Home » Class Certification (Page 2)
Category Archives: Class Certification
E.D.Pa.: Dukes Does Not Affect Court’s Analysis On 216(b) Conditional Cert Motion; Defendant’s Motion to Reconsider Denied
Spellman v. American Eagle Exp., Inc.
In one of the first decisions, post-Dukes, to clarify what affect the Supreme Court’s recent decision will have on conditional certification of FLSA cases, the answer appears to be not much.
In Dukes, the Supreme Court held that the trial court had inappropriately certified a class of over a million women employed by Wal-mart, based on claims of gender bias. The Supreme Court reasoned that the plaintiffs had not met their burden to demonstrate the requisite commonality required by FRCP 23. In the wake of Dukes, there was much speculation as to whether courts would extend the reasoning in Dukes to cases seeking conditional certification of collective actions under 216(b) of the FLSA. In one of the first decisions rendered on this issue, the answer appears to be a resounding no.
This case was before the court on the defendant’s motion seeking reconsideration of the court’s prior order conditionally certifying a class of drivers employed by defendant. Plaintiffs alleged that defendant, a trucking company, improperly misclassified all of its drivers as independent contractors, when they were really employees. Holding that plaintiffs had met their lenient burden of proof as so-called stage one, the court conditionally certified a nationwide class of drivers, all of whom had been classified as independent contractors. Following the Duke’s decision, the defendant sought reconsideration of the order conditionally certifying the class. Denying the motion, the court explained that the differences between FRCP 23, the class action provision under which Dukes was decided and 216(b), the opt-in provision for FLSA collective actions render Dukes inapplicable in the context of an FLSA collective action. As such, the court denied defendant’s motion.
The court reasoned:
“The instant case is a collective action brought pursuant to the FLSA, 29 U.S.C. § 216(b). Unlike Rule 23 class actions. the FLSA requires collective action members to affirmatively opt in to the case. See § 216(b). To determine whether the proposed group of plaintiffs is “similarly situated,” and therefore qualified to proceed as a conditional collective action, a district court applies a two-step test. See Smith v. Sovereign Bancorp, Inc., No. 03–2420, 2003 U.S. Dist. LEXIS 21010 (E.D.Pa. Nov. 13, 2003). In the first step, which is assessed early in the litigation process, the plaintiff at most must make only a “modest factual showing” that the similarly situated requirement is satisfied. See Bosley v. Chubb Corp., No. 04–4598, 2005 U.S. Dist. LEXIS 10974, at *7–9 (E.D.Pa. Jun. 3, 2005). The Plaintiffs have made this modest factual showing, and this Court’s analysis is not affected by Dukes. The second step of the collective action certification process will be conducted at the close of class-related discovery, at which time this Court will conduct “a specific factual analysis of each employee’s claim to ensure that each proposed plaintiff is an appropriate party.” Harris v. Healthcare Servs. Grp., Inc., No. 06–2903, 2007 U.S. Dist. LEXIS 55221, at *2 (E.D.Pa. Jul. 31, 2007). At this second stage, AEX may argue that Dukes‘s analysis of what constitutes a “common question” is persuasive to this Court’s analysis of whether an FLSA collective action should be certified. In the interim, AEX’s motion for reconsideration is denied.”
Click Spellman v. American Eagle Exp., Inc. to read the entire Order.
9th Cir.: Defendant in Putative Wage and Hour Class Action May Not “Pick Off” Class With OJ to Named Plaintiff
Pitts v. Terrible Herbst, Inc.
This case was before the Ninth Circuit on any issue that has become more and more prevalent in recent years, with the increased wage and hour putative class and collective action filings. Specifically, the issue before the Ninth Circuit was “whether a rejected offer of judgment (OJ) for the full amount of a putative class representative’s claim moots a class action complaint where the offer precedes the filing of a motion for class certification.” The Ninth Circuit held that it does not and a defendant may not “pick off” a class by making such an offer to the named-plaintiff alone.
The procedural history in the case is worth discussing, because there were other issues, not discussed in detail, also addressed in the opinion. The trial court had not set a bright-line deadline for filing a motion for class certification simultaneously. And, because the defendant failed to provide plaintiff with the records pertaining to the putative class members during the initial discovery period, plaintiff filed a motion to compel and sought to extend the discovery deadline as well. The court ultimately granted both motions. However, while it held that the OJ did not moot the claim, it nonetheless dismissed the case, because the plaintiff had failed to move for class certification as of the initial discovery deadline. This appeal ensued.
After reviewing surveying applicable case law from around the country, the court held that the district court below properly concluded that a defendant may not “pick off” a putative class action, by tendering payment to the named-plaintiff alone.
Other issues the court discussed included whether state law class actions (Rule 23 classes) are “inherently incompatable” with FLSA opt-in actions. However, because the plaintiff had volutarily dismissed his FLSA claims at the lower court, the Ninth Circuit declined to address this hot-button issue, addressed earlier in the year by the Seventh Circuit and currently pending before the Third Circuit. The court did rule however, that the court below erred in dismissing the case based on plaintiff’s perceived failure to move for class certification in a timely manner. On this issue the Ninth Circuit opined, “[w]ithout a clear statement from the district court setting a deadline for the filing of the motion for class certification, Pitts could not predict that he was expected to file his motion by the end of the initial discovery deadline.”
Click Pitts v. Terrible Herbst, Inc. to read the entire decision.
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.”
S.D.N.Y.: Class Action Waiver Unenforceable in FLSA Case, Because Cost of Individual Litigation vs. Potential Recovery Prohibitive
Sutherland v. Ernst & Young LLP
This case was before the court on Defendant’s motion to stay the proceedings and compel arbitration on an individual (rather than class/collective) basis. There was no dispute as to whether the Plaintiff had executed the arbitration agreement, containing the class waiver, however the court held that the class waiver was unenforceable, after a lengthy discussion of Second Circuit law and the impact of the recent United States Supreme Court case, Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S.Ct. 1758 (2010).
The court reasoned:
“Because the Amex decision retains its persuasive force, the Court applies the test adopted in Amex to determine the enforceability of the class waiver provision here at issue. In the totality of the circumstances, the Court finds that the class waiver provision is invalid because it prevents Sutherland from vindicating her statutory rights.
1. Cost to Individual Plaintiff Versus Potential Recovery
The record supports Sutherland’s argument that her maximum potential recovery would be too meager to justify the expenses required for the individual prosecution of her claim. Sutherland alleges “an actual overtime loss of approximately $1,867.02, with potentially liquidated damages of an equal amount under the FLSA.” (Folkenflik Decl. ¶ 8; see also Sutherland Deck. ¶ 4.) If her only option were to prosecute her claim on an individual basis, Sutherland would be required to pay expenses that would dwarf her potential recovery.
Sutherland’s uncontested submission estimates that her attorney’s fees during arbitration will exceed $160,000, and that costs will exceed $6,000. (Folkenflik Decl. ¶ 20, 24.) Sutherland will utilize expert assistance in support of her claims.(Id. ¶ 22.) Her expert, a professor of accountancy, has submitted an affidavit stating that his fees may exceed $33,500, and that he requires a retainer payment of $25,000. (Carmichael Decl. ¶ 5.) In sum, Sutherland would be required to spend approximately $200,000 in order to recover double her overtime loss of approximately $1,867 .02. Only a “lunatic or a fanatic” would undertake such an endeavor. Carnegie v. Household Intern., Inc., 376 F.3d 656, 661 (7th Cir.2004). Indeed, rather than prosecuting her low-value, high-cost claim on an individual basis, Sutherland “would give up any rights” she might have to recover overtime payments allegedly owed to her. (Sutherland Decl.¶ 2.)
Pursuant to the E & Y Agreement, Sutherland is responsible for the Court Equivalent Fee, or a fee specified by the arbitration provider, whichever is less; arbitration fees and costs are to be shared equally between the parties. (Reece Decl. Exh. D¶ IV.P.) Sutherland has submitted an uncontested affidavit stating that arbitration fees would amount to $24,000, and that the applicable Court Equivalent Fee is $350. (Folkenflik Decl.¶ 24.) E & Y’s offer to pay such costs, which the Court has factored into Sutherland’s expenses as detailed above, thus lessens her burden by $12,350. Although this amount is not insignificant, it is hardly enough to allow Sutherland to bring her claims on an individual basis: she would still be required to spend approximately $200,000 on attorney’s fees and costs, as well as expert fees, in order to recover double her overtime loss of approximately $1,867.02.
E & Y’s attempt to distinguish the cost-recovery differential in Amex from the differential present here is unavailing. The “median plaintiff” in Amex would have recovered damages of $1,751, and the expert’s services would have cost at least several hundred thousand dollars. Amex, 554 F.3d at 317. According to E & Y, a “median plaintiff” in the instant matter could recover “substantially more,” and expert fees here amount to “a small fraction” of those at issue in Amex. (Def. Reply at 6-7.) The Amex decision did not, however, set a cost-to-recovery ratio below which claims are deemed “prosecutable.” The court instead embraced a functional approach, which “depends upon a showing that the size of the recovery received by any individual plaintiff will be too small to justify the expenditure of bringing an individual action.” Amex, 554 F.3d at 320. Sutherland has satisfied her burden on that score.
E & Y also cites to authorities in which the cost-recovery differential was held not to preclude the prosecution of claims on an individual basis. Such decisions are either inapposite or unpersuasive. In Pomposi v. GameStop, Inc., for instance, a class waiver was enforced where the amount in controversy was $11,000, and plaintiff’s total fees and costs ranged from $46,000 to $62,000.09 Civ. 0340, 2010 WL 147196, at *7 (D.Conn. Jan. 11, 2010). The court in Pomposi did not, however, meaningfully discuss plaintiff’s ability to retain counsel notwithstanding the differential between potential costs and recovery. E & Y cites Ornelas v. Sonic-Denver T, Inc., No. 06 Civ. 253, 2007 WL 274738 (D.Colo. Jan. 29, 2007), as standing for the proposition that “compelling arbitration would not preclude plaintiff from pursuing his claims where damages were at least $3500.” (Def. Mem. at 12.) But the plaintiff in Ornelas was allegedly entitled to (i) a trebling of the approximately $3500 in actual damages, and (ii) unspecified punitive damages and interest. Id. at *6. Moreover, the plaintiff in Ornelas apparently would not incur any expert witness fees. Id. at *7. Finally, E & Y offers Anglin v. Tower Loan of Miss., Inc., 635 F.Supp.2d 523 (S.D.Miss.2009) as precedent for “compelling arbitration where damages, attorney’s fees and punitive damages would result in [a] recovery of over $5,000.” (Def. Reply at 12.) The nub of Anglin, however, was that the plaintiff “made no effort” to demonstrate the prohibitive costs of individual arbitration. Anglin, 635 F.Supp.2d at 529. By contrast, Sutherland has “substantial[ly] demonstrat[ed]” that an inability to prosecute her claims on a class basis “would be tantamount to an inability to assert [her] claims at all.” Amex, 554 F.3d at 302-03 n.1.
2. Ability to Obtain Legal Representation
Even if Sutherland were willing to incur approximately $200,000 to recover a few thousand dollars, she would be unable to retain an attorney to prosecute her individual claim. This is due largely to the E & Y Agreement’s obstacles to reimbursement of fees and expenses. Whether attorney’s fees and expenses incurred during arbitration are compensable is subject to the discretion of the arbitrators. (Reece Decl. Exh. D ¶ IV.P.3.) The amount of such reimbursement is also left to the arbitrators’ discretion. (See id. (arbitrators may award attorney’s fees, “in whole or part, in accordance with applicable law or in the interest of justice”); 29 U.S.C. § 216(b) (providing for the reimbursement of “reasonable” attorney’s fees).)
In light of the foregoing, Sutherland cannot reasonably be expected to retain an attorney to pursue her individual claim, and E & Y has not submitted an affidavit stating otherwise. Sutherland cannot afford to advance the fees and costs in order to hire an attorney on an hourly basis: she has remained unemployed since her termination from E & Y in December 2009; she has no savings, and owes $35,000 in student loans. (Sutherland Decl. ¶ 5.) Counsel for Sutherland will not prosecute her individual claim without charge, and will not advance the required costs where the E & Y Agreement’s fee-shifting provisions present little possibility of being made whole. (Folkenflik Decl. ¶ 25.) As the uncontested affidavit of Sutherland’s counsel reflects, Sutherland would find no attorney willing to represent her under the circumstances. (Id. ¶ 27.) Cf. Kristian, 446 F.3d at 60 (“[I]t would not make economic sense for an individual to retain an attorney to handle one of these cases on an hourly basis and it is hard to see how any lawyer could advise a client to do so.”) (internal quotations omitted).
Sutherland’s only option in pursuing her individual claim is thus to retain an attorney on a contingent fee basis. But just as no rational person would expend hundreds of thousands of dollars to recover a few thousand dollars in damages, “no attorney (regardless of competence) would ever take such a case on a contingent fee basis .” Caban v. J.P. Morgan Chase & Co., 606 F.Supp.2d 1361, 1371 (S.D.Fla.2009); see also Folkenflik Decl.¶ 27. Cf. Kristian, 446 F.3d at 59 (“[I]t would not make economic sense for an attorney to agree to represent any of the plaintiffs in these cases in exchange for 33 1/3% or even a greater percentage of the individual’s recovery.”) (internal quotations omitted). E & Y has submitted no evidence that an attorney would expend approximately $200,000 in time and costs in return for a mere chance to earn potentially one-third of Sutherland’s less than $4,000 recovery.
If Sutherland could aggregate her claim with the claims of others similarly situated, however, she would have no difficulty in obtaining legal representation. (See Folkenflik Decl.¶ 25; see also Pl. Reply at 3.) This is because class proceedings “achieve economies of time, effort, and expense….” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 616 (1997) (internal quotations omitted).
3. The Practical Effect of Waiver
Enforcement of the class waiver provision in this case would effectively ban all proceedings by Sutherland against E & Y. She will be unable to pursue her claims, even if they are meritorious. As a result, E & Y would enjoy de facto immunity from liability for alleged violations of the labor laws. The legislative purposes in enacting such laws-including, for example, combating “labor conditions detrimental to the maintenance of the minimum standard of living” FLSA § 2(a), 29 U.S.C. § 202(a), and assuring workers “additional pay to compensate them for the burden of a workweek beyond” 40 hours per week, In re Novartis Wage and Hour Litig. Litig. 611 F.3d 141, 150 (2d Cir.2010)-would go unfulfilled. “Corporations should not be permitted to use class action waivers as a means to exculpate themselves from liability for small-value claims.” Dale v. Comcast Corp., 498 F.3d 1216, 1224 (11th Cir.2007).
Having examined the totality of the facts and circumstances, the Court finds that the class waiver provision here at issue is unenforceable because it prevents Sutherland from vindicating her statutory rights. See Amex, 554 F.3d at 302-03 n.1.
V. Future Proceedings
Although the class waiver provision is unenforceable, the Court cannot order E & Y to submit to class arbitration. After the offending provision is severed from the E & Y Agreement, (see Reece Decl. Exh. D ¶ V.F.), the Agreement is rendered silent as to whether class arbitration is permissible. In accordance with Stolt-Nielsen, class arbitration may not be imposed on parties whose arbitration agreements are silent on the permissibility of class proceedings. 130 S.Ct. at 1764, 1775. See also Fensterstock v. Educ. Fin. Partners, 611 F.3d 124, 140 (2d Cir.2010). The Court must accordingly deny E & Y’s motion to compel arbitration.”
It will be interesting to see whether courts in other circuits will follow this well-reasoned opinion. This is an area of FLSA jurisprudence where there is a wide divergence of opinions. The Eleventh Circuit for example has long-held that FLSA Collective Action rights can be waived by agreement.
Click Sutherland v. Ernst & Young LLP to read the entire opinion.
S.D.N.Y.: Because FLSA Collective Action Is Not A Class Action, FLSA Collective Action Subject To Arbitration Despite FINRA Rule Prohibiting Class Actions
Velez v. Perrin Holden & Davenport Capital Corp.
Plaintiff brought this action alleging violations of the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL”) on behalf of himself and other similarly situated stock brokers employed or formerly employed by defendant Perrin Holden & Davenport Capital Corp. (“PHD Capital”) and its officers and owners. Plaintiff sought designation of the case as as a collective action pursuant to FLSA section 216 for his FLSA claims and as a class action pursuant to Fed.R.Civ.P. 23 for his state law claims.
Defendants moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6) or, in the alternative, to compel arbitration pursuant to the Federal Arbitration Act (“FAA”), 9 U.S .C. §§ 3, 4, on the ground that Plaintiff had agreed to arbitrate his FLSA claims at the time he was hired. In line with other courts that have decided the issue, the court held that a “collective action” is not encompassed within the term “class action” as that term is used in FINRA’s rules, and thus compelled arbitration of Velez’s FLSA claims, allowing for a collective action in FINRA arbitration.
After finding that the Plaintiff’s claims were subject to arbitration, the court then discussed whether, under FINRA rules banning class actions, Plaintiff could proceed with an FLSA collective action. Reasoning he could the court explained:
“FINRA Rule 13200 mandates arbitration of disputes between the parties “except as otherwise provided.” (FINRA Rule 13200, Ex. B to Declaration of Matthew D. Kadushin dated Aug. 27, 2010 (“Kadushin Decl.”).) Notably, FINRA Rule 13204 prohibits arbitration of “class action claims.” (FINRA Rule 13204, Ex. A to Kadushin Decl.) It is thus uncontested that Velez’s state law claims-which plaintiff has asserted as a class action pursuant to Fed.R.Civ.P. 23-are ineligible for arbitration. The parties dispute, however, whether that exemption of class action claims from arbitration also applies to plaintiff’s FLSA collective action claims. While defendants contend that collective actions are distinct from class actions and therefore subject to FINRA arbitration, Velez argues that the phrase “class action” in FINRA Rule 13204 encompasses a collective action and therefore collective action claims are not arbitrable. Velez looks to the interpretation by FINRA staff members of FINRA’s rules to support his position.
Every court to address whether an FLSA collective action is arbitrable pursuant to FINRA’s rules has found in favor of arbitrability. See Gomez v. Brill Securities, Inc., No. 10 Civ. 3503, 2010 WL 4455827 (S.D.N.Y. Nov. 2, 2010); Suschil v. Ameriprise Financial Servs., Inc., No. 07 Civ. 2655, 2008 WL 974045, at *5 (N.D.Ohio Apr. 7, 2008); Chapman v. Lehman Bros., Inc., 279 F.Supp.2d 1286, 1290 (S.D.Fla.2003). This Court agrees with its sister district courts.
FINRA Rule 13204 clearly states that “[c]lass action claims may not be arbitrated” under FINRA’s Code of Arbitration Procedure. However, that rule says nothing about collective action claims. Although collective and class actions have much in common, there is a critically important difference: collective actions are opt-in actions, i.e., each member of the class must take steps to opt in to the action in order to participate in it, whereas class actions are opt-out actions, i.e., class members automatically participate in a class action unless they take affirmative steps to opt out of the class action. Collective actions bind only similarly situated plaintiffs who have affirmatively consented to join the action.
Velez urges the Court to defer to the opinions of FINRA staff who have issued letters construing collective actions to come within the ambit of class actions for the purposes of FINRA arbitration. (See, e.g., Letter from Jean I. Feeney, NASD Assistant General Counsel, dated Sept. 21, 1999, Ex. C. to Kadushin Decl.; Letter from George H. Friedman, NASD Executive Vice President, Dispute Resolution, Director of Arbitration, dated Oct. 10, 2003, Ex. D to Kadushin Decl.) However, those letters do not contain any substantial analysis, and the Feeney letter itself includes the disclaimer that “the opinions expressed herein are staff opinions only and have not been reviewed or endorsed by the Board of Directors of [the] NASD.” Moreover, FINRA’s website specifically states that “[s]taff-issued interpretive letters express staff views and opinions only and are not binding on FINRA and its Board.” (FINRA-Interpretive Letters, Ex. 1 to Affirmation of Emily A. Hayes dated Sept. 9, 2010). Such “staff opinion letters are not the sort of agency interpretation that is entitled to deference by this Court.” Gomez, 2010 WL 4455827 at *1; see also Auer v. Robbins, 519 U.S. 452, 461 (1997); Skidmore v. Swift & Co., 323 U.S. 134 (1944). If FINRA wanted to prohibit arbitration of collective action claims, FINRA is certainly able to amend its rules to do so. See FINRA Rulemaking Process, available at http://www.finra.org/In dustry/Regulation/FINRARules/RulemakingProcess (Feb. 2, 2010); see also Gomez, 2010 WL 4455827 at *2.
As noted above, the parties here have agreed in writing to arbitrate certain disputes as required by FINRA. In light of other district court opinions, this Court’s own interpretation of FINRA rules, and the federal policy favoring arbitration as an alternative forum in which to resolve disputes, this Court finds that FLSA collective actions are within the scope of the parties’ agreement to arbitrate. In addition, no congressional intent precludes arbitration of the federal FLSA claims. See, e.g., Gomez, 2010 WL 4455827 at *2; Coheleach v. Bear, Stearns & Co., 440 F.Supp.2d 338, 240 (S.D.N.Y.2006).”
Accordingly, defendants’ motion was granted to the extent that the court compelled arbitration of Plaintiff’s FLSA claims.
3d Cir.: Enforceability Of Class/Collective Action Waiver In Agreement To Arbitrate Is Issue For Arbitrator Not The Court
Vilches v. Travelers Companies, Inc.
This appeal raised the issue of whether the District Court properly determined that the Plaintiff-Appellant (employee) assented to the insertion of a class arbitration waiver into an existing arbitration policy, and that the waiver was not unconscionable. The District Court ordered the parties into arbitration to individually resolve the claims brought by Plaintiff under the Fair Labor Standards Act of 1938, 29 U.S.C. § 201, et seq. (“FLSA”), and New Jersey Wage and Hour Law, N.J.S.A. § 34:11-4.1, et seq. (“NJWHL”). While it held that the class arbitration waiver was not unconscionable, the Third Circuit vacated the District Court’s order and referred the matter to arbitration to determine whether Vilches can proceed as a class based upon the parties’ agreements.
Discussing the relevant procedural and factual background the court stated:
“We briefly summarize the allegations pertinent to our decision. Appellants Vilches filed a class and collective action in the Superior Court of New Jersey to recover unpaid wages and overtime allegedly withheld in violation of the FLSA and the NJWHL, contending that Travelers consistently required its insurance appraisers to work beyond 40 hours per week but failed to properly compensate the appraisers for the additional labor. Travelers removed the matter to the United States District Court for the District of New Jersey, and filed a Motion for Summary Judgment seeking the dismissal of the complaint and an order compelling Vilches to arbitrate their individual wage and hour claims.
Upon commencing employment with Travelers, Vilches agreed to an employment provision making arbitration “the required, and exclusive, forum for the resolution of all employment disputes that may arise” pursuant to an enumerated list of federal statutes, and under “any other federal, state or local statute, regulation or common law doctrine, regarding employment discrimination, conditions of employment or termination of employment.” (App’x at 79.) The agreement did not expressly reference class or collective arbitration or any waiver of the same. The agreement reserved to Travelers the right to alter or amend the arbitration policy at its discretion with appropriate notice to employees.
In April 2005, Travelers electronically published a revised Arbitration Policy. In addition to restating the expansive scope of the Policy, the update also included an express statement prohibiting arbitration through class or collective action:
The Policy makes arbitration the required and exclusive forum for the resolution of all employment-related and compensation-related disputes based on legally protected rights (i.e ., statutory, contractual or common law rights) that may arise between an employee or former employee and the Company…. [T]here will be no right or authority for any dispute to be brought, heard or arbitrated under this Policy as a class or collective action, private attorney general, or in a representative capacity on behalf of any person. (App’x at 88) (emphasis added). Travelers communicated the revised Policy to Vilches in several electronic communications.
Before the District Court, Vilches initially alleged that they never agreed to arbitrate any claims against Travelers; their position changed, however, during the course of proceedings and they ultimately conceded that all employment disputes with Travelers must be arbitrated pursuant to the arbitration agreement they signed at commencement of employment. They nevertheless insisted that the revised Arbitration Policy introduced by Travelers in April 2005 prohibiting class arbitration, which Travelers attempted to enforce, did not bind them because they never assented to its terms. Vilches further argued that, even assuming that the updated Policy did bind them, the revision was unconscionable and unenforceable.
Notwithstanding the fact that the parties agreed to arbitrate all employment disputes, as we discuss below, the District Court addressed the question of whether Vilches agreed to waive the right to proceed by way of class arbitration. In an oral decision, the District Court granted Travelers’ motion for summary judgment, finding that the various forms of correspondence from Travelers provided sufficient notice to Vilches of the revised Policy, and that their electronic assent and continued employment constituted agreement to the update. As such, the Court held that Vilches waived the ability to proceed in a representative capacity through class arbitration. The Court’s opinion only briefly touched upon the unconscionability claims, stating that “there was no adhesion that was part of that process.” (App’x at 23.) The Court ordered the parties to individually arbitrate the employment disputes, and this appeal followed.”
Holding that the Arbitrator and not the Court should decide the issue of enforceability of the class/collective action waiver, the Third Circuit reasoned:
“The parties agree that any and all disputes arising out of the employment relationship-including the claims asserted here-are to be resolved in binding arbitration. Accordingly, the role of the Court is limited to deciding whether the revised Arbitration Policy introduced in April 2005-and the class arbitration waiver included within that revision-governed this dispute. We conclude that the District Court should not have decided the issue presented as to the class action waiver, and, as we explain below, we will refer the resolution of this question to arbitration in accordance with governing jurisprudence. The District Court should have, however, ruled on the issue of unconscionability and we will address it.
We have repeatedly stated that courts play a limited role when a litigant moves to compel arbitration. Specifically, “whether the parties have submitted a particular dispute to arbitration, i.e., the question of arbitrability, is an issue for judicial determination unless the parties clearly and unmistakably provide otherwise.’ “ Puleo, 605 F.3d at 178 (quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002)). “[A] question of arbitrability arises only in two circumstances-first, when there is a threshold dispute over whether the parties have a valid arbitration agreement at all,’ and, second, when the parties are in dispute as to whether a concededly binding arbitration clause applies to a certain type of controversy.’ “ Id. (quoting Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452 (2003)). In contrast, the Supreme Court has distinguished “questions of arbitrability with disputes over arbitration procedure, which do not bear upon the validity of an agreement to arbitrate.” Id. at 179. We noted in Puleo that “procedural questions”-such as waiver or delay-“which grow out of the dispute and bear on its final disposition are presumptively not for the judge.” Id.
This matter satisfies neither of the Puleo arbitrability circumstances. As stated, neither party questions “whether the parties have a valid arbitration agreement at all.” Id.; (see also Appellants’ Br. at 15 (“Plaintiffs do not challenge the validity of the arbitration agreements they entered into when they first began their employment”); Appellees’ Br. at 6 (“At the outset of employment, Appellants agreed to the Travelers Employment Arbitration Policy”).) The original arbitration provision to which Vilches admittedly agreed provided that “the required, and exclusive, forum for the resolution of all employment disputes ” would be arbitration. (App’x at 79 (emphasis added).) Here, the issue of whether an employee is bound by a disputed amendment to existing employment provisions falls within the scope of this expansive agreement to arbitrate. Indeed, the language makes clear that the “concededly binding arbitration clause applies” to the particular employment claims at stake here, and the parties do not advance a cognizable argument to suggest otherwise. Puleo, 605 F.3d at 178. Accordingly, the second Puleo arbitrability element is also unfulfilled.
While the parties framed their arguments so as to invite the Court’s attention to the class action waiver issue-namely, whether the revised Arbitration Policy expressly prohibiting class arbitration governs the relationship between Travelers and Vilches-we conclude that “the relevant question here is what kind of arbitration proceeding the parties agreed to.” Bazzle, 539 U.S. at 452 (emphasis in original). As stated, the addition of the disputed class arbitration waiver did not disturb the parties’ agreement to refer “all employment disputes” to arbitration, and, thus, “does not bear upon the validity of an agreement to arbitrate.” Puleo, 605 F.3d at 179. Assuming binding arbitration of all employment disputes, the contested waiver provision solely affects the type of procedural arbitration mechanism applicable to this dispute. “[T]he Supreme Court has made clear that questions of contract interpretation’ aimed at discerning whether a particular procedural mechanism is authorized by a given arbitration agreement are matters for the arbitrator to decide .” Id. (emphasis in original). Where 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.” Stolt-Nielsen S.A. v. Animalfeeds Int’l Corp., 130 S.Ct. 1758, 1771-72 (2010).
The Policy originally in force made no mention of class action or class arbitration, and was entirely silent on whether the parties had a right to proceed through class or collective arbitration. In contrast, the amended Policy explicitly precludes class arbitration. Accordingly, we must “give effect to the contractual rights and expectations of the parties,” and refer the questions of whether class arbitration was agreed upon to the arbitrator. Stolt-Nielsen, 130 S.Ct. at 1774.
Although we offer no forecast as to the arbitrator’s potential resolution of these questions, assuming arguendo that the arbitrator finds the class action waiver binding, we will address Vilches’ alternative argument that the addition of the class action waiver was unconscionable for the sake of judicial efficiency, and because it does concern “arbitrabillity.” See Puleo, 605 F.3d at 179.”
The Third Circuit went on to hold that, in the event the class action waiver language was binding, it was not unconscionable.
Click Vilches v. Travelers Companies, Inc., to read the entire opinion.
D.Mass.: Where Arbitration Agreement Silent On Class Action And Parties Did Not Stipulate That There Was ‘No Agreement’ Re: Class Action Arbitration, Arbitrator Properly Decided Class Claims Could Proceed
Smith & Wollensky Restaurant Group, Inc. v. Passow
This case is of interest, because it offers some incite into how courts and arbitrators will interpret the Supreme Court’s recent decision in Stolt-Nielsen.
This matter was before the court on Petitioner-Respondent’s (the employer or “S&W”) Motion to Vacate Arbitrator’s Clause Construction Award. The Claimants in the underlying proceeding were four current and former employees. The parties had a dispute resolution agreement (“DRA”), that provided for binding arbitration of claims between them arising out of the Claimants’ employment. Pursuant to the DRA, the Claimants commenced an arbitration proceeding with the AAA. In a document styled “Class Action Complaint,” they alleged that the Petitioner-Respondent had violated the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201 et seq., the Massachusetts Minimum Wage Act, Mass. Gen. Laws ch. 151 §§ 1, 7, and the Massachusetts Tip Statute, Mass. Gen. Laws ch. 149 § 152A.
Petitioner-Respondent asserted that the case could not proceed as a class action, inasmuch as the DRA did not contemplate the arbitration of class or collective claims. On July 2, 2008, the Arbitrator issued a Partial Final Award on Arbitration Clause Construction (“Initial Clause Construction Award”), holding that the DRA permitted the claims to proceed in arbitration. On April 27, 2010, the Supreme Court of the United States issued Stolt-Nielsen S.A. v. AnimalFeeds International Corp., —U.S. —-, —-, 130 S.Ct. 1758, 1766, 176 L.Ed.2d 605 (2010), which dealt with the arbitration of class claims. Subsequently, the Arbitrator, at the request of the Petitioner-Respondent, reconsidered his Initial Clause Construction Award in light of Stolt-Nielsen. On July 28, 2010, the arbitrator issued a Memorandum and Order Regarding Reconsideration of the Arbitration Clause Construction (the “Revised Clause Construction Award”), in which he affirmed the Initial Clause Construction Award as consistent with Stolt-Nielsen . This Motion followed.
Holding that the Arbitrator properly ruled the case could proceed as a class/collective action, the court reasoned:
“S & W contends that Stolt-Nielsen prevents the claim from proceeding in arbitration. The Court disagrees. In Stolt-Nielsen, “the parties stipulated that there was ‘no agreement’ on the issue of class-action arbitration.” Id. at 1776 n. 10. Here, there was no such stipulation and, thus, the arbitrator was authorized “to decide what contractual basis may support a finding that the parties agreed to authorize class-action arbitration.” Id. The arbitrator ruled that the parties intended that class-action claims and relief were contemplated and permitted by the DRA and the Court concludes that the language of the DRA supports such a ruling.
The arbitrator found that the arbitration clause in the DRA was broad in its reach, covering “any claim that, in the absence of this Agreement, would be resolved in a court of law under applicable state and federal law.” The arbitrator noted that “any claim” is defined as “any claims for wages, compensation and benefits” and that both the FLSA and Massachusetts wage laws statutorily authorize an individual employee to bring a class-action in a court of law. The arbitrator further found that the DRA expressly provided that the “[a]rbitrator may award any remedy and relief as a court could award on the same claim,” that the applicable statutes provide for class relief and the statutes were in existence when the DRA was executed. The arbitrator also noted that “wage and hour claims like those in play here are frequently pursued as class or collective actions, and both the Claimants and S & W must be deemed to understand that.”
The arbitrator’s award was the result of a reasonable interpretation of the DRA. Given this Court’s limited standard of review, such interpretation must stand. See Eastern Associated Coal Corp. v. Mine Workers, 531 U.S. 57, 62, 121 S.Ct. 462, 148 L.Ed.2d 354 (2000) (“[C]ourts will set aside the arbitrator’s interpretation of what their agreement means only in rare instances.”); Paperworkers v. Misco, Inc., 484 U.S. 29, 38, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987) (“[A]s long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, that a court is convinced he committed serious error does not suffice to overturn his decision.”).
The Smith & Wollensky Restaurant Group, Inc.’s Motion To Vacate Arbitrator’s Clause Construction Award (Docket No. 2) is, hereby, DENIED.”
Click Smith & Wollensky Restaurant Group, Inc. v. Passow to read the entire decision.
7th Cir.: Collective Action FLSA Claims May Proceed In A “Hybrid Action” With State Law Rule 23 Claims
Ervin v. OS Restaurant Services, Inc.
In this appeal the Seventh Circuit considered “whether employees who institute a collective action against their employer under the terms of the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201 et seq. (“FLSA”), may at the same time litigate supplemental state-law claims as a class action certified according to Federal Rule of Civil Procedure 23(b)(3). The district court thought not; it rejected the plaintiffs’ effort to proceed as a class under Rule 23(b)(3) on the ground that there is a “clear incompatibility” between the FLSA proceeding and the proposed class action.” Answering this question in the affirmative (finding that so-called “hybrid actions” are permissible) the Seventh Circuit reversed the lower court’s decision holding otherwise and remanded the case for further findings in accordance with its opinion.
The court explained:
“The problem, as the court saw it, stems from the fact that the FLSA requires potential plaintiffs to opt in to participate in an action, while the plaintiffs in a Rule 23(b)(3) class action are included in the case unless they opt out. Trying to use both systems side-by-side would be rife with complications, it concluded; more formally, it held that one could never find the superiority requirement of Rule 23(b)(3) satisfied if the case also involved an FLSA collective action.
The question whether these two distinct types of aggregate litigation may co-exist within one case has divided the trial courts in this circuit and elsewhere. In the Northern District of Illinois alone, compare Barragan v. Evanger’s Dog and Cat Food Co., 259 F .R.D. 330 (N.D.Ill.2009), and Ladegaard v. Hard Rock Concrete Cutters, Inc., 2000 WL 1774091 (N.D.Ill.2000), with Riddle v. National Sec. Agency, Inc., 2007 WL 2746597 (N.D.Ill.2007), McClain v. Leona’s Pizzeria, Inc., 222 F.R.D. 574 (N.D.Ill.2004), and Rodriguez v. The Texan, Inc., 2001 WL 1829490 (N.D.Ill.2001). As far as we can tell, no court of appeals has yet had occasion to address it. But see Wang v. Chinese Daily News, Inc., 623 F.3d 743, 753-55, 760-62 (9th Cir.2010) (holding that a district court properly certified a Rule 23(b)(2) class along with an FLSA collective action and properly exercised supplemental jurisdiction over the state-law claim); Lindsay v. Government Employees Ins. Co., 448 F.3d 416, 420-25 (D.C.Cir.2006) (concluding, in the context of an appeal under Rule 23(f), that the FLSA does not necessarily preclude an exercise of supplemental jurisdiction over related state-law claims); De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 307-12 (3d Cir.2003) (concluding that a district court presiding over an FLSA collective action should not have exercised supplemental jurisdiction over parallel state-law claims).
We conclude that there is no categorical rule against certifying a Rule 23(b)(3) state-law class action in a proceeding that also includes a collective action brought under the FLSA. (We refer to these as “combined” actions, rather than “hybrid” actions, to avoid confusion with other uses of the term “hybrid”-e.g., for cases certified under more than one subsection of Rule 23(b).) In combined actions, the question whether a class should be certified under Rule 23(b)(3) will turn-as it always does-on the application of the criteria set forth in the rule; there is no insurmountable tension between the FLSA and Rule 23(b)(3). Nothing in the text of the FLSA or the procedures established by the statute suggests either that the FLSA was intended generally to oust other ordinary procedures used in federal court or that class actions in particular could not be combined with an FLSA proceeding. We reverse the district court’s class-certification determination and remand for further consideration in accordance with this opinion.”
Click Ervin v. OS Restaurant Services, Inc. to read the entire opinion.
The DOL had submitted an Amicus Brief in support of the Plaintiffs in this case. Click DOL Amicus Brief to read the Amicus Brief the US DOL filed in support of the plaintiff’s in this case.
9th Cir.: Reporters For Newspaper Properly Deemed Nonexempt; Creative Professional Exemption Not Applicable, Because The Reporters’ Work Does Not Require Sophisticated Analysis
Wang v. Chinese Daily News, Inc.
Following a verdict/decision in the plaintiffs favor, the defendant appealed to the Ninth Circuit based on a variety of issues, both substantive and procedural. As discussed here, the Ninth Circuit affirmed the lower Court’s holding that the plaintiffs, reporters for a local Chinese-language newspaper were nonexempt under the Fair Labor Standards Act (“FLSA”) and California Wage and Hour Law.
Reasoning that the plaintiff-reporters were not subject to the so-called “creative professional” exemption, the Court reasoned:
“CDN argues that the district court erred in holding on summary judgment that CDN’s reporters were non-exempt employees entitled to overtime. Specifically, CDN argues that its reporters were subject to the “creative professional exemption” and were therefore exempt employees not subject to FLSA and state-law overtime pay and break requirements. We review the district court’s grant of summary judgment de novo. Bamonte v. City of Mesa, 598 F.3d 1217, 1220 (9th Cir.2010).
Federal law exempts employers from paying overtime to “any employee employed in a bona fide … professional capacity.” 29 U.S.C. § 213(a)(1). To qualify as an exempt professional under federal law, an employee must be compensated “at a rate of not less than $455 per week,” and his or her “primary duty” must be the performance of exempt work. 29 C.F.R. §§ 541.300, 541.700. “[A]n employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, mechanical or physical work.” 29 C.F.R. § 541.302(a). The exemption is construed narrowly against the employer who seeks to assert it. Cleveland v. City of Los Angeles, 420 F.3d 981, 988 (9th Cir.2005). California wage and hour law largely tracks federal law. See Industrial Welfare Commission Order 4-2001 § 1(A)(3)(b) (defining professional to include “an employee who is primarily engaged in the performance of … [w]ork that is original and creative in character in a recognized field of artistic endeavor … and the result of which depends primarily on the invention, imagination, or talent of the employee”); see also id. § 1(A)(3)(e) (directing that the exemption is “intended to be construed in accordance with … [inter alia, 29 C.F.R. § 541.302 ] as [it] existed as of the date of this wage order”).
As applied to journalists, the federal Department of Labor construed the “creative professional exemption” in a 2004 regulation:
Journalists may satisfy the duties requirements for the creative professional exemption if their primary duty is work requiring invention, imagination, originality or talent, as opposed to work which depends primarily on intelligence, diligence and accuracy. Employees of newspapers, magazines, television and other media are not exempt creative professionals if they only collect, organize and record information that is routine or already public, or if they do not contribute a unique interpretation or analysis to a news product. Thus, for example, newspaper reporters who merely rewrite press releases or who write standard recounts of public information by gathering facts on routine community events are not exempt creative professionals. Reporters also do not qualify as exempt creative professionals if their work product is subject to substantial control by the employer. However, journalists may qualify as exempt creative professionals if their primary duty is performing on the air in radio, television or other electronic media; conducting investigative interviews; analyzing or interpreting public events; writing editorials, opinion columns or other commentary; or acting as a narrator or commentator. 29 C.F.R. § 541.302(d) (2004). Unlike the “interpretation” it replaced, the 2004 regulation was promulgated pursuant to notice and comment rulemaking and therefore has the force of law. See 69 Fed.Reg. 22122, 22157-58 (Apr. 23, 2004). In promulgating the new regulation, the Department of Labor explained that “[t]he majority of journalists, who simply collect and organize information that is already public, or do not contribute a unique or creative interpretation or analysis to a news product, are not likely to be exempt.” Id. at 22158. Although we have not decided a case applying the creative professional exemption to journalists, other courts have explored the circumstances under which print journalists qualify for the exemption. In Reich v. Gateway Press, Inc., 13 F.3d 685 (3d Cir.1994), the Third Circuit concluded that none of the reporters at a chain of nineteen local weeklies was exempt. The newspapers largely contained “information about the day-to-day events of their respective local communities … overlooked by the Pittsburgh metropolitan daily press.” Id. at 688. The reporters primarily generated articles and features using what they knew about the local community, spent 50-60% of their time accumulating facts, and mostly filed recast press releases or information taken from public records. They wrote a feature article or editorial about once per month. Id. at 689. The court held that they were among the majority of reporters who were non-exempt. Id. at 699-700. It noted that the work was not “the type of fact gathering that demands the skill or expertise of an investigative journalist for the Philadelphia Inquirer or Washington Post, or a bureau chief for the New York Times.” Id. at 700.
In Reich v. Newspapers of New England, Inc., 44 F.3d 1060 (1st Cir.1995), the First Circuit similarly held that reporters and other employees employed by a small community newspaper were not exempt professionals. The day-to-day duties of the reporters involved “general assignment work” covering hearings, criminal and policy activity, and legislative proceedings and business events. Employees were not “asked to editorialize about or interpret the events they covered.” Id. at 1075. They, too, were therefore among the majority of reporters who were not exempt, even though their work occasionally demonstrated creativity, invention, imagination, or talent. Id.
By comparison, in Sherwood v. Washington Post, 871 F.Supp. 1471, 1482 (D.D.C.1994), the district court held that a Washington Post reporter whose “job required him to originate his own story ideas, maintain a wide network of sources, write engaging, imaginative prose, and produce stories containing thoughtful analysis of complex issues” was exempt. As a high-level investigative journalist who had held multiple positions of prominence at one of the nation’s top newspapers, the reporter was the sort of elite journalist whom the creative professional exemption was intended to cover.
The parties in this case submitted extensive evidence on summary judgment. Reporters stated in their depositions that they wrote between two and four articles per day, and that they very seldom did investigative reporting. The reporters proposed articles, but the editors gave considerate direction and frequently assigned the topics. One reporter explained that with having to write so much, “you didn’t have enough time to-really analyze anything.” Some time was spent rewriting press releases. There were no senior reporters or others with distinctive titles, and each of the reporters performed essentially the same tasks.
Editors’ declarations submitted by CDN, on the other hand, stated that articles “include background, analysis and perspective on events and news,” that CDN employs some of the most talented reporters in the Chinese newspaper industry, and that the reporters have extensive control over their time, pace of work, and ideas for articles to write. They stated that reporters must cultivate sources, sift through significant amounts of information, and analyze complicated issues. Several editors stated that they approved more than 90% of the topics suggested by reporters. Reporters’ salaries ranged from $2,060 to $3,700 per month.
Although the evidence submitted revealed disputes over how to characterize CDN’s journalists, we agree with the district court that, even when viewing the facts in the light most favorable to CDN, the reporters do not satisfy the criteria for the creative professional exemption. CDN’s Monterey Park (Los Angeles) operation, with twelve to fifteen reporters and a local circulation of 30,000, is not quite as small or unsophisticated as the community newspapers described in the Newspapers of New England and Gateway Press cases. But CDN is much closer to the community newspapers described in those cases than to the New York Times or Washington Post. As the district court explored in detail, the materials submitted on summary judgment make clear that CDN’s articles do not have the sophistication of the national-level papers at which one might expect to find the small minority of journalists who are exempt. Moreover, the intense pace at which CDN’s reporters work precludes them from engaging in sophisticated analysis. CDN’s reporters’ primary duties do not involve “conducting investigative interviews; analyzing or interpreting public events; [or] writing editorial[s], opinion columns or other commentary,” 29 C.F.R. § 541 .302(d), even if they engage in these activities some of the time. Indeed, many CDN articles may be characterized as “standard recounts of public information [created] by gathering facts on routine community events,” id., as opposed to the product of in-depth analysis. Characterizing CDN journalists as exempt would therefore be inconsistent with the Department of Labor’s intent that “the majority of journalists … are not likely to be exempt,” 69 Fed.Reg. at 22158, and with the requirement that FLSA exemptions be construed narrowly.
The evidence before the district court did not create a genuine issue of material fact as to the reporters’ status. We therefore affirm the district court’s determination on summary judgment that CDN’s reporters were non-exempt employees who were entitled to the protections of the FLSA and California law.”
Not discussed here, the Court also held that the certification of both a collective action of the FLSA claims and a class action of the California state law claims was within the court’s discretion, as was the lower court’s decision to invalidate many opt-out forms received in response to the initial class action notice, in response to what it believed was coercion from the defendant employer.
To read the entire decision, click here.
D.R.I.: Collective Action FLSA Claims Not Mooted By Offer Of Judgment, In Full Satisfaction, To Named Plaintiff; Motion To Dismiss Denied
Nash v. CVS Caremark Corp.
Plaintiff pled this lawsuit for overtime benefits as a “collective action” under the Fair Labor Standards Act (“FLSA”). That is, he purported to act on behalf of himself and “other employees similarly situated” pursuant to 29 U.S.C. § 216(b). After one supposedly “similarly situated” party opted in to the case, Defendants presented both that person and Plaintiff with offers of judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure. The opt-in party previously accepted the offer and was no longer part of the case; Plaintiff rejected the offer, but did not dispute that it was adequate to cover his damages. Defendants then moved to dismiss the suit on grounds that the Rule 68 offer mooted Plaintiff’s claim. However, since that time, other parties opted into the action and seeking to have their claims resolved as part of a “collective action” with Plaintiff. Denying, Defendants’ Motion to Dismiss on mootness grounds, the Court discussed the remedial purposes of the FLSA’s collective action mechanisms.
Discussing Rule 68 initially, the Court reasoned, “[n]othing in the text of Rule 68 compels dismissal of a case for lack of subject matter jurisdiction when a plaintiff rejects an adequate offer of judgment. Rather, the Rule creates what amounts to a penalty scheme when a plaintiff moves forward with litigation despite being offered the maximum damages she can hope to obtain at trial. “If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.” Fed.R.Civ.P. 68(d). Of course, as a practical matter, in some circumstances a Rule 68 offer may “eliminate[ ] a legal dispute upon which federal jurisdiction can be based,” because “[y]ou cannot persist in suing after you’ve won.” Greisz v. Household Bank (Illinois), N.A., 176 F.3d 1012, 1015 (7th Cir.1999). But this does not transform Rule 68 into an escape hatch from every lawsuit. Rather, as this case makes clear, whether a controversy becomes moot following a Rule 68 offer depends on the factual circumstances, the cause of action, and the procedural status of the claims at issue. Moreover, nothing in Rule 68 itself suggests that it should be used as a vehicle for sabotaging claim-aggregating devices like 29 U.S.C. § 216(b) and Rule 23. See Fed.R.Civ.P. 1. (explaining that the Federal Rules of Civil Procedure should be “construed and administered to secure the just, speedy, and inexpensive determination of every action and proceeding”).”
The Court then distinguished a 216(b) collective action, from a Rule 23 class action:
“The Court agrees with Judge Almond that Cruz v. Farquharson, 252 F.3d 530, 533 (1st Cir.2001), in which the First Circuit approved the dismissal of a Rule 23 action as moot, is distinguishable. Cruz emphasized that between the date the plaintiffs in that case received “complete relief,” and the date the district court dismissed the case as moot, “no new plaintiffs tried to intervene, and the named plaintiffs made no effort to amend their complaint to add new parties.” Cruz, 252 F.3d at 533. That is not so here. Four additional parties have, in fact, “tried to intervene” as “similarly situated” plaintiffs by submitting their consents for the Plaintiff to pursue claims on their behalf.
As Judge Almond noted, where even one similarly-situated plaintiff opts in to an FLSA suit after the rejection of a Rule 68 offer, courts “have refused to permit defendants to moot putative FLSA collective actions.” Yeboah v. Central Parking Sys., No. 06 CV 0128(RJD)(JMA), 2007 WL 3232509, at *3 (E.D.N.Y. Nov. 1, 2007); see Reyes v. Carnival Corp., No. 04-21861-CIV., 2005 WL 4891058, at *2 (S.D.Fla. May 25, 2005) (refusing to dismiss FLSA action where “other plaintiffs. opted in to [the] suit [after] the offer of judgment was made”); Roble v. Celestica Corp., 627 F.Supp.2d 1008, 1013-14 (D.Minn.2007) (finding that identifying opt-ins sustained jurisdiction); Rubery v. Buth-Na-Bodhaige, Inc., 494 F.Supp.2d 178, 179-80 (W.D.N.Y.2007) (denying motion to dismiss where more than fifty people had filed consents to join FLSA action). This is true even if, as here, there is no dispute about the adequacy of the offer. See Yeboah, 2007 WL 3232509, at *5 (explaining that even if the plaintiff could not dispute the sufficiency of the judgment, “it neither mooted plaintiff’s FLSA claim nor deprived [the court] of subject matter jurisdiction,” because of the “presence of opt-ins.”).
Defendants contend that the opt-ins cannot be considered “plaintiffs” or “parties” to the suit for purposes of any exception to mootness carved out by Cruz. See Cruz, 252 F.3d at 533. Cruz stressed that there had been no “decision on class certification” under Rule 23, appearing to require a formal grant of class status in order to preserve a controversy after named parties obtain full relief. Here, the case has not yet reached the equivalent stage in the § 216(b) context: “preliminary collective action certification,” which requires an initial demonstration that the plaintiff “is ‘similarly situated’ to the other members of the proposed class.” Poreda v. Boise Cascade, L.L.C., 532 F.Supp.2d 234, 238 (D.Mass.2008). In the absence of preliminary certification, Defendants argue, Plaintiff has no procedural right to act on behalf of purported “similarly situated” parties. “[A] § 216(b) plaintiff … presents only a claim on the merits …. [and][i]n contrast to the Rule 23 plaintiff, a § 216(b) plaintiff has no claim that he is entitled to represent other plaintiffs.” Cameron-Grant v. Maxim Healthcare Servs., Inc., 347 F.3d 1240, 1249 (11th Cir.2003).
In other words, Defendants insist, without the only safe harbor arguably warranted by Cruz-collective action status-this lawsuit died the moment that Plaintiff rejected his Rule 68 offer. At that time, there were no other opt-ins with live claims, and plaintiff had no right to stand in for anyone else. Later opt-ins could not resurrect the action once it expired.
This logic has some superficial appeal. But its limitation is that, if true, employers could always “use Rule 68 as a sword … and avoid[ ] ever having to face a collective action.” Sandoz v. Cingular Wireless LLC, 553 F.3d 913, 919 (5th Cir.2008). Congress clearly did not intend such an “anomaly” in enacting § 216(b). See id. Neither does Cruz, which concerns Rule 23, require the result Defendants urge here, which would effectively thwart Congress’ preference to “avoid multiple lawsuits where numerous employees” allege FLSA violations. Prickett v. DeKalb County, 349 F.3d 1294, 1297 (11th Cir.2003).
The Court recognizes that Cruz may create some tension with the underlying rationale for decisions allowing § 216(b) opt-ins to preserve jurisdiction. As explained by the Fifth Circuit in Sandoz, at bottom those cases rest on what is known as the “relation back” doctrine. See Sandoz, 553 F.3d at 921;see, e.g., Yeboah, 2007 WL 3232509, at *3 (citing Weiss v. Regal Collections, 385 F.3d 337, (3d Cir.2004), a Rule 23 case dealing with the “relation back” doctrine). Sandoz acknowledged the quandary raised by Cameron-Grant: a named FLSA plaintiff “cannot represent any other employees until they affirmatively opt in to the collective action.” Sandoz, 553 F.3d at 919 (citing Cameron-Grant, 347 F.3d at 1249.). “If our analysis stopped there,” the court reasoned, “[the plaintiff’s] case would be moot,” because she had received an adequate offer of judgment before any opt-ins joined the case. Id. Nevertheless, the court cited Sosna v. Iowa, 419 U.S. 393 (1975), as providing a solution. There, the Supreme Court observed that a Rule 23 controversy might become moot “before the district court can reasonably be expected to rule on a certification motion.” Id. at 402 n. 11. Depending on the circumstances, in such instances class certification might “be said to ‘relate back’ to the filing of the complaint,” which would preserve jurisdiction. Id. at 402 n. 11.Sandoz found that the “relation back” doctrine was just as appropriate for § 216(b) as Rule 23, because both types of actions were vulnerable to strategic mooting by Defendants. Accordingly, “there must be some time for a[n FLSA] plaintiff to move to certify a collective action before a defendant can moot the claim through an offer of judgment.” Sandoz, 553 F.3d at 921.
Defendants fairly point out that Cruz did not approve of such an approach to Rule 23, and in fact took a narrow view of Sosna. The holding in Sosna was that jurisdiction did not disappear when a named plaintiff’s claim became moot after certification of a class with live controversies. Sosna, 419 U.S. at 402. Cruz stated outright that the “holding in Sosna ” was not applicable, because the plaintiffs in Cruz had not obtained class certification. Cruz, 252 F.3d at 534. At the same time, Cruz did not address the footnote in Sosna explaining the “relation back” idea. Furthermore, no First Circuit decision has considered the question of whether it would be proper to use the “relation back” approach in the context of § 216(b).FN2
In the Court’s view, applying the “relation back” doctrine is appropriate in this case. Plaintiff represents he has not yet moved for preliminary certification because he has been busy opposing Defendants’ efforts to transfer venue and dismiss the case, which they commenced less than a month after the Complaint was filed. Under the “relation back” doctrine, the opt-ins who appeared after Plaintiff rejected the Rule 68 offer sustain jurisdiction; this will give Plaintiff the opportunity to seek provisional certification without “undue delay” after the entry of this Order. Sandoz, 553 F.3d at 921 (quoting Weiss, 385 F.3d at 348). This, in turn, will enable “due deliberation” on the issue of whether Plaintiff is the appropriate representative of a collective action. See Weiss, 385 F.3d at 348.”
Last, the Court noted that policy precludes a dismissal due to mootness under these circumstances, because of the remedial purposes of the FLSA:
“As discussed, and as Judge Almond noted, granting dismissal in these circumstances would impair the Congressional preference for collective actions embodied in 216(b). The Court offers some additional comments on this topic below. But there is also a second policy consideration that favors affirming the R & R. Specifically, the present motion underscores the unique danger of tactical manipulation in FLSA cases. Thus, as explained below, to the extent Cruz could be read to establish a broad mootness regime that reaches beyond the Rule 23 context, an exception for FLSA actions is warranted.
To begin with, it is clear that allowing Defendants to “pick off” named FLSA plaintiffs one-by-one encourages manipulation of cases and ultimately of the federal courts. See Sandoz, 553 F.3d at 919. One court in Illinois described the ways employers can hamstring collective actions if allowed to snuff named plaintiffs’ claims using Rule 68:
[The] defense strategy creates a virtually unwinnable situation for plaintiffs in collective or class action lawsuits. Defendant makes an offer of “judgment” to Plaintiff, then alleges that the action is moot. Plaintiff therefore must either pursue discovery very early in the case, when a court likely will deem it premature, or seek class certification and/or notice before discovery, which runs the risk of harming the interest of those as-yet undiscovered class members. Reed v. TJX Cos., NO. 04 C 1247, 2004 WL 2415055, at *3 (N.D.Ill. Oct. 27, 2004). The FLSA enforcement scheme clearly does not envision such a minefield. Section 216(b) does not require plaintiffs to petition for provisional certification of a “collective action” when filing a complaint. In fact, the final ruling on whether the named plaintiff may maintain a “collective action” usually occurs “after discovery is complete.” Poreda, 532 F.Supp.2d at 239. The collective action process “should be able to ‘play out’ according to the directives” of § 216(b) and the cases applying it, to permit “due deliberation by the parties and the court” on collective action certification. See Weiss, 385 F.3d at 347-48 (discussing the Rule 23 process).
The moot-and-dismiss tactic also facilitates forum-shopping and plaintiff-shopping. At oral argument, Defendants confirmed that multiple lawsuits regarding the overtime claims asserted here are pending in different jurisdictions around the country. Permitting use of Rule 68 to moot cases in one or more forums and thereby cherry-pick another, potentially with the weakest collective action representative, upends the longstanding principle that, in cases based on federal-question jurisdiction, the plaintiff is the “master of the claim.” Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987).
Defendants might object that Rule 23 actions present the same worries. After all, Rule 23 advances a policy similar to § 216(b): the efficient resolution of widespread small claims dependent on common legal and factual questions. Arguably, the opt-out structure of Rule 23 embodies an even firmer commitment to aggregating claims, in contrast to the opt-in rule for § 216(b) cases. And if this is true, how can the cited policies provide any basis to distinguish Cruz, where the same concerns were not enough to stave off dismissal of a Rule 23 action? In that case, the plaintiffs alleged, there was a large pool of class members, and the defendant had defused class action litigation by mooting the claims of the named parties. See Cruz, 252 F.3d at 535.
The answer to the question above is that FLSA actions are more vulnerable to manipulation than Rule 23 actions. For the latter, filing a complaint tolls the statute of limitations for all alleged class members, whether they know of the lawsuit or not. See Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 350 (1983) (“The filing of a class action tolls the statute of limitations as to all asserted members of the class ….”). In contrast, parties alleged to be “similarly situated” in a § 216(b) case must affirmatively opt in to toll the limitations period. See29 U.S.C. § 256 (explaining that an FLSA action is not considered to be commenced for a similarly situated party until he submits written consent to join the case); Bonilla v. Las Vegas Cigar Co., 61 F.Supp.2d 1129, 1136-37 (D.Nev.1999) ( “[A]ll potential plaintiffs to § 216(b) actions must file their consent to the suit to toll the statute of limitations.”) (emphasis in original).
This means that defendants can bleed value out of a large pool of outstanding FLSA claims in a way they cannot with a comparable group of Rule 23 claims. “Picking off” § 216(b) plaintiffs delays the point at which any collective action can be provisionally certified. This stalls notification to potential “ similarly situated” parties. O’Donnell v. Robert Half Int’l, Inc., 534 F.Supp.2d 173, 177 (D.Mass.2008) (“A class may be conditionally certified and notified of the pendency of an action only if the putative class members are “similarly situated” with the named plaintiffs.”) The longer it takes for an FLSA class to mature, the lower members’ damages will be once they opt in, given the two-year limitations period. See29 U.S.C. § 255 (2010). In a parallel situation under Rule 23, the clock for absentees stops upon the filing of a complaint that raises their claims. Thus, even if employers pick off some named plaintiffs, the limitations period for absentees pauses while any applicable class action is pending.
The predicament of the opt-ins in this case brings the problem into sharper focus. Widespread claims involving common issues invite lawsuits in different jurisdictions, as is the situation here. Note the disparate outcomes this creates for Rule 23 absentees and FLSA opt-ins. As a practical matter, if a Rule 23 action is dismissed, class members may not have to worry about expiration dates for their claims drawing closer. If there is another class action underway that allegedly embraces their claims, the automatic tolling rule from Crown, Cork & Seal shelters them. Opt-ins to collective actions enjoy no such protection. If the suit to which they have hitched their claims sinks-the result Defendants seek here-the clock starts running again, even if they might be “similarly situated” to the named plaintiff in another pending case. Thus, as Judge Almond observed:
[I]f [Defendants were] successful in dismissing the case as mooted, the four plaintiffs who opted in … would arguably have to either initiate new individual FLSA actions or join another applicable collective action. Thus, the tolling of the limitations period for their claims could be delayed and, if they were ultimately successful, their back pay damages could be reduced since the value of their claims is potentially diminished with each passing day. (R & R at 4-5.) The point is that FLSA opt-ins are more exposed to the erosion and possible expiration of their claims than Rule 23 absentees.
Simply put, it is easier to drown collective actions than class actions. If allowed to use Rule 68 as a weapon, defendants can torpedo complaint after complaint, leaving opt-ins to swim for the nearest viable action as their claims leak value. This justifies a more relaxed mootness standard in FLSA cases than Rule 23 cases, and therefore provides an additional basis for distinguishing Cruz.”
Thus, the Court denied Defendants’ Motion to Dismiss.