Tag Archives: Supplemental Jurisdiction

3d Cir.: Hybrids Are Permissible; Rule 23, FLSA Claims Not Incompatible

Knepper v. Rite Aid Corp.

In one of the most anticipated wage and hour decisions pending at the circuit court level, the Third Circuit held yesterday that Rule 23 state law wage and hour class actions (opt-out) are not inherently incompatible with FLSA collective action (opt-in).  Likely ending one of the longest running and hotly contested issues in wage and hour litigation the Third Circuit “join[ed] the Second, Seventh, Ninth and D.C. circuits in ruling that this purported ‘inherent incompatibility’ does not defeat otherwise available federal jurisdiction.”

At the court below the plaintiffs had asserted a hybrid cause of action– claims under both the FLSA’s collective action mechanism and multiple states’ wage and hour laws (Rule 23 class actions).  Unlike some so-called hybrids though, here the Court’s jurisdiction over the Rule 23 state law claims was based on the original jurisdiction of CAFA, rather than the supplemental jurisdiction of 1367.  While the court below had held that the Rule 23 claims could not be brought together with the FLSA collective action claims, based on “inherent incompatibility” the Third Circuit disagreed and reversed.

Framing the issue, the court explained:

“This case involves a putative conflict between an opt-out Fed.R.Civ.P. 23(b)(3) damages class action based on state statutory wage and overtime laws that parallel the federal Fair Labor Standards Act (FLSA) and a separately filed opt-in collective action under 29 U.S.C. § 216(b) of the FLSA. Both suits allege violations arising from the same conduct or occurrence by the same defendant. At issue is whether federal jurisdiction over the Rule 23 class action based solely on diversity under the Class Action Fairness Act (CAFA), 28 U .S.C. § 1332(d), is inherently incompatible with jurisdiction over the FLSA action, and whether the FLSA preempts state laws that parallel its protections. “

Although there had been many prior trial level decisions from the courts within the Third Circuit holding that so-called hybrids were “inherently incompatible,” the panel noted that “The concept of inherent incompatibility has not fared well at the appellate level. Four courts of appeals have rejected its application to dual-filed FLSA and class actions.”

Looking first to the text of the FLSA, the court agreed with the Seventh Circuit “that that the plain text of § 216(b) provides no support for the concept of inherent incompatibility.”  The court then explained that a look at legislative history was unnecessary in light of the unambiguous nature of the FLSA’s text in this regard.  Nonetheless, looking at the legislative history, the court concluded, “we disagree that certifying an opt-out class based on state employment law contravenes the congressional purpose behind the Portal–to–Portal Act.”

Perhaps most significantly, the court revisited its decision in De Asencio and noted that it was “distinguishable, as the Seventh, Ninth, and D.C. Circuits have all concluded. Ervin, 632 F.3d at 981 (“De Asencio represents only a fact-specific application of well-established rules, not a rigid rule about the use of supplemental jurisdiction in cases combining an FLSA count with a state-law class action.”); Wang, 623 F.3d at 761; Lindsay, 448 F.3d at 425 n. 11. Unlike the state law claims at issue in De Asencio, there is no suggestion that the claims under the MWHL and the OMFWSA are novel or complex; Rite Aid’s principal objection is that these state claims are too similar to federal claims with which the federal courts are well familiar. Nor does this case present an instance of supplemental jurisdiction, where there is statutory authority to decline jurisdiction in the factual circumstances of De Asencio.  Here, independent jurisdiction exists over plaintiffs’ claims under CAFA, which provides no statutory basis for declining jurisdiction in this instance. For these reasons, we do not believe De Asencio supports dismissal.”

The court concluded:

“In sum, we disagree with the conclusion that jurisdiction over an opt-out class action based on state-law claims that parallel the FLSA is inherently incompatible with the FLSA’s opt-in procedure. Nothing in the plain text of § 216(b) addresses the procedure for state-law claims, nor, in our view, does the provision’s legislative history establish a clear congressional intent to bar opt-out actions based on state law. We join the Second, Seventh, Ninth, and D.C. Circuits in ruling that this purported “inherent incompatibility” does not defeat otherwise available federal jurisdiction.”

The court also rejected the contention that the FLSA somehow preempts more beneficial state wage and hour laws.

Click Knepper v. Rite Aid Corp. to read the entire Opinion of the Court.  Click here to read the Secretary of Labor’s amicus brief in support of the plaintiff-appellant and here to read the amicus brief submitted on behalf of several employee rights’ organizations, including the National Employment Law Association (NELA).

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Filed under Class Certification, Collective Actions, Hybrid

S.D.Fla.: FLSA Defendant’s Counterclaims Based On Prior General Release Dismissed Because They Would Substantially Predominate Over FLSA Claims

Dawson v. Office Depot, Inc.

This matter came before the Court sua sponte, after its review of the pleadings. Plaintiffs filed a Complaint which alleged a violation of the FLSA. Defendants filed a Counterclaim, which alleged two state law claims: 1) Rescission of General Release Agreement and 2) Breach of General Release Agreement, presumably both arising out of the fact that Plaintiff had previously signed a general release and then sought damages in the instant case under the FLSA nonetheless.

After reviewing Defendants’ Counterclaim, the Court found that the state law claims asserted in Counts I & II are so related to the federal claim in the instant action that they form part of the same case or controversy. 28 U.S.C. § 1367(a) (2006). Therefore, the Court recognized its authority to exercise supplemental jurisdiction over Defendants’ Counterclaim.

Nevertheless, the Court recognized its supplemental jurisdiction inquiry did not end there.

“In 1990, Congress codified the formerly well-entrenched jurisdictional doctrine denominated as pendent and ancillary jurisdiction set forth in United Mine Workers of Am. v. Gibbs, 383 U.S. 715 (1966). 28 U.S.C. § 1367(c) provides in pertinent part:

The district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if-

(1) the claim raises a novel or complex issue of State law, [or]

(2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction ….”

Applying 28 U.S.C. § 1367(c)(2) to the facts before it, the Court found that supplemental jurisdiction should not be exercised over the state law claims asserted in Defendants’ Counterclaim because those claims present questions of state law which would otherwise predominate over the federal claims present here and obscure their significance. See Winn v. North Am. Philips Corp., 826 F.Supp. 1424, 1426 (S.D.Fla.1993). Therefore, the Court, pursuant to § 1367(c)(2), exercised its discretion and dismissed the state law claims set forth in Counts I & II of Defendants’ Counterclaim.

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Filed under Counterclaims