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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.
2d. Cir.: Individualized Damages Determinations Alone Cannot Preclude Class Certification Under Rule 23’s Predominance Inquiry
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.
U.S.S.C.: Arbitration Agreement “Silent” as to Class Actions Allows For Same
Oxford Health Plans LLC v. Sutter
Although not an FLSA case, this case has far ranging effects throughout the litigation and arbitration worlds. The issue presented to the Court was whether an arbitrator exceeded his authority by rendering a clause construction of the parties’ arbitration agreement that permitted class arbitration, where the parties’ arbitration agreement was silent on its face as to the issue. The Court held that the arbitrator did not exceed his authority and, as the Third Circuit had prior, affirmed the District Court’s opinion upholding the arbitrator’s clause construction permitting class arbitration, because it was a well-reasoned opinion and the parties’ had explicitly asked the arbitrator to render a clause construction. In so doing, the Supreme Court distinguished this case from its prior case Stolt-Nielsen explaining that:
[ ] Oxford misreads Stolt-Nielsen: We overturned the arbitral decision there because it lacked any contractual basis for ordering class procedures, not because it lacked,in Oxford’s terminology, a “sufficient” one. The parties in Stolt-Nielsen had entered into an unusual stipulation that they had never reached an agreement on class arbitration. See 559 U. S., at 668–669, 673. In that circumstance, we noted, the panel’s decision was not—indeed, could not have been—”based on a determination regarding the parties’ intent.” Id.,at 673, n. 4; see id., at 676 (“Th[e] stipulation left no room for an inquiry regarding the parties’ intent”). Nor, we continued, did the panel attempt toascertain whether federal or state law established a “default rule” to take effect absent an agreement. Id., at 673. Instead, “the panel simply imposed its own conception of sound policy” when it ordered class proceedings. Id.,at 675. But “the task of an arbitrator,” we stated, “is to interpret and enforce a contract, not to make public policy.” Id.,at 672. In “impos[ing] its own policy choice,” the panel “thus exceeded its powers.” Id., at 677.
The contrast with this case is stark. In Stolt-Nielsen, the arbitrators did not construe the parties’ contract, and did not identify any agreement authorizing class proceedings. So in setting aside the arbitrators’ decision, we found not that they had misinterpreted the contract, but that they had abandoned their interpretive role. Here, the arbitrator did construe the contract (focusing, per usual, on its language), and did find an agreement to permit class arbitration. So to overturn his decision, we would have to rely on a finding that he misapprehended the parties’ intent. But §10(a)(4) bars that course: It permits courts to vacate an arbitral decision only when the arbitrator strayed from his delegated task of interpreting a contract, not when he performed that task poorly. Stolt-Nielsen and this case thus fall on opposite sides of the line that §10(a)(4) draws to delimit judicial review of arbitral decisions.
While the unanimous decision supports the idea that class arbitration is permissible where the parties’ agreement is silent on its face, as with its prior decisions on class arbitration issues, the decision also leaves many related issues unresolved.
Click Oxford Health Plans LLC v. Sutter to read the Court’s opinion and Justice Alito’s concurring opinion.
Recent Conditional Certification Decisions of Interest
Anyone who has ever moved for or opposed a motion for conditional certification (i.e. a “Stage 1” motion) of a collective action is likely familiar with the common defense tactic whereby a defendant asserts that the named plaintiff and members of the putative class are not similarly situated. Typically a defendant argues that individualized issues pertaining to the claims of the named plaintiff(s) (and members within the putative class) render the case ill-suited for class/collective treatment. As discussed below, three recent decisions discuss three separate issues related to this analysis. In the first, a court held that a pro se plaintiff could not adequately serve the interests of the putative class and denied conditional certification. However, in the second and third cases discussed below, the courts rejected the defendants’ contentions that: (1) an undocumented (“illegal”) immigrant was ill-suited to serve as a representative plaintiff; and (2) issues regarding whether specific putative class members signed binding arbitration agreements relating to the issues raised by the named-plaintiff were not properly raised at stage 1.
Pro Se Plaintiff Inadequate Representative for Collective Action
Koch v. CHS Inc.
In the first case, the pro se plaintiff (apparently fairly savvy) moved for conditional certification. Denying the motion, the court held that a pro se plaintiff cannot pursue their claims in a collective action for lack of adequacy of representation. Specifically, the court explained:
The issue of whether a pro se plaintiff can sue on behalf of other members in a collective action is one of adequacy of representation. Determining adequate representation is typically based on a two-part inquiry: “First, the named representatives must appear able to prosecute the action vigorously through qualified counsel, and second, the representatives must not have antagonistic or conflicting interests with the unnamed members of the class.” Lerwill v. Inflight Motion Pictures, Inc., 582 F.2d 507, 512 (9th Cir.1978). Courts have generally concluded that a pro se plaintiff cannot pursue claims on behalf of others in a representative capacity. See Simon v. Hartford Life, Inc., 546 F.3d 661, 664 (9th Cir.2008); see also Johns v. County of San Diego, 114 F.3d 874, 876 (9th Cir.1997) (“While a non-attorney may appear pro se on his ow n behalf, he has no authority to appear as an attorney for others than himself.”); C.E. Pope Equity Trust v. United States, 818 F.2d 696, 697 (9th Cir.1987) (holding that a pro se litigant may not appear as an attorney for others). Here, because Koch is a pro se litigant, he cannot pursue claims on behalf of other CHS employees in a representative capacity.
The rule holds true for pro se plaintiffs seeking to bring collective action suits under the F LSA. Morgovsky v. AdBrite, Inc. ., No. C10–05143–SBA, 2012 WL 1595105 *4 (N.D.Cal. May 4, 2012) (denying pro se plaintiff’s motion to bring a collective action under the FLSA and dismissing collective action claims); Spivey v. Sprint/United Mgt. Co., No. 04–2285–JWL, 2004 WL 3048840 (D.Kan. Dec.30, 2004) (holding that a claim under 29 U.S.C. § 216(b) cannot be brought by a pro se plaintiff).
Accordingly, the Court agrees with CHS that Koch, because he proceeds in the litigation pro se, cannot represent the class members on whose behalf he purports to bring suit. Therefore, proceeding with the litigation as a collective action is not permitted pursuant to 29 U.S.C. § 216(b). The motion will be denied.
Click Koch v. CHS Inc. to read the entire Memorandum Decision and Order.
Named-Plaintiff’s Immigration Status Has No Bearing on Similarly Situated Analysis
Torres v. Cache Cache, Ltd.
In the second case of interest, arising from alleged tip pool violations at defendant’s restaurant, the defendant opposed conditional certification, in part, based on the fact that the named-plaintiff was allegedly an undocumented immigrant. The court rejected this notion, citing well-established authority that an FLSA plaintiff’s immigration status is irrelevant to a claim inasmuch thereunder, inasmuch as same seeks payment for work already performed. Discussing this issue the court reasoned:
Finally, in an apparent attempt to distinguish Plaintiff from other proposed collective action members, Defendants note his status as an illegal immigrant and involvement in other similar FLSA lawsuits. Neither of these issues, however, is likely to provide Defendants with a valid defense that is unique to Plaintiff. First, there are a number of cases finding that evidence of immigration status has no relevance in an FLSA action. See e.g. Reyes v. Snowcap Creamery, Inc., 2012 WL 4888476 at *2 (D.Colo. Oct.15, 2012) (recognizing that “weight of authority clearly holds that a plaintiff’s immigration status is irrelevant in an FLSA action” and citing supporting authority). It is also questionable whether Defendants will be able to introduce evidence of other lawsuits involving Plaintiff. See Van Deelen v. Johnson, 2008 WL 4683022 at *2 (D.Kan. Oct.22, 2008) (evidence of plaintiff’s prior lawsuits cannot be admitted for purpose of proving that plaintiff is litigious but may be admissible for other purposes).
Click Torres v. Cache Cache, Ltd. to read the entire Order.
Whether Putative Class Members’ Claims Are Subject to Arbitration is an Issue Reserved for Stage 2
Hernandez v. Immortal Rise, Inc.
In the final decision, the court had before it the Report and Recommendation of the magistrate judge recommending conditional certification. As it had in its opposition to the underlying motion, the defendant argued that members of the putative class who had previously signed agreements to arbitrate their FLSA claims, were not similarly situated to the plaintiff and the remainder of the putative class. As such, the defendant argued such putative class members should be excluded from receiving notice of their right to join the case by opting in. Rejecting this contention, the court held that the issue of whether (and who) may have signed arbitration agreements, is an issue reserved for Stage 2 (decertification) analysis, and is not properly addressed at the conditional certification stage:
Next, defendants argue that the proposed class should be limited to cashiers and those who had not signed arbitration agreements, excluding grocery packers and delivery workers, whom defendants never employed, and employees subject to arbitration agreements. However, these are issues of fact that should be determined during discovery rather than at this preliminary stage. See D’Antuono v. C & G of Groton, Inc., No. 11–cv–33, 2011 U.S. Dist. LEXIS 135402, at *12–13 (D.Conn. Nov. 23, 2011) (holding that the enforceability of arbitration agreements should not be determined during conditional class certification); Lujan v. Cabana Mgmt., No. 10–cv–755, 2011 U.S. Dist. LEXIS 9542, at *23–24, 2011 WL 317984 (E.D.N.Y. Feb. 1, 2011) (quoting Realite v. Ark Rests. Corp., 7 F.Supp.2d 303, 307 (S.D.N.Y.1998)) (holding that defendants’ contention that its restaurants constituted separate entities raised a contested issue of fact, and was therefore not a basis for denying conditional class certification). Thus, Judge Bloom correctly found that the proposed class should not be limited as defendants propose.
Click Hernandez v. Immortal Rise, Inc. to read the entire Order.
7th Cir.: Named-Plaintiffs Who Settled Their Individual Claims Following Decertification Retained Standing to Appeal Decertification Based on Possibility of Incentive Awards
Espenscheid v. DirectSat USA, LLC
This case presented the relatively novel issue of whether the named-plaintiffs in a decertified class/collective action retain standing to appeal decertification once they have settled their individual claims. Noting that it was a case of first impression, the Seventh Circuit held that individual employees had sufficient interest for standing to appeal decertification, in large part because they retained a financial stake inasmuch as the stood to receive incentive awards if the class/collective action was ultimately successful.
Briefly discussing the relevant procedural history and facts the court explained:
The district judge certified several classes but later decertified all of them, leaving the case to proceed as individual lawsuits by the three plaintiffs, who then settled, and the suits were dismissed. The settlement reserved the plaintiffs’ right to appeal the decertification, however, and they appealed. The defendants then moved to dismiss the appeal on the ground that the plaintiffs had suffered no injury as a result of the denial of certification and so the federal judiciary has lost jurisdiction of the case.
The court distinguished the case from one in which the defendant seeks to moot or “pick off” a class/collective by making an offer of judgment that exceeds the named-plaintiff’s damages and reasoned that the named-plaintiffs retained standing by virtue of prospective incentive awards, if the case were to proceed as a class/collective rather than individual basis:
One might think that because the plaintiffs settled, the only possible injury from denial of certification would be to the unnamed members of the proposed classes; and if therefore the plaintiffs have no stake in the continuation of the suit, they indeed lack standing to appeal from the denial of certification. Premium Plus Partners, L.P. v. Goldman, Sachs & Co., 648 F.3d 533, 534–38 (7th Cir.2011); Pettrey v. Enterprise Title Agency, Inc., 584 F.3d 701, 705–07 (6th Cir.2009). This is not a case in which a defendant manufactures mootness in order to prevent a class action from going forward, as by making an offer of judgment that exceeds any plausible estimate of the harm to the named plaintiffs and so extinguishes their stake in the litigation. As we explained in Primax Recoveries, Inc. v. Sevilla, 324 F.3d 544, 546–47 (7th Cir.2003) (citations omitted), “the mooting of the named plaintiff’s claim in a class action by the defendant’s satisfying the claim does not moot the action so long as the case has been certified as a class action, or … so long as a motion for class certification has been made and not ruled on, unless … the movant has been dilatory. Otherwise the defendant could delay the action indefinitely by paying off each class representative in succession.”
But the plaintiffs point us to a provision of the settlement agreement which states that they’re seeking an incentive reward (also known as an “enhancement fee”) for their services as the class representatives. In re Synthroid Marketing Litigation, 264 F.3d 712, 722 (7th Cir.2001); In re Continental Illinois Securities Litigation, 962 F.2d 566, 571–72 (7th Cir.1992); In re United States Bancorp Litigation, 291 F.3d 1035, 1038 (8th Cir.2002); 2 Joseph M. McLaughlin, McLaughlin on Class Actions § 6:27, pp. 137–42 (6th ed.2010). The reward is contingent on certification of the class, and the plaintiffs argue that the prospect of such an award gives them a tangible financial stake in getting the denial of class certification revoked and so entitles them to appeal that denial.
After an extensive discussion of incentive payments to class representatives, the Seventh Circuit adopted the plaintiffs reasoning. Additionally the court noted that judicial economies could never be preserved if the named-plaintiffs forfeited standing when they settled their individual claims, because another named-plaintiff would simply come forward and start the entire process anew, the court held that the named-plaintiffs here retained their standing to pursue class/collective issues, notwithstanding the settlement of their individual claims. Thus, the court denied the defendants motion to dismiss.
Click Espenscheid v. DirectSat USA, LLC to read the entire Order denying Defendants’ Motion to Dismiss.
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).
W.D.N.Y.: Common Law Claims Not Preempted To the Extent They Provide a Remedy Not Available Under the FLSA
Gordon v. Kaleida Health
In an unusual procedural posture, this case was before the court on plaintiffs’ motion to remand their state common law claims, based on lack of subject matter jurisdiction. The court held that it had subject matter jurisdiction however, because of FLSA preemption considerations. As discussed here, the court held that common law claims seeking to recover straight-time compensation otherwise not covered under the FLSA are not preempted by the FLSA.
Discussing the issue the court reasoned:
“In many district court cases where this issue has arisen, the plaintiffs’ common law claims were brought in conjunction with FLSA claims, based on the same facts, and seeking the same relief. In such cases, most courts have had no trouble dismissing the common law claims as preempted to the extent recovery is available under the FLSA, even where the plaintiff also brought wage claims under a parallel state statute. See, e.g., Guensel v. Mount Olive Bd. of Educ., Civ. No. 10–4452, 2011 U.S. Dist. LEXIS 132102, at *19, 2011 WL 5599717 (D.N.J. Nov. 16, 2011) (common law claims that are “directly covered” by FLSA must be brought under the FLSA); DeMarco v. Northwestern Mem. Healthcare, Civ. No. 10–C–397, 2011 U.S. Dist. LEXIS 88541, at *17–18, 2011 WL 3510905 (N.D.Ill. Aug. 10, 2011) (unjust enrichment and other state common law claims seeking relief available under the FLSA are preempted); Bouthner v. Cleveland Constr., Inc., Civ. No. RDB–11–244, 2011 U.S. Dist. LEXIS 79316, at *21–22, 2011 WL 2976868 (D.Md. July 21, 2011) (although common law claim made no reference to FLSA, it was preempted where claim sought wages mandated by FLSA).
Two courts in this Circuit have expressly concluded that common law claims are preempted to the extent they seek recovery available under the FLSA, but are not preempted to the extent that state law provides a remedy not available under federal law. DeSilva v. N. Shore–Long Island Jewish Health Sys., 770 F.Supp.2d 497, 532–33 (E.D.N.Y.2011) (finding common law claims preempted by FLSA to extent they sought overtime wages, but not preempted to extent they sought straight-time pay not available under the FLSA); Barrus v. Dick’s Sporting Goods, Inc., 732 F.Supp.2d 243, 263 (W.D.N.Y.2010) (dismissing common law claims seeking unpaid overtime as preempted by FLSA, but allowing claim for unpaid straight time wages to go forward). Other district courts have held likewise. See, e .g., Monahan v. Smyth Auto., Inc., No. 10–CV–00048, 2011 Dist. LEXIS 9877, at *9–11, 2011 WL 379129 (S.D. Oh Feb. 2, 2011) (unjust enrichment claim not preempted where it was based on alleged failure to pay the state’s minimum wage, which was higher than FLSA minimum wage rate); Mickle v. Wellman Prods. LLC, No. 08–CV–0297, 2008 U.S. Dist. LEXIS 63697, at *10–11, 2008 WL 3925266 (N.D.Okla.2008) (while state statute created a distinct cause of action for overtime compensation, the plaintiffs’ common law claim seeking such relief was duplicative of remedies provided by the FLSA and was preempted).
The law on this issue is by no means settled—some courts have declined to find common law claims preempted where a state’s statute incorporates the FLSA’s minimum wage and/or overtime provisions, and others have dismissed entirely common law claims for which the FLSA provides only partial relief. However, I find the foregoing cases from within this Circuit persuasive. As the DiSilva court noted, the FLSA’s savings clause expressly provides that wage and hour actions may be brought under state wage statutes, “it says nothing about a party’s ability to pursue general common law claims that have no specific relevance to the labor law context.” 2011 U.S. Dist. LEXIS 27138, at *93 (emphasis in original).
Here, Plaintiffs common law claims are not brought in conjunction with any claim for relief under the FLSA or the NYLL. They refer generally to statutory law only as the basis for calculating damages. This vague reference to “state law” is not enough to draw purely common law claims into the ambit of the FLSA’s savings clause. Accordingly, to the extent Plaintiffs are seeking unpaid overtime wages that are available under the FLSA, their common law claims are preempted, and to the extent they are seeking straight-time wages for which no federal relief is available, they are not.”
Click Gordon v. Kaleida Health to read the entire Decision and Order.
W.D.Pa.: Following Denial of Class Cert as Incompatible With 216(b) Collective Action, Plaintiffs’ Motion to Dismiss State Law Claims to Re-File in State Court Granted
Bell v. Citizens Financial Group, Inc.
Although all circuit courts that have taken up the issue have held that so-called hybrid wage and hour cases- comprised of both opt-in collective actions (FLSA) and opt-out class action (state wage and hour law)- are permissible, some courts within the Third Circuit continue to hold otherwise. As a result, not surprisingly, defendant-employers in such cases continue fighting the class action components of such cases on “inherent incompatibility” grounds. Such was the case here, where the court had previously conditionally certified the FLSA claims, but denied plaintiffs related motion for class certification of Pennsylvania Minimum Wage Act (“PMWA”) claims on compatibility grounds. However, in what may become a frequently cited case going forward, the plaintiffs took the logical next step and asked the court to dismiss the PMWA claims so they could re-file them in state court alone, where there would be no issue of compatibility. Not surprisingly, the defendants then threw up their arms, essentially arguing that the plaintiffs should not be able to bring their class claims in federal court and therefore not be able to proceed as a class in any venue. The court rejected the defendants argument, permitting the voluntary dismissal of the state law claims to be pursued separately in state court.
After reviewing the applicable standards under Rule 41, the court granted plaintiffs’ motion for voluntary dismissal of the PMWA claims. The court reasoned:
“Here, defendants have already filed an answer and do not stipulate to the dismissal. Therefore, the court must weigh the equities and decide whether to enter an order of dismissal. Defendants do not assert, and the court cannot ascertain, that they would suffer any plain legal prejudice as a result of dismissal of Watson’s claims. Watson’s intent to re-file a PMWA claim in state court is not plain prejudice. Pouls, 1993 WL 308645, at *1.
Upon weighing the factors set forth in Pouls, we conclude that it is appropriate to grant Watson’s motion to voluntarily dismiss her case. Defendants are not prejudiced by their efforts and expenses in this litigation, because other opt-in plaintiffs remain and the instant suit will continue. Defendants have failed to identify any efforts or expenses unique to Watson. Similarly, the progression of the litigation and Watson’s diligence in moving for dismissal are not determinative factors, due to the ongoing nature of the collective action suit. Consideration of the final factor, the duplicative or excessive expense of subsequent litigation, yields some possibility of prejudice to defendants. If Watson does file a PMWA case in state court and if defendants successfully remove it to federal court, defendants might incur some duplicative expenses in future federal court litigation on issues of claim incompatibility. However, at this time, such expenses are highly speculative. Therefore, we do not find plain prejudice to defendants based on duplicative expenses.
Accordingly, because there is no plain legal prejudice and because the equities weigh in favor of dismissal, we will grant plaintiff Watson’s motion to dismiss her claims without prejudice to her right to refile these claims in state court. An appropriate order follows.”
With the issue of permissibility of so-called hybrids up at the Third Circuit right now it will be interesting to see if this decision gains legs in its trial courts. For now however it is safe to say that defendants in so-called hybrid cases should be careful what they wish for in seeking dismissal of state classes, because two is not always better than one.
Click Bell v. Citizens Financial Group, Inc. to read the entire Memorandum and Order.
S.D.Cal.: Although Arbitration Agreement With Class Waiver Enforceable, Confidentiality Provision Stricken as Unconscionable Because Overbroad
Grabowski v. Robinson
This case was before the court on defendant’s motion to compel arbitration on an individual (rather than class) basis. Although the court noted that plaintiffs were required to sign the arbitration agreement contained in their compensation agreements, under threat of forfeiture of commissions, the court held that did not make the agreement unenforceable as entered into under duress. The court also, in large part, dismissed other arguments regarding the substantive and procedural unconscionability of the agreement. However, as discussed here, the court held that the confidentiality provision which barred any discussion of the litigation without the other party’s consent to be far too broad.
Discussing the confidentiality provision the court stated:
“Plaintiff contends: ‘[T]he Defendant’s rules impose confidentiality which unfairly favors Defendant. While arbitration normally is not open to the public, the Defendant’s rules go much further. Defendant’s rules require that the record of the proceedings be confidential under threat of a sanction order by the arbitrator.’
The Employment Dispute Mediation/Arbitration Procedure contains a provision entitled, “Confidentiality,” which states:
All aspects of the arbitration, including without limitation, the record of the proceeding, are confidential and shall not be open to the public, except (a) to the extent both Parties agree otherwise in writing, (b) as may be appropriate in any subsequent proceedings by the Parties, or (c) as may otherwise be appropriate in response to a governmental agency or legal process, provided that the Party upon whom such process is served shall give immediate notice of such process to the other Party and afford the other Party an appropriate opportunity to object to such process.
At the request of a Party or upon his or her initiative, the Arbitrator shall issue protective orders appropriate to the circumstances and shall enforce the confidentiality of the arbitration as set forth in this article.
In Davis, the Court of Appeals for the Ninth Circuit stated that, under California law, “[c]onfidentiality by itself is not substantively unconscionable,” but the employer’s “confidentiality clause … is written too broadly” and “unconscionably favors [the employer],” when the clause at issue “would prevent an employee from contacting other employees to assist in litigating (or arbitrating) an employee’s case.” Davis, 485 F.3d at 1078–79 (“The clause precludes even mention to anyone ‘not directly involved in the mediation or arbitration’ of ‘the content of the pleadings, papers, orders, hearings, trials, or awards in the arbitration’ or even ‘the existence of a controversy and the fact that there is a mediation or an arbitration proceeding.’ ”). In this case, the confidentiality provision in the Employment Dispute Mediation/Arbitration Procedure is broader than what the court in Davis indicated would be conscionable. Cf. id. at 1079 (noting that “[t]he parties to any particular arbitration, especially in an employment dispute, can always agree to limit availability of sensitive employee information (e.g., social security numbers or other personal identifier information) or other issue-specific matters, if necessary”).
The Court finds that the confidentiality provision in the arbitration agreement is substantively unconscionable under California law.”
While courts- seemingly bound by a recent slew of employer/arbitration-friendly decisions from the Supreme Court- continue to compel arbitration and enforce class and collective action provisions contained in arbitration agreements, this decision seems somewhat in line with the remedial nature of the FLSA and related state wage and hour laws. One way employees and their counsel can try to even the playing field might be to seek court-approved notice of pending litigation, notwithstanding the inability to proceed as a class/collective action. Notifying other employees of existing litigation (and their rights to be paid in accordance with wage and hour laws) would certainly be in line with the remedial purposes of the FLSA and related state wage and hour laws. In any event, the court’s holding that an employer cannot hide its alleged violations for other employees certainly seems to be a step in the right direction.
Click Grabowski v. Robinson to read the entire Opinion.