Dominguez v. Better Mortgage Corporation

In an appeal addressing issues which frequently confront district courts when managing FLSA collective action and prospective opt-ins to such cases, the Ninth U.S. Circuit Court of Appeals recently affirmed a district court’s order imposing restrictions on the employer-defendant’s communications with its current employees regarding the claims in the lawsuit.

The issue arose after Lorenzo Dominguez, a former underwriter for Better Mortgage Corporation, filed a putative collective/class action in which he alleged that the company violated federal and state wage and hour laws, primarily because it failed to pay Dominguez and its other underwriters overtime.

Just days after Dominguez sued, the New York-based company offered workers $10,000 to sign a retention agreement that required them to agree to an updated at-will employment agreement with a new arbitration provision that would cover Dominguez’s claims, in order to continue their employment. Better Mortgage also offered workers a release agreement that indicated they were being paid $5,000 to release their claims in the Dominguez lawsuit, according to court documents. All three agreements included a warning in bold that said “Do Not Share This Email.”

Dominguez filed a motion asking the district court to invalidate both the release agreements and the new employment agreements, arguing that Better Mortgage’s ability to communicate with putative class and collective action members without court approval should be restricted. Better Mortgage argued that such restrictions were improper and would impermissibly restrain its First Amendment rights.

The district court agreed with Dominguez, and held that Better Mortgage obtained signatures on the new employment agreements and release agreements through coercion and misleading information. As such, it invalidated the agreements.

The court also required Better Mortgage to send a court-approved curative notice to the underwriters and prohibited the company from communicating with putative class members except in writing as approved by the court.

Better Mortgage appealed.

The Ninth Circuit affirmed the restriction on communications, finding it both justified and narrowly tailored to the situation.

Citing longstanding FLSA jurisprudence the Ninth Circuit explained:

The Supreme Court recognizes that district courts have the duty and the power to oversee communications from both defendants and class counsel with potential class members and FLSA collective action participants, but also that this power must be exercised cautiously”.

Here, the district court exercised the appropriate caution, the court found:

The district court’s detailed order shows a careful analysis of the prior communications and how those communications affected the employees’ understanding of their options in this pending lawsuit,” the court explained. “The misleading and coercive nature of these efforts was clear.”

The court reasoned that the restriction on communications was substantiated because, the district court “paid attention to the timing of the messages, to how the different messages presented inconsistent and thus confusing information, and to missing content that could have helped employees better evaluate their options.”

Better Mortgage argued that the restriction was too broad. Specifically, it argued that the restriction should have been narrowed to permit it to discuss wage and hours matters with employees and obtain factual information to defend itself in the litigation. Citing this argument, the Ninth Circuit said it demonstrated that–in the absence of the restriction–Better Mortgage intended to continue communicating with current employees in ways related to the lawsuit.

Thus, the Ninth Circuit held the district court acted within its discretion in finding that narrowing the restriction would have allowed Better Mortgage to circumvent the order.

As such the panel affirmed the district court’s order restricting communications between Better Mortgage and current employees regarding wage and hour issues to written communications, which had to be approved by the district court before transmitted.

Click Dominguez v. Better Mortgage Corporation to read the entire opinion, including the dissent.