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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.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.
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.Nev.: FLSA Precluded Nevada State Law Class Action
Daprizio v. Harrah’s Las Vegas, Inc.
This case was before the Court on Defendant’s Motion to Dismiss Plaintiffs’ state law claims on several grounds. As discussed here, the Court ruled that the FLSA precludes Nevada State Law Class Action claims.
“The Court finds that the FLSA precludes the state law class action. The conflict between the two mass action schemes involves the mechanisms by which parties become members of a suit. Defendant argues that “allowing the parallel claims to be pursued concurrently would allow the application of the collective action opt-out mechanism of Rule 23, invoked by the state law claims, to govern what Congress intended to be a more limited situation of opt-in collective action [under the FLSA].” (Mot. Dismiss 13, ECF No. 2). The Court agrees. The FLSA states that, “No employee shall be a party plaintiff to any such action unless he gives consent in writing to become such a party and such consent is filed in the court in which such action is brought.” 29 U.S.C. § 216(b). This is the “opt-in” provision used for FLSA collective actions, under which a putative class member is not bound unless he or she affirmatively opts in to the suit. Gardenvariety class actions, however, are governed by Rule 23, which states that “the court will exclude from the class any member who requests exclusion.” Fed.R.Civ.P. 23(c)(2)(B)(v). This is the “opt-out” provision, under which members of a certified class must affirmatively opt out of the class or be bound by the class action litigation. This divergence between the respective opt-in and opt-out procedures of a FLSA collective action and a garden-variety class action results in a class action under state labor laws being preempted by the FLSA’s collective action scheme.
The Ninth Circuit has based its preemption analysis on the Supreme Court’s three categories: (1) express preemption-“where Congress explicitly defines the extent to which its enactments preempt state law”; (2) field preemption-“where state law attempts to regulate conduct in a field that Congress intended the federal law exclusively to occupy”; and (3) conflict preemption-“where it is impossible to comply with both state and federal requirements, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Williamson v. Gen. Dynamics Corp., 208 F.3d 1144, 1149 (9th Cir.2000) (citing Indus. Truck Ass’n, Inc. v. Henry, 125 F.3d 1305, 1309 (9th Cir.1997) (citing English v. Gen. Elec. Co., 496 U.S. 72, 78-80 (1990))). “Consideration of the issues arising under the Supremacy Clause ‘start[s] with the assumption that the historical police powers of the states [are] not to be superseded by … Federal Act unless that [is] the clear and manifest purpose of Congress.’ “ Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516 (1992) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1947)). “Preemption issues must be decided on a case-by-case basis.” Williamson, 208 F.3d at 1155.
A court of this District has ruled that the FLSA precludes state-law labor class actions. In Williams v. Trendwest Resorts, Inc., the court found that “the class action mechanisms of the FLSA and Rule 23 are incompatible. It would be inappropriate to permit Plaintiff’s attempt to circumvent the restrictive opt-in requirement of the FLSA….” No. 2:05-CV-0605-RCJ-LRL, 2007 WL 2429149 at *4 (D.Nev. Aug. 20, 2007) (Jones, J.). In Trendwest Resorts, the defendant’s employees were attempting to recover overtime wages under the FLSA as well as under California state labor law. The court pointed out that notice was sent to 1578 employees of Trendwest Resorts in California and Nevada, but only 194 individuals had opted into the putative class. Id. Had Rule 23 been implemented, the other 1100 California employees who failed to affirmatively opt in would have been brought into the case. Id . In the present case, there is only one complaining party and an unknown number of potential class members. “[T]he policy behind requiring FLSA plaintiffs to opt in to the class would largely be thwarted if a plaintiff were permitted to back door the shoehorning in of unnamed parties through the vehicle of calling upon similar state statutes that lack such an opt-in requirement.” Leuthold v.. Destination Am., Inc., 224 F.R.D. 462, 470 (N.D.Cal.2004) (citation and internal quotation marks omitted).
Plaintiff argues that no preemption issue exists since none of the three types of preemption apply. Express and field preemption are not in dispute since neither side alleges that the federal law expressly preempts state law or that labor disputes are strictly a federal issue. Conflict preemption, Plaintiff argues, also does not apply because the “Nevada overtime and minimum wage claims do not ‘stand as an obstacle’ to Congress’ purpose in enacting the FLSA.” (Resp. Mot. Dismiss 9:11-12, ECF No. 14). In support of this argument, Plaintiff points to the “savings clause” of the FLSA which allows states to enact wage and hour laws more favorable to workers than the minimum requirements of the FLSA and quotes Williamson, which states that, “the FLSA’s ‘savings clause’ is evidence that Congress did not intend to preempt the entire field.” 208 F.3d at 1151 (citing 29 U.S.C. § 218(a)). This argument is unpersuasive for two reasons. First, the savings clause of the FLSA that Plaintiff mentions deals expressly with minimum wages and child labor laws. The language leaves little room for broader inference and probably no room for broader application. Second, the quote from Williamson Plaintiff mentions explicitly refers to field preemption, a type of preemption Plaintiff explicitly disclaims. The savings clause simply means that plaintiffs may bring FLSA collective actions based on violations of state wage and hour laws that are stricter than federal requirements. But the fact that Congress permits suit based on a state’s wage and hour requirements that are stricter than those in the FLSA does nothing to ameliorate the conflict between the FLSA opt-in provision and the Rule 23 opt-out provision.
Because of the tension between the opt-in procedure of an FLSA collective action and the opt-out procedure of a garden-variety Rule 23 class action, a conflict exists. See, e.g., Rose v. Wildflower Bread Co., No. CV09-1348-PHX-JAT, 2010 WL 1781011, at *3 (D.Ariz. May 4, 2010). The Ninth Circuit has stated even more broadly in dicta that “[c]laims that are directly covered by the FLSA (such as overtime and retaliation disputes) must be brought under the FLSA.” Williamson, 208 F.3d at 1154. This could be read as preempting even Plaintiff’s individual claim, but that question is not before the Court.”
There continues to be a rift between various circuits (and even within circuits) as to whether so-called hybrid FLSA Collective Actions may co-exist with State Law Class claims. Stay tuned to see whether the Supreme Court will ultimately weigh in.
To read the entire decision, click here.
D.N.J.: Plaintiffs’ State Law Claims Not “Inherently Incompatible” With FLSA Claims; Plaintiffs’ Motion to Remand Denied
Dare v. Comcast Corp
This matter was before the Court on the motion of Plaintiffs to sever and remand all state wage and hour claims pursuant to Fed.R.Civ.P. 21. In denying Plaintiffs’ motion, the Court discussed, at length the state of Third Circuit law applicable to so-called hybrid (state law and FLSA) cases.
Unlike many cases within the Third Circuit to have considered the viability of hybrid Wage and Hour cases, in this case it was the Plaintiffs arguing that State Law claims and FLSA claims were “inherently incompatible.” Rejecting this oft-raised argument the Court explained:
“Fed.R.Civ.P. 21 provides for the severance of claims “at any time, on just terms.” Courts must balance several considerations in determining whether severance is warranted, including “the convenience of the parties, avoidance of prejudice to either party, and promotion of the expeditious resolution of the litigation.” German v. Federal Home Loan Mortgage Corp., 896 F.Supp. 1385, 1400 n. 6 (2d Cir.1995); see also Official Committee of Unsecured Creditors v. Shapiro, 190 F.R.D. 352, 355 (E.D.Pa.2000). Specific factors that must be weighed are:
(1) whether the claims arise out of the same transaction or occurrence; (2) whether the claims present some common questions of law or fact; (3) whether settlement of the claims or judicial economy would be facilitated; (4) whether prejudice would be avoided if severance were granted; and (5) whether different witnesses and documentary proof are required for the separate claims. In re Merrill Lynch & Co., Inc. Research Reports Securities Litigation, 214 F.R.D. 152, 154-55 (S.D.N.Y.2003).
In this case, the factors all weigh against severance at this time. With regard to the first two factors, it is clear that both Plaintiffs’ state and federal claims arise from and are predicated upon the same set of core facts. Specifically, both claims are based on the fact that Defendants allegedly failed to pay its employees for overtime or off-the-clock hours worked, failed to provide the required minimum wage, and took unauthorized deductions from employee wages. As to the third factor, severance of the state claims would require the parties to litigate parallel cases with duplicative discovery, thereby frustrating judicial economy. Fourth, there is no indication that any of the parties would be prejudiced by not severing Plaintiffs’ state law claims at this time. Finally, there is no indication that the state and federal claims would require different witnesses or documentary proofs.
Although Plaintiffs have raised a number of arguments in support of their position that the claims should be severed, all are without merit. First, Plaintiffs argue that their state law claims should be severed and remanded in this case because “an FLSA opt-in collective action and a state law wage and hour opt-out class action are ‘inherently incompatible.’ “ (Pl. Br. at 3.) However, this is not an accurate statement of the law. Although Plaintiffs cite to De Asencio v. Tyson Foods, Inc., 342 F.3d 301 (3d Cir.2003) in support of their argument, this case does not stand for that proposition. To the contrary, the Third Circuit’s holding in De Asencio was premised on a case-specific analysis of supplemental jurisdiction, and not any alleged incompatibility between Rule 23 class actions and FLSA collective actions. See 342 F.3d at 312. Plaintiffs have failed to cite to any case in which the state class action claims were dismissed on the basis of their alleged inherent incompatibility with FLSA claims.
Second, Plaintiffs argue that the differences between the opt-in nature of their FLSA collective action and the opt-out nature of their state law class action warrants severance of the state law claim. However, the Court finds the procedural differences between the state and federal claims to be outweighed by the common questions of fact and substantive law. See De Asencio, 342 F.3d at 307-312 (noting that bringing state law class action in same case as FLSA claim “may be proper strategy where the state and federal actions raise similar issues and require similar terms of proof”); Cannon v. Vineland Hous. Auth., 627 F.Supp.2d 171, 176 n. 4 (D.N.J.2008) (noting that FLSA and New Jersey wage and hour laws employ same test for overtime claims).
Third, Plaintiffs argue that denial of the motion will prejudice them by delaying both class certification and the speedy trial of their state claims by a state court should this Court decline to exercise supplemental jurisdiction at some point in the future. However, the Court can conceive of no reason why the presence of both state and federal claims in this action would prevent Plaintiffs from seeking to certify the class in a timely manner. Indeed, since filing the instant motion Plaintiffs have moved to conditionally certify the class for their state claims. Further, any hypothetical delay Plaintiffs might suffer should the Court decline supplemental jurisdiction at some point in the future is outweighed by the very real prejudice of having to conduct parallel state and federal court actions with expensive, duplicative discovery that Defendants would face were this motion granted. Plaintiffs contention that Defendants would not be prejudiced by severing the state claims because any duplicative discovery, additional expense, or inconsistent results could have been avoided if they declined to remove the case is likewise unavailing. Plaintiffs have not cited any authority to suggest that a defendant waives its right to argue that it would be prejudiced by an action simply by exercising its right to remove a case involving a federal question.
Finally, Plaintiffs argue that the state claim should be severed because it will substantially predominate the FLSA claim. This argument implicates the Court’s exercise of supplemental jurisdiction over Plaintiffs’ state claim. District courts have supplemental jurisdiction over any claims that share a “common nucleus of operative fact” with a claim over which they have original jurisdiction. See 28 U.S.C. § 1367(a); De Asencio, 342 F.3d at 307-312. The courts may nonetheless decline to exercise supplemental jurisdiction if “the state law claim substantially predominates over the claim or claims over which the district court has original jurisdiction.” 28 U.S.C. § 1367(c)(2). Generally, a state claim will be found to substantially predominate where it “ ‘constitutes the real body of a case, to which the federal claim is only an appendage’-only where permitting litigation of all claims in the district court can accurately be described as allowing a federal tail to wag what is in substance a state dog.” Borough of W. Mifflin v. Lancaster, 45 F.3d 780, 789 (3d Cir.1995) (quoting United Mine Workers v. Gibbs, 383 U.S. 715, 727 (1966)); see also De Asencio, 342 F.3d at 309. In such instances, “the state claims may be dismissed without prejudice and left for resolution to state tribunals.” Gibbs, 383 U.S. at 726.
The Third Circuit has made clear that in examining supplemental jurisdiction over state wage and hour claims brought alongside an FLSA collective action:
[a] court must examine the scope of the state and federal issues, the terms of proof required by each type of claim, the comprehensiveness of the remedies, and the ability to dismiss the state claims without prejudice to determine whether the state claim constitutes the real body of the case. This is necessarily a case-specific analysis. De Asencio, 342 F.3d at 312. This analysis may only be conducted after the parties have completed substantial discovery, the opt-in procedure is completed, and the plaintiffs move for class certification of their state claims. See id. at 309-312.
In this case, the opt-in procedure for Plaintiffs’ FLSA claim has not been completed and discovery is ongoing. Further, although Plaintiffs have moved for conditionally certify the state law class, this motion is still pending before the Court. Accordingly, it is premature for the Court to consider whether Plaintiffs’ state law claim substantially predominates over its FLSA claim such that the Court should decline supplemental jurisdiction. Plaintiffs’ argument on this issue is therefore not a proper basis for severance at this time.”
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