comcast’s clustering strategy had increased its market share in that geographical area from around twenty to seventy percent. Id. The plaintiffs sought to certify the class of Comcast subscribers in that geographical area under Rule 23(b)(3), claiming that questions of law and fact common to the class predominated over any questions affecting individual members. Id. The district court held, and neither the plaintiffs nor defendants contested on appeal, that in order to meet the predominance requirement, the plaintiffs had to show that: (1) the injury suffered by the class was “capable of proof at trial through evidence that [was] common to the class rather than individual to its members”; and (2) “the damages resulting from [the anticompetitive] injury were measurable on a class-wide basis through use of a common methodology.” Id. (first alteration in original) (quoting Behrend v. Comcast Corp., 264 F.R.D. 150, 154 (E.D.Pa.2010)) (internal quotation marks omitted).

The plaintiffs offered four theories of antitrust injury or impact, only one of which the district court concluded was susceptible of classwide proof: Comcast’s clustering around Philadelphia reduced competition from “overbuilders,” competitors who build competing cable networks where there exists an incumbent cable provider.FN4
Id. at 1430–31. To prove that the damages resulting from the anticompetitive injury were measurable on a classwide basis, the plaintiffs offered expert testimony that modeled the class damages based on all four theories of antitrust injury; the model did not isolate damages resulting from the “overbuilder” theory. Id. at 1431. Nevertheless, both the district court and the United States Court of Appeals for the Third Circuit concluded that the expert testimony was sufficient to establish that damages resulting from the “overbuilder” theory of injury were measurable on a classwide basis. Id. Rejecting the notion that the plaintiffs were required to offer a model of classwide damages that attributed damages only to the “overbuilder” theory of injury, the Court of Appeals explained that the plaintiffs were required merely to provide assurance that, “if they can prove antitrust impact, the resulting damages are capable of measurement and will not require labyrinthine individual calculations.” Id. at 1431 (quoting Behrend v. Comcast Corp., 655 F.3d 182, 206 (3d Cir.2011)) (internal quotation mark omitted). A more rigorous analysis, the Court of Appeals concluded, would constitute an “attac[k] on the merits of the methodology [that] [had] no place in the class certification inquiry.” Id. (first and third alterations in original) (quoting Behrend, 655 F.3d at 207) (internal quotation marks omitted).

The Supreme Court granted certiorari. After noting that neither party had contested the district court’s holding that Rule 23(b)(3) predominance required a showing that damages resulting from the anticompetitive injury were measurable on a classwide basis, id. at 1430, the Court identified the question presented as whether the plaintiffs “had … establish[ed] that damages could be measured on a classwide basis,” id. at 1431 n. 4. The Court reversed, holding that the plaintiffs’ expert testimony failed to carry that burden. Id. at 1432–33.

The Court began by noting that it had recently held that establishing the Rule 23(a) prerequisites to class certification required a “rigorous analysis,” which would “frequently entail ‘overlap with the merits of the plaintiff’s underlying claim.’ ” Id. at 1432 (quoting Dukes, 131 S.Ct. at 2551). Those “same analytical principles,” the Court explained, govern the Rule 23(b) inquiry. Id.

The Court then held that the plaintiffs’ expert testimony did not withstand the “rigorous analysis” for the Rule 23(b)(3) predominance test. The Court explained that the plaintiffs would be entitled only to damages resulting from their theory of injury. Id . at 1433. Thus, “a model purporting to serve as evidence of damages …. must measure only those damages attributable to that theory.” Id. “If the model does not even attempt to do that,” the Court explained, “it cannot possibly establish that damages are susceptible of measurement across the entire class for purposes of Rule 23(b)(3).” Id. Because there was “no question” that the damages model was not based solely upon the “overbuilder” theory of injury certified by the district court, but also included calculations accounting for the three other theories of injury, id . at 1433–34, the Court concluded that “Rule 23(b)(3) cannot authorize treating [cable] subscribers within the Philadelphia cluster as members of a single class,” id. at 1435.

The Second Circuit then explained that Comcast did not hold that a class cannot be certified under Rule 23(b)(3) solely because damages cannot be measured on a classwide basis, as many defendants in many contexts have since argued:

Comcast, then, did not hold that a class cannot be certified under Rule 23(b)(3) simply because damages cannot be measured on a classwide basis. See id. at 1430 (noting that the requirement of a classwide damages model “is uncontested here”); id. at 1436 (Ginsburg and Breyer, JJ., dissenting) (“[T]he decision should not be read to require, as a prerequisite to certification, that damages attributable to a classwide injury be measurable ‘on a class-wide basis.’ “). Comcast’s holding was narrower. Comcast held that a model for determining classwide damages relied upon to certify a class under Rule 23(b)(3) must actually measure damages that result from the class’s asserted theory of injury; but the Court did not hold that proponents of class certification must rely upon a classwide damages model to demonstrate predominance. See id . at 1433; see also In re Deepwater Horizon, 739 F.3d 790, 817 (5th Cir.2014) (construing the “principal holding of Comcast [as being] that a ‘model purporting to serve as evidence of damages … must measure only those damages attributable to th[e] theory’ of liability on which the class action is premised” (ellipsis and second alteration in original) (quoting Comcast, 133 S.Ct. at 1433)); Butler v. Sears, Roebuck & Co., 727 F.3d 796, 799 (7th Cir.2013) (construing Comcast as holding only “that a damages suit cannot be certified to proceed as a class action unless the damages sought are the result of the class-wide injury that the suit alleges” (emphasis in original)); Leyva v. Medline Indus. Inc., 716 F.3d 510, 514 (9th Cir.2013) (interpreting Comcast to hold that class-action plaintiffs “must be able to show that their damages stemmed from the defendant’s actions that created the legal liability”); accord Catholic Healthcare W. v. U.S. Foodservice Inc. ( In re U.S. Foodservice Inc. Pricing Litig.), 729 F.3d 108, 123 n. 8 (2d Cir.2013) (“Plaintiffs’ proposed measure for damages is thus directly linked with their underlying theory of classwide liability … and is therefore in accord with the Supreme Court’s recent decision in Comcast … . “). Indeed, as the Court explained, if all four types of anticompetitive injury had been approved for certification by the district court, the plaintiff’s damages methodology “might have been sound, and might have produced commonality of damages.” Comcast, 133 S.Ct. at 1434.

To be sure, Comcast reiterated that damages questions should be considered at the certification stage when weighing predominance issues, but this requirement is entirely consistent with our prior holding that “the fact that damages may have to be ascertained on an individual basis is … a factor that we must consider in deciding whether issues susceptible to generalized proof ‘outweigh’ individual issues.” McLaughlin, 522 F.3d at 231. The Supreme Court did not foreclose the possibility of class certification under Rule 23(b)(3) in cases involving individualized damages calculations.

The court then noted that its reading of Comcast was consistent with all 4 Circuits to have reached the issue previously:

Our reading of Comcast is consistent with the Supreme Court’s statement in Comcast that its decision turned upon “the straightforward application of class-certification principles.” 133 S.Ct. at 1433. Our reading is also consistent with the interpretation of those Circuits that have had the opportunity to apply Comcast. See AstraZeneca AB v. United Food & Commercial Workers Unions & Emp’rs Midwest Health Benefits Fund (In re Nexium Antitrust Litig.), No. 14–1521, 2015 WL 265548, at *8, *10 (1st Cir. Jan.21, 2015) (explaining that Comcast “simply” requires that a damages calculation reflect the associated theory of liability, and discussing the “well-established” principle that individualized damages do not automatically defeat Rule 23(b)(3) certification); Dow Chem. Co. v. Seegott Holdings, Inc. ( In re Urethane Antitrust Litig.), 768 F.3d 1245, 1257–58 (10th Cir.2014) ( “Comcast did not rest on the ability to measure damages on a class-wide basis.”); In re Deepwater Horizon, 739 F.3d at 817 (rejecting, post-Comcast, the argument “that certification under Rule 23(b)(3) requires a reliable, common methodology for measuring classwide damages” (internal quotation marks omitted)); Butler, 727 F.3d at 801 (holding, upon the Supreme Court’s grant of certiorari, vacatur, and remand in light of Comcast, that “the fact that damages are not identical across all class members should not preclude class certification”); Glazer v. Whirlpool Corp. (In re Whirlpool Corp. Front–Loading Washer Prods. Liab. Litig .), 722 F.3d 838, 860–61 (6th Cir.2013) (noting that Comcast was “premised on existing class-action jurisprudence” and that “it remains the ‘black letter rule’ that a class may obtain certification under Rule 23(b)(3) when liability questions common to the class predominate over damages questions unique to class members”); Leyva, 716 F.3d at 513 (reiterating Ninth Circuit precedent, post-Comcast, that “damage calculations alone cannot defeat certification” (quoting Yokoyama v. Midland Nat’l Life Ins. Co., 594 F.3d 1087, 1094 (9th Cir.2010)) (internal quotation mark omitted)).

Because the trial court did not complete its full analysis under Rule 23, inasmuch as it held that individualized damages alone precluded class certification, the Second Circuit reversed and remanded the case for further findings regarding plaintiffs’ motion for class certification.  Of note, on the same day, in an unreported decision, the Second Circuit affirmed a trial court’s order granting class certification, notwithstanding the defendant-appellant’s argument that individualized damages precluded class certification regarding liability issues.

Click Roach v. T.L. Cannon Corp. to read the entire decision and Jason v. Duane Reade, Inc. to read the unreported decision in that case.

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W.D.Ark.: In Individual FLSA Cases, Where All Parties Are Represented By Counsel Throughout, Court Approval of Settlement Not Required

Schneider v. Habitat for Humanity Intern., Inc.

What seemed taboo in many parts of the country just a few years ago, dismissing an FLSA case with prejudice and foregoing court approval, has continued to gain steam in most jurisdictions. Most recently, a court in the Western District of Arkansas declined to approve the settlement of an individual-plaintiff FLSA claim, where the parties had jointly requested that the court review the settlement agreement in camera, so that they could avoid placing it in the docket. However, in denying to approve the settlement, the court advised the parties that—under the circumstances of this particular case—court-approval of the settlement agreement was not necessary. Instead, the court held that where: (1) the lawsuit is not a collective action; (2) all individual plaintiffs were represented by an attorney from the time of the filing of the complaint through the conclusion of subsequent settlement negotiations; and (3) all parties have indicated to the Court in writing through their attorneys that they wish for their settlement agreement to remain private and that they do not wish for any reasonableness review of their settlement to occur no reasonableness review or public filing of an FLSA settlement is necessary.

After reviewing 80 years of FLSA jurisprudence that court’s long cited for the premise that all FLSA settlements must be court approved, the court also discussed recent Fifth Circuit authority which cast doubt on that view, in circumstances where there was little or no risk that an employer would be likely to improperly exercise its authority over an employee in order to extract an improper settlement from the employee.

Adopting the view that many settlement agreements do not require a court’s blessing, the court explained:

Unfortunately, this Court is not aware of any Eighth Circuit precedent that addresses the issues raised in the instant Joint Motion. However, this Court believes that the risk is minimal that an unreasonable settlement will result from “unequal bargaining power as between employer and employee” in FLSA lawsuits where each of the following three criteria is met: (1) the lawsuit is not a collective action; (2) all individual plaintiffs were represented by an attorney from the time of the filing of the complaint through the conclusion of subsequent settlement negotiations; and (3) all parties have indicated to the Court in writing through their attorneys that they wish for their settlement agreement to remain private and that they do not wish for any reasonableness review of their settlement to occur. In such cases, this Court does not believe any reasonableness review or public filing of an FLSA settlement is necessary. The Court finds that each of these requirements is met in the instant case.

As such, the court denied the parties’ motion to review FLSA settlement in camera [if necessary], and directed the parties to file a joint stipulation of dismissal under FRCP 41(a) instead:

IT IS THEREFORE ORDERED that the parties’ Joint Motion to Review FLSA Settlement in Camera, if Necessary, Approve Settlement, and Dismiss with Prejudice (Doc. 23) is DENIED. The parties may instead file a joint stipulation of dismissal under Fed.R.Civ.P. 41(a)(1)(A)(ii).

Click Schneider v. Habitat for Humanity Intern., Inc. to read the entire Opinion and Order.

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