M.D.Tenn.: Where Employees Believed They Were Required to Sign WH-58 and/or Unaware of Private Lawsuit Regarding Same Issues, Waivers Null & Void
Woods v. RHA/Tennessee Group Homes, Inc.
This case was before the court on a variety of motions related to the plaintiffs’ request for conditional certification and for clarification as to the eligible participants in any such class. The case arose from plaintiffs’ claims that defendants improperly automatically deducted 30 minutes for breaks that were not provided to them. Of interest here, during the time the lawsuit was pending, the DOL was also investigating defendants regarding the same claims. Shortly after the lawsuit was commenced, the DOL made findings and recommendations to the defendants, in which it recommended payments of backwages to certain employees that were also putative class members in the case. As discussed here, the defendants then made such payments to the putative class members, but required that all recipients of backwage payments sign a WH-58 form (DOL waiver), which typically waives an employees claims covered by the waiver. Subsequently, the plaintiffs sought to have the WH-58’s declared null & void and asserted that any waiver was not knowing and/or willful as would be required to enforce. The court agreed and struck the waivers initially. However, on reconsideration the court held that a further factual showing was necessary to determine whether the WH-58 waivers were effectual or not under the circumstances.
The court explained the following procedural/factual background relevant to the waiver issue:
“The six named plaintiffs filed this putative collective action on January 13, 2011. Coincidentally, on the same day, the Department of Labor (“DOL”) contacted the defendant and commenced an investigation regarding the Meal Break Deduction Policy. (Docket No. 80 at 25 (transcript of April 14, 2011 hearing).) The DOL was apparently following up on a complaint that it had received nearly a year earlier. (Id. at 32.) Several days later, on January 18, the defendant informed the DOL of the pending private lawsuit.
Nevertheless, the DOL proceeded with the investigation and, in early March 2011, the DOL and the defendant reached a settlement, pursuant to 29 U.S.C. § 216(c). Under the settlement, the defendant agreed to comply with the FLSA in the future and to pay a certain amount of back wages to employees who were subject to the Meal Break Deduction Policy. (See Docket No. 80 at 14.)
To distribute these payments, the defendant posted the following notice in a common area:
The following employees must come to the Administrative Building and see Michelle regarding payment for wages as agreed upon by the Stones River center and the Department of Labor on Tuesday, April 12, 2011, 8:00 am–4:00 pm.
If you have questions, see Lisa or Kamilla
(Docket No. 43, Ex. 1 at 72; Docket No. 56, Ex. 1.) The posting contained a list of over 60 employees (see Docket No. 56, Ex. 1), including several employees who had already opted into this lawsuit (see, e.g., Docket No. 43, Ex. 1 at 56), although the defendant claims that their inclusion was an oversight. In her declaration, Human Resources Director Kamilla Wright states that she was simply “instructed to post a list of employees for whom checks were available.” (Docket No. 55 ¶ 7.)
Wright was further instructed “that when an employee came to the office to pick up their check, [she] was to have them sign the receipt for payment of back wages and then give them their check.” (Id. ¶ 9.) The declaration of Lisa Izzi, the defendant’s administrator, states that Izzi received identical instructions. (Docket No. 56 ¶ 9.) Accordingly, at the meetings with employees, each employee was given a check and DOL Form WH–58, which was titled “Receipt for Payment of Back Wages, Employment Benefits, or Other Compensation.” (Docket No. 43, Ex. 1 at 13.) The form stated:
I, [employee name], have received payment of wages, employment benefits, or other compensation due to me from Stones River Center … for the period beginning with the workweek ending [date] through the workweek ending [date.] The amount of payment I received is shown below.
This payment of wages and other compensation was calculated or approved by the Wage and Hour Division and is based on the findings of a Wage and Hour investigation. This payment is required by the Act(s) indicated below in the marked box(es):
[X] Fair Labor Standards Act 1 …
(Id.) Further down, in the middle of the page, the form contained the following “footnote”:
FN1NOTICE TO EMPLOYEE UNDER THE FAIR LABOR STANDARDS ACT (FLSA)—Your acceptance of this payment of wages and other compensation due under the FLSA based on the findings of the Wage and Hour Division means that you have given up the right you have to bring suit on your own behalf for the payment of such unpaid minimum wages or unpaid overtime compensation for the period of time indicated above and an equal amount in liquidated damages, plus attorney’s fees and court costs under Section 16(b) of the FLSA. Generally, a 2–year statute of limitations applies to the recovery of back wages. Do not sign this receipt unless you have actually received this payment in the amount indicated above of the wages and other compensation due you.
(Id.) Below that was an area for the employee to sign and date the form.
It appears that Wright and Izzi did not, as a matter of course, inform the employees that accepting the money and signing the WH–58 form was optional. Nor did they inform the employees that a private lawsuit covering the same alleged violations was already pending.
On April 12 and 13, 2011, a number of employees accepted the payments and signed the WH–58 forms. On April 13, the plaintiffs’ counsel learned of this and filed a motion for a temporary restraining order or preliminary injunction, seeking to prevent the defendant from communicating with opt-in plaintiffs and potential opt-in plaintiffs. (Docket No. 43.)
The court held a hearing on the plaintiffs’ motion on April 14, 2011. At that hearing, the court expressed its displeasure with the defendant’s actions, which, the court surmised, were at least partly calculated to prevent potential class members from opting in to this litigation. The court stated that it would declare the WH–58 forms (and the attendant waiver of those employees’ right to pursue private claims) to be null and void; thus, those employees would be free to opt in to this lawsuit.”
On reconsideration, the court reconsidered its prior Order on the issue. While re-affirming that non-willful waivers would be deemed null & void, the court explained that the issue would be one for the finder of fact at trial. After a survey of the relevant case law, the court explained:
“To constitute a waiver, the employee’s choice to waive his or her right to file private claims—that is, the employee’s agreement to accept a settlement payment—must be informed and meaningful. In Dent, the Ninth Circuit explicitly equated “valid waiver” with “meaningful agreement.” Dent, 502 F.3d at 1146. Thus, the court stated that “an employee does not waive his right under section 16(c) to bring a section 16(b) action unless he or she agrees to do so after being fully informed of the consequences.” Id. (quotation marks omitted). In Walton, the Seventh Circuit likened a valid § 216(c) waiver to a typical settlement between private parties:
When private disputes are compromised, the people memorialize their compromise in an agreement. This agreement (the accord), followed by the payment (the satisfaction), bars further litigation. Payment of money is not enough to prevent litigation…. There must also be a release. Walton, 786 F.2d at 306. The relevant inquiry is whether the plaintiffs “meant to settle their [FLSA] claims.” Id.
Taken together, Sneed, Walton, and Dent suggest that an employee’s agreement to accept payment and waive his or her FLSA claims is invalid if the employer procured that agreement by fraud or duress. As with the settlement of any other private dispute, fraud or duress renders any “agreement” by the employee illusory. See 17A Am.Jur.2d Contracts § 214 (“One who has been fraudulently induced to enter into a contract may rescind the contract and recover the benefits that he or she has conferred on the other party.”); id. § 218 (“ ‘Duress’ is the condition where one is induced by a wrongful act or threat of another to make a contract under circumstances which deprive one of the exercise of his or her free will. Freedom of will is essential to the validity of an agreement.” (footnote omitted)). The court finds that employees do not waive their FLSA claims, pursuant to § 216(c), if their employer has affirmatively misstated material facts regarding the waiver, withheld material facts regarding the waiver, or unduly pressured the employees into signing the waiver.
This holding does conflict with Solis v. Hotels.com Texas, Inc ., No. 3:03–CV–0618–L, 2004 U.S. Dist. LEXIS 17199 (N.D.Tex. Aug. 26, 2004), in which the district court rejected the contention that “an allegation of fraud could lead to the invalidity of a waiver under 216(c).” Id. at *6. That finding was mere dicta, however, and, regardless, this court is not bound by decisions from the Northern District of Texas.
Here, the defendant posted a sign with a list of employees’ names stating that those employees “must come to the Administrative Building and see Michelle regarding payment for wages as agreed upon by the Stones River center and the Department of Labor.” (Docket No. 43, Ex. 1 at 72 (emphasis added).) It appears that, when the employees met with the defendant’s human resources representatives, neither the representatives nor the Form WH–58 informed the employees that they could choose to not accept the payments. On the evidence presented at the April 14 hearing and submitted thereafter, the court finds that reasonable employees could have believed that the defendant was requiring them to accept the payment. Obviously, this calls into question the willingness of the employees’ waivers.
Additionally, it appears that the defendant never informed the employees that a collective action concerning the Meal Break Deduction Policy was already pending when the waivers were signed. The court finds that it was the defendant’s duty to do so. Section 216 exists to give employees a choice of how to remedy alleged violations of the act—by either accepting a settlement approved by the DOL or by pursing a private claim. An employer should not be allowed to short circuit that choice by foisting settlement payments on employees who are unaware that a collective action has already been filed. If employees are unaware of a pending collective action, they are not “fully informed of the consequences” of their waiver, Dent, 502 F.3d at 1146, because waiving the right to file a lawsuit in the future is materially different than waiving the right to join a lawsuit that is already pending. In the former situation, an employee who wishes to pursue a claim must undertake the potentially time-consuming and expensive process of finding and hiring an attorney; in the latter, all an employee must do is sign and return a Notice of Consent form.
Thus, the court finds that any employee of Stones River Center may void his or her § 216(c) waiver by showing either: (1) that he or she believed that the defendant was requiring him or her to accept the settlement payment and to sign the waiver; or (2) that he or she was unaware that a collective action regarding the Meal Break Deduction Policy was already pending when he or she signed the waiver. The court will vacate its April 14, 2011 Order, to the extent that the order declared all such waivers to be automatically null and void. Instead, under the above-described circumstances, the waivers are voidable at the election of the employee. Because the validity of any particular employee’s waiver depends on questions of fact, the issue of validity as to each employee for whom this is an issue will be resolved at the summary judgment stage or at trial.”
Click Woods v. RHA/Tennessee Group Homes, Inc. to read the entire Memorandum Opinion on all the motions.
M.D.Fla.: Applying Twombly, Defendant’s Assertion of Generalized Affirmative Defense of “Good Faith” Struck, Due to Insufficient Facts
Drzik v. Haskell Co.
This case was before the court on Plaintiff’s motion to strike several affirmative defenses pled by Defendant as factually insufficient under FRCP 8 and Twombly. Significantly, the court struck Defendant’s two affirmative defenses asserting that liquidated damages were not due to Plaintiff because Defendant had acted in “good faith” in committing violations, if any, of the FLSA. The case is significant, because the affirmative defenses struck are asserted in the majority of FLSA defendants’ answers, typically with identical language to that pled here. Noting that such bare bones allegations do not satisfy the pleading requirements of Rule 8, the court struck the Defendant’s affirmative defense(s) of good faith, with leave to replead with additional facts.
Holding that the Defendant’s allegations of good faith were insufficient as pled, the court explained:
“[Defendant’s] Third and Fifth Affirmative Defenses respectively claim that Plaintiff’s claims are barred because Haskell has acted in good faith, and because of the existence of exceptions, exclusions, or exemptions provided in the FLSA. (Doc. 6 at 6). These affirmative defenses correctly state that a “good faith” defense and exceptions exist under the FLSA. See 29 U.S.C. §§ 207, 260. However, the affirmative defenses, as drafted, are lacking in sufficient details and fail to provide the requisite notice of the theory of the defense. See Twombly, 550 U.S. at 556 (explaining the need for factual support to give defendant fair notice of claims, but equally applicable to defenses). The requirement to include factual support to provide fair notice of claims is also applicable to affirmative defenses. Therefore, if Haskell intends to pursue these defenses it will need to plead some factual basis to give the Plaintiff fair notice of its defense. Therefore, Plaintiff’s Motion is granted as to the Third and Fifth Affirmative Defenses and those defenses are stricken with leave to amend.”
As the trend of defendants filing more and more motions to dismiss based on Twombly continues, it will be interesting to see if we begin seeing an uptick in motions like this, which seek to apply the pleading standards equally to the other side of the “v.”
Click Drzik v. Haskell Co. to read the entire Order.
S.D.Fla.: Pharma Rep (PSR) Entitled to Overtime If She Worked Over 40 Hours; Administrative and Outside Sales Exemptions Inapplicable
Palacios v. Boehringer Ingelheim Pharmaceuticals, Inc.
Pharmaceutical companies have been involved in a series of cases in recent years, regarding the exempt status of their pharmaceutical sales representatives (“PSRs”). While the DOL has stated in a multiple amicus briefs that PSRs performing typical duties are not exempt under either the outside sales exemption or administrative exemption, the industry has stubbornly refused to reclassify its PSRs as non-exempt and begin paying overtime.
In the most recent case, Judge Ursula Ungaro in the Southern District of Florida joined the Second Circuit, the DOL and several other District-level courts around the country, and held that a Boehringer PSR was neither outside sales exempt nor administratively exempt.
First, the court rejected the contention that the plaintiff was subject to the outside sales exemption. Noting that she could not be outside sales exempt, if she did not perform sales, the court explained:
“Here, there is no dispute that Plaintiff was not permitted to give healthcare providers drugs in exchange for anything of value. It is also undisputed that the employees in Boehringer’s Trade Relations and Managed Markets sell drugs to retailers, and the retailers sell the drugs to patients with prescriptions for them. Moreover, there is no dispute that Plaintiff was not an employee in the Trade Relations and Managed Markets groups. Thus, none of the work that Plaintiff performed involved the “transfer of title to tangible property.” At best, Plaintiff’s presentation of Boehringer’s core message to physicians was non-exempt promotional work that was incident to the sales made by individuals in the Trade Relations and Managed Market groups. Accordingly, the Court agrees with the Second Circuit’s rationale. Plaintiff’s inability to transfer ownership of any one of the drugs she was responsible for in exchange for money, her inability to take a purchase order for any of the drugs, and her inability to obtain a binding commitment from physicians to prescribe a drug, renders her unable to make a “sale” as defined under the FLSA and its implementing regulations. See In re Novartis, 611 F.3d at 154.”
In a footnote, the court discussed the fact that it was declining to follow the Ninth Circuit’s liberal reading of the phrase “sale.”
Specifically, the court said:
“The Court declines to follow the Ninth Circuit’s liberal reading of the phrase “sale” and its tenuous application of the outside sales exemption to PSRs. The crux of the Ninth Circuit’s reasoning in SmithKline Beecham is as follows: Because the products for which PSRs are responsible may be legally dispensed only with a prescription written by a licensed healthcare provider, the relevant purchaser is the healthcare provider, and thus PSRs make a “sale” when they obtain non-binding commitments from providers that they will write a prescription. 635 F.3d at 396. The undersigned disagrees with the contention that the relevant purchaser is the healthcare provider. First, the healthcare provider is not bound to write a prescription just because she tells a PSR that she will. Second, even if the provider writes a prescription, she does not actually purchase anything. The prescription merely allows a patient to purchase a given drug; it does not guarantee that there will be a “transfer of title to tangible property” because the prescription does not obligate the patient to purchase the drug. Accordingly, PSRs like Plaintiff cannot make a “sale” to physicians, because physicians cannot purchase the drugs.”
The court also held that plaintiff’s duties failed to satisfy either prong of the administrative exemption’s duties requirements. The court explained:
“Here, Plaintiff was not involved in “running or servicing” Boehringer’s business. Instead, Plaintiff worked out of her vehicle or in physicians’ offices communicating to physicians Boehringer’s carefully scripted core message. Boehringer has separate departments in its corporate headquarters that are responsible for preforming administrative duties and running and servicing its business. For example, Boehringer has separate Trade Relations and Managed Markets groups, and separate advertising, sales operation, and commercial analytics departments. Plaintiff never worked in any of these groups or departments. Plaintiff’s role was to merely perform promotional work that aided these departments in their duties. Plaintiff also was not involved in Boehringer’s “management policies or general operations.” She never performed any work in the functional areas of tax, finance, accounting, auditing, advertising, research and development, personnel management, human resources, labor relations, government relations, or information technology. Accordingly, Plaintiff’s role was not related to the management or general business operations of Boehringer.”
After holding that plaintiff’s role was not related to the management or generatl business operations of defendant, it also addressed the plaintiff’s lack of independent discretion:
“In comparing Plaintiff’s primary duties against the factors set forth in § 541.202(b), the Court finds no evidence in the record that Plaintiff had any authority to formulate, affect, interpret, or implement Boehringer’s management or operating policies, or that she was involved in planning Boehringer’s long-term or short-term business objectives, or that she carried out major assignments in conducting the operation of Boehringer’s business, or that she had any authority to commit Boehringer in matters that have significant financial impact. See In re Novartis, 611 F.3d at 157. For example, although Plaintiff could decide how to use funds reserved for promotional events, her managers gave her a strict budget for each event, which she was not permitted to exceed. The record does not indicate that Plaintiff was allowed to negotiate and bind Boehringer to any significant matters, or waive or deviate from Boehringer’s established policies and procedures without its prior approval. Moreover, Plaintiff’s ability to determine how best to engage physicians, develop a rapport with them, and address their questions and concerns about a particular product are all skills that Plaintiff developed and honed through Boehringer’s training sessions. And, although Plaintiff determined how best to approach physicians, Boehringer never allowed her to stray outside the core message. Finally, even though Plaintiff had discretion in determining the order in which she would visit physicians, Boehringer determined which physicians she would visit, required her to visit every physician on its list, and mandated how many times she had to visit each physician in a six-month period. If Plaintiff did not visit every physician on the list the specified number of times, she was subject to discipline. In light of all the controls that Boehringer placed upon Plaintiff, the Court finds that Plaintiff did not exercise discretion or independent judgment relating to matters of significance.”
Click Palacios v. Boehringer Ingelheim Pharmaceuticals, Inc. to read the entire Order on Motions for Summary Judgment.
Andrew Frisch, the publisher of the Overtime Law Blog, represents Ms. Palacios. If you are a Pharmaceutical Sales Rep who believes you have been wrongly denied overtime, call Mr. Frisch at (888)OVERTIME or click here to learn about your wage and hour rights today.
S.D.Fla.: Defendant May Not Seek SJ Against Individual Plaintiffs Where Case Remains Certified At Stage 2
Hernandez v. Starbucks Coffee Co.
In this case plaintiffs, “store managers” at Starbucks claimed they had been uniformly misclassified as exempt employees and wrongly denied overtime as a result. The case was before the court on defendant’s motion for summary judgment regarding 4 individual plaintiffs in the (certified) class—on the ground that these Plaintiffs offered generally consistent testimony that compels the conclusion that they are exempt “executive” employees as a matter of law. Significantly, prior to defendant filing its motion for summary judgment, the court had denied defendant’s motion to decertify the class. The court denied defendant’s motion, largely on the ground that it is inappropriate for a defendant to attempt to target individual plaintiffs for summary judgment, where the class is proceeding as a whole and liability will therefore be determined on a classwide rather than individual basis.
The court explained:
“Before reaching the merits of this argument, the Court must first consider whether it is even proper for Defendant to move for summary judgment as to selected individual Plaintiffs when the Court is presented with a collective action. Relying upon Hogan v. Allstate Ins. Co., 361 F.3d 621, 623 (11th Cir.2004), Defendant argues that where a “FLSA collective action has been conditionally certified but no ruling has been made as to whether the case will proceed to trial as a collective action, the district court may entertain summary judgment motions as to individual plaintiffs.” [DE–241, pg. 12]; see also Lindsley v. Bellsouth Telecomm., Inc., Case No. 07–6569, 2009 WL 322144, at *2 (E.D.La. Feb.9, 2009) (denying motion to strike motion for summary judgment against an individual, named plaintiff, finding it “appropriate to choose [the individual plaintiff] as a test plaintiff to resolve the issue of employee versus independent-contractor status.”).
In response, Plaintiffs argue that the Court should reject Defendant’s attempt to have its motion treated as one directed to only certain individuals, as opposed to the class as a whole, pointing to Judge Marra’s conclusion in Pendlebury v. Starbucks Coffee Company, Case No. 04–80521–CIV–KAM, DE–495 (S.D. Fla. filed Jan. 8, 2008). Plaintiffs point out that unlike Hogan, 361 F.3d at 623, neither this Court nor Plaintiffs have consented to a “test plaintiff” procedure, and Defendant cannot randomly select certain individual Plaintiffs and at the same time seek to prohibit Plaintiffs from using testimony from other Plaintiffs in order to oppose the entry of summary judgment. Defendant attempts to refute this argument by contending that Rule 56(a) permits it to seek summary judgment as to a claim or defense, or part of a claim or defense, and reiterates the holding in Hogan. Defendant also argues that Plaintiffs have not cited to any authority prohibiting the Court from considering such a motion where as here the Court has not yet conducted a stringent review of the propriety of collective treatment.
Importantly, subsequent to Defendant filing the instant motion for summary judgment, on June 28, 2011, this Court denied Defendant’s motion for decertification [DE–300], concluding that Plaintiffs are similarly situated and can proceed as a class. As such, the Court has now conducted a stringent review of the propriety of collective treatment and found collective treatment to be appropriate. Defendant’s reliance on Hogan as its basis for moving for summary judgment as to only four (4) individual Plaintiffs is misplaced. Defendant similarly attempted to raise this argument and rely on Hogan in filing its motion for partial summary judgment in Pendlebury. The Pendlebury court rejected Defendant’s argument, pointing out that in Hogan the court had specifically authorized the selection of test plaintiffs for purposes of discovery and motions for summary judgment. Case No. 04–80521–CIV–KAM, DE–495 at pg. 3. The court concluded that “allowing Defendant to move for summary judgment against particular individuals who are indistinguishable from other members of the class defeats the entire purpose of a collective action.” Id. at 5. Instead, the court held that since the action was certified as a collective action, the court would “only address dispositive motions that resolve common issues of law or fact as to the entire class or an identifiable subclass.” Id.
Similarly here, the Court has already concluded that collective treatment is appropriate and has not authorized the use of “test” plaintiffs. Instead it appears that Defendant unilaterally selected individuals as its “test” plaintiffs. Notably, Defendant does not argue that these Plaintiffs somehow represent a “subclass” or otherwise address the Pendlebury court’s ruling on this issue in any manner. Consequently, the Court finds that it is not proper for Defendant to move for summary judgment as to individual Plaintiffs given the Court’s recent conclusion that Plaintiffs shall proceed as a class.”
E.D.Pa.: Defendant’s Attempt to Obtain Class Waivers From Absent Class Members While Motion for Conditional Certification Pending Impermissible; Corrective Measures Ordered
Williams v. Securitas Sec. Services USA, Inc.
Before the court was the emergency motion of plaintiffs for a protective order and corrective mailing to address defendant’s improper communications with absent class members. While plaintiffs motion for conditional certification was pending before the court (but before it had been resolved), the defendant sought to obtain class waivers of the claims in the case from its current employees, by sending each an alternative dispute resolution agreement. The court held that such attempts by the defendant amounted to an obstruction of the court’s role in managing the collective action, granted plaintiffs motion and ordered related corrective action by defendant.
The motion alleged that defendant distributed to all its employees, including its Pennsylvania employees, a document entitled “Securitas Security Services USA, Inc. Dispute Resolution Agreement” (hereinafter “the Agreement”). The body of the Agreement consists of ten paragraphs on four type-written, single-spaced pages and is written in a small font. A fifth page provides a place for the employee to acknowledge receipt of the document. In relevant part:
“The Agreement purports to require all Securitas employees to submit “any dispute arising out of or related to Employee’s employment with [Securitas] … or termination of employment” to a binding arbitration conducted pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq. It states in small boldface letters that “this Agreement requires all such disputes to be resolved only by an arbitrator through final and binding arbitration and not by way of court or jury trial.” The Agreement specifies that any dispute arising from federal “wage-hour law” and the FLSA must be arbitrated. The Agreement states, again in small bold font, “there will be no right or authority for any dispute to be brought, heard or arbitrated as a class, collective or representative action (“Class Action Waiver”).”
Paragraph 7 of the Agreement says that although the Agreement is meant to apply “broadly,” if an employee is “a named party plaintiff, or ha[s] joined as a party plaintiff this Agreement shall not apply to those Actions, and you may continue to participate in them without regard to this Agreement,” but “shall apply to all Actions in which you are not a plaintiff or part of a certified class.” The Agreement then lists five representative or class action lawsuits in which Securitas is a named defendant, including this lawsuit, “Frankie Williams and Kimberly Ord, filed 12/10/2010, USDC, Eastern District of Pennsylvania Case No. 2:10–CV–07181–HB.” The term “Actions” is defined as “litigation on behalf of [Securitas] employees in which those employees desire to represent claims of other employees in class, collective or other representative actions.” Thus, the term “Actions” does not appear to be limited only to the five lawsuits enumerated later in paragraph 7. The nature of the Williams action is not explained.
The Agreement further states that if the employee would like to participate in one of the “Actions,” he or she “may opt out of this Agreement by following the procedure set forth in Section 9, below.” To opt out of the Agreement, the employee must call a toll-free telephone number within 30 days of the date the employee received the Agreement. According to the Agreement, “Should an Employee not opt out of this Agreement within 30 days of the Employee’s receipt of this Agreement, continuing the Employee’s employment constitutes mutual acceptance of the terms of this Agreement by the Employee and [Securitas].” The Agreement declares that not opting out means an employee forfeits the right to participate in any collective or representative action. Securitas adds that it will not retaliate against any employee for opting out of the Agreement or for asserting claims according to its terms.
The fifth page of the Agreement states as follows:
ACKNOWLEDGMENT OF RECEIPT OF THE SECURITAS SECURITY SERVICES USA, INC. DISPUTE RESOLUTION AGREEMENT
BY SIGNING BELOW, I AM ACKNOWLEDGING RECEIPT OF THE SECURITAS SECURITY SERVICES USA, INC. DISPUTE RESOLUTION AGREEMENT, EFFECTIVE IMMEDIATELY.
Below this text is a place for the employee to sign and date the Agreement. There is also a place for a witness to sign his or her name.”
The court rejected defendant’s attempts to stretch the holding of the Supreme Court’s recent holding in AT&T Mobility LLC v. Concepcion, stating:
“Under Hoffman–La Roche, this court has a responsibility to prevent confusion and unfairness concerning this action in which plaintiffs seek to have the matter proceed as a collective action and to insure that all parties act fairly while the court decides whether and how this action will move forward under the FLSA. In the meantime, to prevent confusion and unfairness, we will order Securitas to rescind the Agreement with respect to its Pennsylvania employees as it relates to this litigation. We will require Securitas to set forth the nature of this action and advise its Pennsylvania employees that the Agreement is not binding with regard to those employees’ right to participate in this lawsuit, notwithstanding the fact that the employee may have signed the Agreement or failed timely to opt out.
Securitas contends that any interference by this court with its efforts to compel arbitration of disputes with its employees will be contrary to the Supreme Court’s recent decision in AT&T Mobility LLC v. Concepcion, –––U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011). We disagree. In Concepcion, the Supreme Court held that, generally, states may not adopt rules of contract interpretation that undermine the “overarching purpose” of the FAA, which “is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings.” Id. at 1748. There, the Court considered California contract law, which deemed unconscionable certain contracts that disallowed class arbitration. The Court found the law impermissibly stood “as an obstacle to the accomplishment of the FAA’s objectives.”
Securitas’ reliance on Concepcion is inapposite because plaintiffs’ motion for a protective order does not rely on any state-law ground to invalidate the Agreement. Here the issue is quite different. This court has found the Agreement to be a confusing and unfair communication with the class of possible plaintiffs in this action under the FLSA.
Securitas argues that invalidating the Agreement merely because this class action lawsuits is pending is equivalent to preventing it from adopting any arbitration policy at all. Whatever right Securitas may have to ask its employees to agree to arbitrate, its current effort, which specifically references this lawsuit, is confusing and misleading and clearly designed to thwart unfairly the right of its employees to make an informed choice as to whether to participate in this collective action under the FLSA. Since the Agreement by its terms will directly affect this lawsuit, this court has authority to prevent abuse and to enter appropriate orders governing the conduct of counsel and the parties. Hoffman–La Roche, 493 U.S. at 171–72. Securitas did not act fairly when it gave notice through the Agreement to potential class members concerning this lawsuit.
Defendant’s proposal to resolve the plaintiffs’ pending motion for conditional class certification before resolving issues related to the Agreement is insufficient to prevent potential plaintiffs from misapprehending their rights. The confusing nature of the Agreement may cause Securitas employees to misunderstand the nature of their rights to participate in this litigation while the court determines whether to conditionally certify a class, damage not easily undone. Similarly, Securitas’s proposal to allow its Pennsylvania employees a second 30–day opt out period if the court conditionally certifies a class is also insufficient because it is for the court, not Securitas, to determine the amount of time employees shall have to consider their right to join this action. Immediate action by this court is necessary.
Securitas shall be required to implement the corrective measures described in the accompanying order.”
In the accompanying Order, the court required that the defendant submit a proposed corrective notice to the plaintiffs within 48 hours which, among other things, stated the the dispute resolution agreement was not binding on with regard to participation in the case (i.e. they would not be precluded from joining this class if they signed the agreement at issue).
W.D.Mo.: Plaintiffs Sufficiently Pled a “Rounding” Claim, Where Alleged Defendants’ Policy of Rounding Resulted in Improper Denial of Wages
McClean v. Health Systems, Inc.
The Plaintiffs, Certified Nursing Assistants (“CNAs”) for Defendant, claimed that they were required to work off the clock during automatically deducted meal breaks, during mandatory meetings and training sessions, and while performing mandatory data entry known as “dart charting.” The result of these policies was to allegedly deny the Plaintiffs wages and overtime. After the Plaintiffs amended their Complaint the Defendants filed a motion to dismiss regarding several of Plaintiffs’ allegations. As discussed here, the court denied Defendants’ motion as it pertained to Plaintiffs’ claims arising from Defendants’ policy of rounding their time to the nearest quarter of an hour, regardless of actual time worked.
Discussing the sufficiency of the rounding claim, the court explained:
“One of the Plaintiffs’ substantive allegations is that the Defendants have a practice of “reduc[ing] [their] employees’ work hours by rounding their hours to the nearest quarter hour of time to their detriment (i.e., the rounding did not average out to equally benefit Defendants and its employees over time) which results in Defendants not paying its employees for all time worked.” Doc. 51 at ¶ 112. Defendants cite federal regulations which expressly allow the practice of rounding to the nearest 15–minute increment. 29 C.F.R. § 785.48(b) (“For enforcement purposes this practice of [rounding to 5, 10 or 15–minute increments] will be accepted, provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.”). The Defendants submit Harding v. Time Warner, Inc. in support of their position that the Plaintiffs have not sufficiently pled a claim of improper rounding. No. 09cv1212–WQH–WMC, 2010 WL 457690 (S .D.Cal. Jan. 26, 2010). In Harding, the court found that, despite describing the allegedly improper rounding procedures in detail, Harding had failed to provide “specific factual allegations” showing that employees had been underpaid. Id. at *5. The Plaintiffs provided the following statements regarding rounding in their Amended Complaint:
112. Defendants further reduce its [sic] employees’ work hours by rounding their hours to the nearest quarter hour of time to their detriment (i.e., the rounding did not average out to equally benefit Defendants and its [sic] employees over time) which results in Defendants not paying its [sic] employees for all time worked. This practice results in Plaintiffs and all other similarly situated employees being denied wages including overtime premiums and Defendants’ illegal rounding practices are not de minimus. [sic]
113. Even though Defendants had a computerized timekeeping system in place and could have easily recognized and paid Plaintiffs’ and other similarly situated employees’ actual hours worked, Defendants deliberately disregarded the system’s records and rounded Plaintiffs’ and other similarly situated employees work time down to the nearest quarter of an hour.”
114. Defendants willfully and illegally rounded Plaintiffs’ and other similarly situated employees’ work time down to the nearest quarter of a [sic] hour.
Doc. 51 at ¶¶ 112–14 (legal conclusions in bold). Iqbal requires “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949. The Plaintiffs allege that the rounding did not average out properly. They further allege that the Defendants maintain a computerized system which keeps time, but still chose to use rounding. Assuming the truth of these allegations, the Court can plausibly infer that the Defendants chose to round time because it would be more favorable than paying for actual time worked on a minute by minute basis, thus violating the averaging rationale inherent to rounding. While the Plaintiffs could have chosen to state more, to require them to plead, for example, specific minutes on specific days for which they were denied wages would be fact pleading inconsistent with Iqbal. Hamilton v. Palm, 621 F.3d 816, 817 (8th Cir.2010) (noting that “Iqbal did not abrogate the notice pleading standard of Rule 8(a)(2)”). The Defendants’ Motion to dismiss the Plaintiffs’ rounding claim is DENIED.”
Click McClean v. Health Systems, Inc. to read the entire Order.
M.D.Ga.: DOL Properly Invoked the “Government Informer Privilege” Where Defendants Sought Identities of Witnesses Who Cooperated in Pre-Suit DOL Investigation
Solis v. New China Buffet No. 8, Inc.
This case was before the court on defendants’ motion to compel the DOL (“DOL” or “Plaintiff”) to provide complete answers to discovery requests. Specifically, Defendants sought information relating to the DOL’s investigation (prior to the filing of the lawsuit) of this Fair Labor Standards Act (“FLSA”) case, particularly the identities of any employees that gave statements to the DOL, the contents of those statements, and the contents of the investigative file. The DOL refused to provide that information based on the informer’s privilege. The court upheld the DOL’s refusal based on the investigation privilege. However, the court ordered the DOL to provide the full contact information for all witnesses disclosed by the DOL in their Rule 26 disclosures.
The court boiled Defendants’ arguments down as follows:
“Defendants mount two arguments against Plaintiff’s refusal to disclose the requested information and documents. First, they argue that Plaintiff has not properly invoked the informer’s privilege. Second, they argue that the informer’s privilege should not protect the information they are seeking.”
Rejecting the Defendants’ first contention, that the DOL had not properly invoked the privilege, the court explained:
“Plaintiff properly invoked the informer’s privilege in this case. In response to Defendants’ Motion to Compel, Plaintiff produced a declaration from Acting Wage and Hour Administrator Nancy J. Leppink . In her declaration, Administrator Leppink stated that she had personally reviewed the relevant parts of the investigation file, including information withheld or redacted. [Doc. 34–1 ¶ 8]. She went on to the state that the Secretary of Labor objected to the production of the requested documents and identifying information because it was protected from disclosure pursuant to the informant’s privilege. [Id. ¶ 11]. She then “invoke[d] the informant’s privilege to protect from disclosure the identities, and any statements and other documents, or portions thereof, which could reveal the identifies, of persons who have provided information to the U.S. Department of Labor in the instant case.” [Id. ¶ 12].”
Turning to the applicability of the informer privilege to the case at bar, the court held that the discovery sought was properly the subject of the privilege. Describing the nature and purpose of the informer privilege, the court explained:
“What courts have termed the “informer’s privilege is in reality the Government’s privilege to withhold from disclosure the identity of persons who furnish information of violations of law to officers charged with enforcement of that law.” Rovario v. United States, 353 U.S. 53, 59, 77 S.Ct. 623, 627, 1 L.Ed.2d 639 (1957). The privilege protects “employees with legitimate complaints, exercising their constitutional and statutory right to present their grievances to the government.” Brennan v. Engineered Prods. Inc., 506 F.2d 299, 302 (8th Cir.1974). “The purpose of the privilege is the furtherance and protection of the public interest in effective law enforcement.” Rovario, 353 U.S. at 59, 77 S.Ct. at 627. The government may invoke the privilege “to conceal the names of employees who precipitated the suit by filing complaints with the Department of Labor.” Does I thru XXIII v. Advanced Textile Corp. ., 214 F.3d 1058, 1072 (9th Cir.2000). The privilege “applies whether the [Department of Labor] solicited statements from an employee or the employee made a complaint to the [ Department of Labor].” Martin v. New York City Transit Auth., 148 F.R.D. 56, 63 (E.D.N.Y.1993) (citing Dole v. Local 1942, International Bhd. of Elec. Workers, AFL–CIO, 870 F.2d 368, 370–71 (7th Cir.1989)). The privilege applies to both current and former employees of a company whose workers have communicated with the Department of Labor. Hodgson v. Charles Martin Inspectors of Petroleum, Inc., 459 F.2d 303, 305–06 (5th Cir.1972).
The informer’s privilege is not absolute. Its scope is “limited by the underlying purpose of the privilege as balanced against the fundamental requirements of fairness and disclosure in the litigation process.” Charles Martin, 459 F.2d at 305. If the “disclosure of the contents of a communication will not tend to reveal the identity of an informer, the contents are not privileged.” Rovario, 353 U.S. at 60, 77 S.Ct. at 627. Generally, in questions involving the privilege, “the interests to be balanced … are the public’s interest in efficient enforcement of the Act, the informer’s right to be protected against possible retaliation, and the defendant’s need to prepare for trial.” Charles Martin, 459 F.2d at 305. The defendant’s need for certain information is generally less weighty during the discovery phase, as opposed to the pre-trial stage of the proceedings. See id. at 307, Brennan, 506 F.2d at 303.”
The court then held that the privilege was indeed applicable here. In so doing, the court rejected Defendants’ argument that it would be inefficient to depose all 48 witnesses disclosed by the DOL, and questioned Defendants’ base assertion that they needed to know who participated investigation:
“The Defendants’ need to depose all forty-eight former employees listed in Appendix A, or even only those who provided statements, in order to adequately prepare a defense appears far from pressing. The relevance of the identity of informers in a FLSA case is often questionable. See Chao v. Westside Drywall, Inc., 254 F.R.D. 651, 660 (D.Or.2009) (noting that “the names of informers are [often] irrelevant to whether the employer properly paid its employees and otherwise complied with the Act’s requirements”). Defendants have failed to make any showing that this case is outside the normal situation wherein a defendant has access to information and its own witnesses regarding its wage and record keeping practices, and the identity of informers is largely irrelevant. In any event, courts have generally found that the cost and inconvenience that Defendants seek to avoid does not tip the balance in favor of disclosure. See Charles Martin, 459 F.2d at 307 (“[T]hat depositions would be expensive show that the statements would facilitate defendant’s investigation but such facilitation is not a requirement for fundamental fairness to the defendant.”); Brennan, 506 F.2d at 303 & n. 3 (noting that at the discovery stage defendant was entitled to know “the charges, dates, names of underpaid employees, and names of those persons known to the plaintiff who had information concerning the issues” and that defendant had the ability to depose nineteen workers listed as possessing such information).”
For these reasons, the court upheld the application of the informer privilege. However, because the DOL had disclosed the names of the witnesses at issue, among the 48 witnesses on their Rule 26 disclosures, the court held Defendants were entitled to their contact information, notwithstanding the fact that the DOL did not have to identify whom of the 48 witnesses had given statements in the pre-suit investigation.
While this case is of limited usefulness to private practitioners, it does give an interesting analysis into a privilege that seems to be litigated more and more, with the DOL getting more active in litigating cases.
Click Solis v. New China Buffet No. 8, Inc. to read the entire Order on Defendants’ Motion to Compel.
D.Md.: Loading/Unloading of Materials Could Be Deemed “Integral and Indispensable” for Fire Protection Services; DMSJ Denied
Ross v. Wolf Fire Protection, Inc.
Plaintiffs, employees who installed fire protection services (sprinklers) on behalf of their employer, filed this lawsuit claiming that Defendant failed to pay them for all of their compensable work time. Specifically, Plaintiffs asserted that Defendant improperly failed to start their work day each day when they were required to come to Defendant’s facility to pick up expensive tools necessary for their work and load Defendant’s trucks. Similarly, Plaintiffs alleged that Defendant failed to properly pay them for time spent when they were required to return such tools (and work vehicles) to Defendant’s facility at the end of each work day. The Defendant argued that such time was precluded by the Portal-to-Portal Act, and in any event was de minimus such that it was not compensable time. The court held that the facts could support a finding that such time was “integral and indispensable” to their work, thus making it potentially compensable. As such, it denied Defendant’s motion.
Rejecting Defendant’s contentions, the court reasoned:
“The Defendants argue that the Plaintiffs “have never been instructed or directed to come to the [warehouse] before the start of the workday or at the end of the workday to pick up or drop off tools,” so loading of equipment at the warehouse cannot be an integral and indispensable part of their jobs. Defs.’ Mot. 7. The Plaintiffs contend that loading the equipment was integral because the equipment was necessary to installing sprinkler systems, and the Defendants required that they pick up the equipment at the warehouse. Pl.’s Opp’n 2–4.
An activity is “integral and indispensable” to the employee’s principal activities if it is “(1) necessary to the principal work performed and (2) done for the benefit of the employer.” Perez, 601 F.Supp.2d at 676 (citing Alvarez v. IBP, Inc., 399 F.3d 894, 902–03 (9th Cir.2003)).
The parties do not dispute that the Plaintiffs’ principal work was sprinkler system installation. See Defs.’ Mot. 6; Pls.’ Opp’n 2. Phillips’s affidavit is that the equipment he loaded and unloaded included items “necessary” to installing the sprinkler systems, such as the sprinkler heads, and because this equipment was expensive, Fire Protection “did not want [it] delivered directly to the job site” and “required [employees] to pick the[ ] [equipment] up at the warehouse, sign for [it], and account for [it].” Phillips Aff. ¶ 9.
From the evidence in Phillips’s affidavit, a reasonable factfinder could conclude that Phillips needed the equipment loaded at the warehouse to complete his job (the first part of the “integral and indispensable” inquiry). From his testimony that Fire Protection did not want expensive items delivered directly to the job sites, and required that the pipefitters pick up and sign for the equipment, a reasonable factfinder could conclude that the loading and unloading was “done for the benefit of the employer.” It is genuinely disputed whether Fire Protection required the plaintiffs to load and unload equipment, and whether the loading and unloading was “integral” to their “principal activity” requiring compensation under the FLSA.”
Rejecting Defendant’s contention that Plaintiffs were not entitled to be paid for travel time, the court explained:
“The Defendants argue that the Plaintiffs’ “voluntary carpooling” while “transporting tools, equipment and supplies” is not compensable under the FLSA. Defs.’ Reply 4. The Plaintiffs contend that because their workday started with loading the trucks at the warehouse, they must be compensated for all subsequent travel time within the workday. Pls.’ Opp’n 3–5.
The Portal–to–Portal Act did not change the “continuous workday” rule that “any walking, riding, or traveling time that occurs after the beginning of the employee’s first principal activity and before the end of the employee’s last principal activity … is covered by the FLSA.” Epps, 2011 WL 1566004, at *5 (internal quotation marks omitted). Applicable regulations provide that:
Time spent by an employee in travel as part of his principal activity, such as travel from job site to job site during the workday must be counted as hours worked. Where an employee is required to report to a meeting place … to pick up and to carry tools, the travel from the designated place to the work place is part of the day’s work, and must be counted as hours worked regardless of contract, custom, or practice. 29 C.F.R. § 785.38.
As discussed above, Phillips’s affidavit that Fire Protection required him to report to the warehouse to load and sign out expensive equipment Fire Protection did not want delivered directly to the job site creates a genuine dispute whether the loading and unloading was a principal activity. Viewing the evidence in the light most favorable to the Plaintiffs, it also creates a genuine dispute about whether travel from the warehouse to the job site and the return to the warehouse at the end of the day are “part of the day’s work” requiring compensation under the FLSA. The Defendants’ motion for summary judgment on the Plaintiffs’ FLSA unpaid wages claim will be denied.”
The issues discussed in this case are far from unique in the work world. However, many employers continue to violate the law, assuming that they need only pay employees for time spent at customer work sites, where the employer is profiting from the employees’ work. This case serves as a reminder that this is a misconception of the law.
Click Ross v. Wolf Fire Protection, Inc. to read the entire Memorandum and Opinion.
E.D.N.Y.: Where Agreement to Arbitrate Is Silent As To Class Arbitration, Arbitrator Not Court to Decide Class Arbitrability Issue
Guida v. Home Savings of America, Inc.
Plaintiffs brought this putative class action on behalf of themselves, and on behalf of individuals similarly situated, against Defendants, asserting claims under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201 et. seq., and related New York state wage and labor laws. Defendants moved to dismiss plaintiffs’ complaint, and compel arbitration on an individual basis pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et. seq. While Plaintiffs agreed to arbitrate the dispute, they argued that the arbitrator should decide whether the arbitration can proceed on a class basis, because the arbitration agreement was silent on the issue of class arbitration. The court agreed and held that while the parties were required to arbitrate the dispute, the determination of whether or not the arbitration should proceed on a class basis is for the arbitrator to make in the first instance.
Discussing the relevant provisions of the agreement(s) to arbitrate, the court explained:
“The terms of the Alternative Dispute Resolution Agreement are identical for all of the plaintiffs. The following are relevant portions from the Alternative Dispute Resolution Agreements:
I understand that Home Savings of America makes available arbitration for resolution of employment disputes that are not otherwise resolved by internal policies or procedures.
I agree that if I am unable to resolve any dispute through the internal policies and procedures of Home Savings … I will arbitrate … any legal claim that I might have against Home Savings … or its employees, in connection with my employment or termination of employment … whether arising out of issues or matters occurring before the date of this Agreement or after such date.
I agree to abide by and accept the final decisions of the arbitration panel as ultimate resolution of any disputes or issues for any and all events that arise out of employment or termination of employment.
I agree that the Employee Dispute Resolution Rules of the American Arbitration Association will apply to any resolution of any such matters. In exchange for the benefits of arbitration, I agree that the arbitrator will only have the power to grant those remedies available in court, under applicable law.”
In light of the silence as to class arbitration, the court held that the issue was one for the arbitrator, not the court to decide. The court reasoned that Supreme Court jurisprudence supported this holding, because the issue was one of substantive interpretation of the contract language and not merely a procedural issue:
“This Court concludes, in light of StoltNielsen and Bazzle, that the ability of a class to arbitrate a dispute where the parties contest whether the agreement to arbitrate is silent or ambiguous on the issue is a procedural question that is for the arbitrator to decide. Even though Bazzle does not have the full weight of Supreme Court precedent, it is nevertheless instructive. See, e.g., Barbour v. Haley, 471 F.3d 1222, 1229 (11 th Cir.2006) (“Plurality opinions are not binding on this court; however, they are persuasive authority.”); Galli v. N.J. Meadowlands Comm’n, 490 F.3d 265, 274 (3d Cir.2007) (concluding that dicta in Supreme Court opinions has persuasive value). The Second Circuit found Bazzle persuasive, as have other courts prior to Stolt–Nielsen. See Vaughn v. Leeds, Morelli & Brown, P.C., 315 F. App’x 327, 329 (2d Cir.2009) (concluding that the district court “properly compelled arbitration on the question of the arbitrability of class claims under the Settlement Agreement[,]” citing Bazzle and Howsam); JSC Surgutneftegaz v. President & Fellows of Harvard College, 04 Civ. 6069(RMB), 2007 U.S. Dist. LEXIS 79161, at *6 (S.D.N.Y. Oct. 11, 2007) (citing Bazzle for the proposition that “arbitrators are well situated to answer the question whether contracts forbid[ ] class arbitration” (quotation marks omitted)); Scout. com, LLC v. Bucknuts, LLC, No. C07–1444 RSM, 2007 WL 4143229, at *5 (W.D.Wa. Nov.16, 2007) (concluding that, in light of Bazzle, it was for the arbitrator to decide the procedural question of whether the plaintiffs can arbitrate as a class (collecting cases)). Furthermore, many courts since Stolt–Nielsen have continued to follow Bazzle’s conclusion that the ability to arbitrate on a class basis is a procedural question left for the arbitrator to decide. This Court finds the Third Circuit’s opinion in Vilches v. The Travelers Companies, Incorporated, No. 10–2888, 2011 U.S.App. LEXIS 2551 (3d Cir. Feb. 9, 2011), particularly instructive. In Vilches, the Third Circuit reconciled Bazzle and StoltNielsen as follows:
Although contractual silence [on the issue of arbitration on a class basis] has often been treated by arbitrators as authorizing class arbitration, Stolt–Nielsen suggests a return to the pre-Bazzle line of reasoning on contractual silence, albeit decided by an arbitrator, because it focuses on what the parties agreed to—expressly or by implication.
Id. at *12–13 n. 3. The Third Circuit concluded that the ability of the plaintiffs to proceed on a class basis in arbitration was essentially a question of “what kind of arbitration proceeding the parties agreed to [,]” id. at *10 (emphasis in original) (citing Bazzle), and went on to conclude that “[w]here contractual silence is implicated, the arbitrator and not a court should decide whether a contract was indeed silent on the issue of class arbitration, and whether a contract with an arbitration clause forbids class arbitration.” Id. at *11 (quotation marks omitted) (citing StoltNielsen, 130 S.Ct. at 1771–72, describing the plurality opinion in Bazzle). In Vilches, the agreement in question “did not expressly reference class or collective arbitration or any waiver of the same.” Id. at *3. The parties debated whether a revised arbitration policy including a class arbitration waiver applied to plaintiffs but agreed that plaintiffs’ causes of action alleged in the complaint otherwise fell under the purview of the arbitration agreement. Id. at *3–6, *9–10. The court in Vilches referred the “questions of whether class arbitration was agreed upon to the arbitrator.” Id. This Court similarly concludes that Stolt–Nielsen and Bazzle are reconcilable and that arbitrating on a class basis is a procedural question that is for the arbitrators to decide in accordance with the Supreme Court’s analysis in Stolt–Nielsen, which provides a framework for the arbitrator’s analysis of the issue.
Nor is Vilches alone in its conclusion. There are a number of cases in addition to Vilches in which courts have concluded, subsequent to Stolt–Nielsen, that the ability of plaintiffs to arbitrate on a class basis is an issue to be determined by the arbitrator. See, e.g., Aracri v. Dillard’s Inc., No. 1:10cv253, 2011 WL 1388613, at * 4 (S.D.Ohio Mar.29, 2011) (concluding that “it is not for this Court, but for an arbitrator to decide whether class arbitration is forbidden under the Arbitration Agreement and Dillard’s Rules of Arbitration” where the arbitration agreement did not explicitly mention class arbitration but the parties contested whether Dillard’s Rules, to which all arbitration claims were subject, provided for class arbitration); Smith v. The Cheesecake Factory Restaurants, Inc., No. 3:06–00829, 2010 U.S. Dist. LEXIS 121930, at *7 (M.D.Tenn. Nov. 16, 2010) (concluding that “whether the parties agreed to class arbitration is to be resolved by the arbitrator[,]” citing Stolt–Nielsen and Bazzle); Fisher v. General Steel Domestic Sales, LLC, No. 10–cv–1509–WYD–BNB, 2010 U.S. Dist. LEXIS 108223, at *6–7 (D.Col. Sept. 22, 2010) (where parties agreed that plaintiffs’ claims were subject to arbitration but were contesting whether the agreement in question permitted class arbitration, “based on the plain language of Stolt–Nielsen, it is clear that an arbitrator may, as a threshold matter, appropriately determine whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class” (quotation marks omitted)). See also Clark v. Goldline Int’l, Inc., No. 6:10–cv–01884 (JMC), 2010 U.S. Dist. LEXIS 126192, at *21–22 (D.S.C. Nov. 30, 2010) (“[T]he court notes that whether a class is appropriately certified in this case or otherwise is yet to be determined. Second, whether the Account Agreement precludes any putative classmember from bringing a claim has no bearing on the validity or enforceability of the arbitration provisions. Such issues raised by Plaintiffs must be determined by an arbitrator, not this court.” (citing Bazzle)). But see Chen–Oster v. Goldman, Sachs & Co., No. 10 Civ. 6950(LBS)(JCF), 2011 U.S. Dist. LEXIS 46994, at *10 (S.D.N.Y. Apr. 28, 2011) (concluding that the ability to arbitrate on a class basis requires a “determination of the scope and enforceability of the arbitration clause, and therefore the issue is appropriately characterized as a dispute over arbitrability[,]” further noting that this question “fits into the narrow circumstances where contracting parties would likely have expected a court to have decided the gateway matter[,]” relying on Stolt–Nielsen’s emphasis that Bazzle was solely a plurality opinion).”
Interestingly, the court also addressed and rejected Defendants’ argument that the Supreme Court’s recent holding in AT & T Mobility LLC v. Concepcion stood for the proposition that the issue of whether or not to arbitrate on a class basis is not a procedural issue, which would have allowed the court to decide the issue.
Click Guida v. Home Savings of America, Inc. to read the entire Memorandum and Order.