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Medina v. Happy’s Pizza Franchise, LLC
In an emerging trend in FLSA cases, this case was before the court on the plaintiffs’ motion for decertification. The motion followed the defendants’ motion to dismiss, pursuant to FRCP 19, for failure to join necessary parties, franchisees who owned and operated its franchises. The court granted plaintiffs’ motion, but noted that it was not considering the motion so much as a decertification motion in the collective action context, as a motion to subclass the existing opt-ins by geographic region (state).
Describing the relevant background the court explained:
Happy’s Pizza is a chain of franchise restaurants that sells pizza, chicken, seafood, and ribs in several states. Happy’s Pizza Franchise, LLC, sells the right to operate restaurants and use the Happy’s name and recipes to what it contends are independent franchisee corporations. Happy Asker is the sole member of Happy’s Pizza Franchise, LLC. Happy’s Pizza Chicago # 1, Inc. and Happy’s Pizza Chicago # 2, Inc. are two of the franchisee corporations. They operate restaurants in Chicago.
Plaintiffs filed suit in May 2010, alleging that Happy’s regularly directed them to work more than forty hours a week but did not pay them overtime wages in violation of the FLSA. All three plaintiffs alleged that they had worked at the Chicago Happy’s restaurants operated by the defendant corporations. Medina and Escobar also alleged that they had worked in Happy’s restaurants in Lansing and Ann Arbor, Michigan and that they had been subjected to the same practices there. Plaintiffs sought to include in the case similarly situated Happy’s employees who likewise had not been paid appropriate overtime wages.
The Court granted conditional certification and authorized the plaintiffs to send notice to Happy’s employees. At least 254 plaintiffs have opted into the lawsuit, although the parties dispute the exact number. Among the opt-in plaintiffs, a majority worked for Happy’s restaurants in either the Eastern or Western Districts of Michigan. Approximately fifty plaintiffs worked for Happy’s restaurants in Ohio, all in the Northern District of Ohio, and twenty-three of the opt-in plaintiffs worked for Happy’s restaurants in Illinois, all in the Northern District of Illinois. Only about twenty of the opt-in plaintiffs worked for Happy’s restaurants that are operated by the two Happy’s franchises named as defendants, Happy’s Pizza Chicago # 1 and Happy’s Pizza Chicago # 2. The remaining opt-in plaintiffs worked for forty-six other Happy’s restaurants. Defendants contend these restaurants are all operated by distinct franchisee corporations that are not defendants in this suit.
Following the defendants’ motion to dismiss, based on plaintiffs’ failure to join the franchisees whom various opt-ins worked for as defendants, the plaintiffs moved for what they called partial decertification, asking the court to transfer all of the opt-in plaintiffs who had not worked for Happy’s restaurants in this district to the appropriate districts in Michigan or Ohio.
Among other things, in opposition to the plaintiffs’ motion, the defendants argued: (1) partial decertification followed by transfer of the opt-in plaintiffs, was inappropriate, because decertification of a collective action results in dismissal of opt-in plaintiffs; (2) that the court lacked the authority to transfer the Ohio and Michigan plaintiff subclasses to district courts in those states; (3) that the court should have considered their motion to dismiss prior to addressing plaintiffs motion; and (4) that neither 1 nor the proposed 4 collective actions were appropriate because the plaintiffs were not similarly situated to one another, having worked for different franchisees.
The court rejected each of the defendants’ contentions, reasoning in part:
In this case, the use of subclasses, based on the judicial districts in which the plaintiffs worked, will similarly be a more efficient mechanism for adjudicating the plaintiffs’ claims. As defendants have argued, the plaintiffs from the different judicial districts worked at different restaurants, which suggests that a significant part of the evidence for each subclass would be distinct. Defendants also note that the Michigan and Ohio plaintiffs cannot bring supplemental claims under Illinois law, as the named plaintiffs have done, and that they may be in a position to assert supplemental state law claims based on Michigan and Ohio law, which the Illinois plaintiffs cannot bring. Dividing the plaintiffs into subclasses will allow those claims to be more effectively handled as well…
Because there is no basis to conclude at this point that the plaintiffs are not similarly situated, there is no reason to decertify the collective action and dismiss the opt-in plaintiffs. Instead, the Court divides the opt-in plaintiffs into subclasses and severs from this case the three subclasses containing the Michigan and Ohio opt-in plaintiffs.
Click Medina v. Happy’s Pizza Franchise, LLC to read the entire Memorandum Opinion and Order.
2 New Decisions Regarding Enforcement of Arbitration Agreements in Context of FLSA Claims Reach Opposite Results
Recent weeks have brought more opinions regarding the issue of whether specific arbitration agreements are enforceable. However, as two recent opinions show, these decisions continue to be fact-specific in virtually all instances, and judge and/or state-law specific in others. In the first case, Carey v. 24 Hour Fitness USA Inc., relying on Texas state law, the Fifth Circuit affirmed a lower court’s decision holding that an arbitration agreement allowing the employer to unilaterally change the terms lacked the necessary consideration to render the agreement enforceable. In a second case, LaVoice v. UBS Financial Services, Inc., a court within the Southern District of New York examined a different arbitration-related issue- the substantive unconscionability of a collective action waiver- concluding that compelling a potentially high value FLSA claim to arbitration on an individual basis does not conflict with the substantive law regarding the FLSA’s collective action provisions. Significantly, the court’s conclusion in this regard appears to conflict with another recent holding discussed here, in which another court within the same district held that collective action waivers are unenforceable per se, because they prevent employees from vindicating their substantive statutory rights under the FLSA.
Carey v. 24 Hour Fitness USA Inc.
Law360 aptly summarized this decision as follows:
“The Fifth Circuit on Wednesday allowed a proposed overtime class action against 24 Hour Fitness USA Inc. to go forward, finding an arbitration agreement at issue contained an ‘escape hatch’ for the fitness chain that made it unenforceable.
In a unanimous, published opinion, the appeals court upheld a Texas federal court’s ruling that the arbitration agreement in 24 Hour Fitness’ employee handbook was illusory because it allowed the company to retroactively modify or terminate the agreement.
Because 24 Hour Fitness reserved the right to unilaterally adjust the conditions of employment — including those which required employees to arbitrate claims on an individual basis — the appeals court found that the arbitration agreement was invalid from the outset.
‘If a 24 Hour Fitness employee sought to invoke arbitration with the company pursuant to the agreement, nothing would prevent 24 Hour Fitness from changing the agreement and making those changes applicable to that pending dispute if it determined that arbitration was no longer in its interest,’ the panel said.
Click Carey v. 24 Hour Fitness USA Inc. to read the entire Fifth Circuit Opinion.
LaVoice v. UBS Financial Services, Inc.
In LaVoice, the court held that an arbitration agreement, requiring individual arbitration was enforceable, despite plaintiff’s argument that such an scheme would deprive plaintiff of substantive statutory rights to proceed collectively under the FLSA. Discussing the issue, the court reasoned:
“…LaVoice also argues that the arbitration agreements between him and UBS are unenforceable because they would preclude him from exercising his statutory rights. To support this position, LaVoice likens the class waivers in the instant case with those that were found unenforceable in the Amex line of cases. LaVoice also draws comparison between his circumstances and those of the plaintiff in Sutherland v. Ernst & Young LLP, 768 F.Supp.2d 547 (S.D.N.Y.2011).
The enforceability of a class action waiver in an arbitration agreement must be considered on a case-by-case basis “on its own merits, governed with a healthy regard for the fact that the FAA is a congressional declaration of a liberal federal policy favoring arbitration agreements.” Amex II, 634 F.3d at 199. Turning to the class waiver at issue and LaVoice’s specific circumstances, this Court finds that the “practical effect of enforcement of the waiver” in the instant case would not “preclude” LaVoice from exercising his rights under the statutes. Id. at 196. The Court comes to its finding that LaVoice’s statutory rights will not be precluded by enforcement of the class waiver after reviewing his submissions regarding: his estimated damages claim, his estimated attorneys’ fees, his estimated expert fees, his disinclination to pursue his claims individually, his counsel’s disinclination to pursue the claims individually, and his likelihood of success at arbitration.
Although LaVoice and Defendants contest the value of LaVoice’s overtime claim, in reaching its decision, the Court accepts the figure cited in LaVoice’s own opposition papers of overtime claims between $127,000 to $132,000. Aff. Jeffrey G. Smith in Supp. of Opp’n. to Mot. to Compel Arbitration at ¶ 5. Assuming this self-reported value of claims, the Court finds that LaVoice’s circumstances differ drastically on their face from those of the plaintiffs in either the Amex line of cases or Sutherland. Plaintiffs in those cases could each only claim de minimus damages of less than $6000.
With respect to the estimated attorneys’ fees, the Court finds that, unlike the arbitration agreement at issue in Sutherland, the arbitration agreements at issue in the instant case would permit LaVoice to recover an award of attorneys’ fees. Since the agreements authorize the arbitrator(s) to “award whatever remedies would be available to the parties in a court of law” and awards of attorneys’ fees are mandatory for the prevailing party under the FLSA, the agreements themselves crate no impediment to LaVoice’s recovery of fees. See Ex. 6 to Decl. of Matthew Levitan at 20; Ex. 10 to Decl. of Matthew Levitan at 3; and 29 U.S.C. § 216(b) (“The court in such action shall … allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.”) The instant case is therefore distinguishable from Sutherland and its consideration of attorneys’ fees in determining whether plaintiff’s claims were unarbitrable. See also Banus v. Citigroup Global Mkts., Inc., No. 09–7128, 2010 WL 1643780, at *10 n. 61 (S.D.N.Y. Apr.23, 2010) (enforcing class action waiver in arbitration agreement where plaintiff’s estimated recovery was $45,675.36 and attorney’s fees would be “at least $100,000.”)
The court also evaluated and rejected plaintiff’s claim that expert costs to be incurred would be prohibitive in an individual claim, whereas spreading the cost over a collective group would be more palatable and rejected same, in the context of plaintiff’s proffered argument that his counsel would be disinclined to pursue his claims on an individual basis by themselves.
The court concluded, “[i]n light of the foregoing, the Court finds that LaVoice has not met his “burden of showing the likelihood of incurring” such “prohibitively expensive” costs such that the class waiver provisions in the instant action would preclude him from bringing his claims against Defendants in an individual or collective capacity. Amex II, 634 F.3d at 197 (citing Randolph, 531 U.S. at 92.)”
Click LaVoice v. UBS Financial Services, Inc. to read the entire Memorandum and Order compelling the case to arbitration on an individual basis.
As more and more cases are decided following recent United States Supreme Court jurisprudence on arbitrability and class waiver issues, it’s becoming more and more clear that the results are very fact-specific to each case. Hopefully, higher courts will begin to weigh in on some of the broader issues and give some clarity in the near future.
11th Cir.: Following Tender of Unpaid Wages and Liquidated Damages, an Employer Only Moots a Case if the Plaintiff Agrees to Dismissal, Absent Payment of Mandatory Fees and Costs
Dionne v. Floormasters Enterprises, Inc.
Following a controversial opinion that created more questions than it answered, the Eleventh Circuit reconsidered it’s prior Opinion in this case and in so doing largely restricted its holding to the unique facts presented in the case. Previously the Court had held that an employer, who denies liability for nonpayment for overtime work, need not pay attorney’s fees and costs pursuant to 29 U.S.C. § 216(b) of the Fair Labor Standards Act (“FLSA”) if the employer tenders the full amount of overtime pay claimed by an employee, and moves to dismiss on mootness grounds where the employee concedes that “the claim for overtime should be dismissed as moot. Although the prior Opinion seemed restricted to these unique facts where the employee conceded that the overtime claim should be dismissed (but attempted to reserve as to fees/costs), courts throughout the Eleventh have since expanded the holding to scenarios where the employee makes no such stipulation. Here, the Eleventh Circuit affirmed the prior decision, but clarified and limited its applicability.
Significantly, the Eleventh Circuit included the following footnote in its new Opinion:
“Our decision in this matter addresses a very narrow question: whether an employee who conceded that his claim should be dismissed before trial as moot, when the full amount of back pay was tendered, was a prevailing party entitled to statutory attorney’s fees under § 216(b). It should not be construed as authorizing the denial of attorney’s fees, requested by an employee, solely because an employer tendered the full amount of back pay owing to an employee, prior to the time a jury has returned its verdict, or the trial court has entered judgment on the merits of the claim.”
It remains to be seen exactly how the new Dionne Opinion will be applied by trial courts, but it does appear that much of the uncertainty created by the initial Opinion has now been resolved. To that end, it appears that a Plaintiff who has suffered a theft of his or her wages can now safely accept tender of such wages (and liquidated damages) in response to a lawsuit to collect same, without fear that the employer can avoid payment of mandatory fees and costs, as long as they do not agree that the tender moots the case.
Click Dionne v. Floormasters Enterprises, Inc. to read the entire Opinion on Petition for Rehearing.
M.D.Fla.: Defendant Does Not Moot FLSA Case By Tender of Unpaid Wages/Liquidated Damages, Absent Payment of Reasonable Attorneys Fees and Costs
Klinger v. Phil Mook Enterprises
Following the recent 11th Circuit decision Dionne v. Floormasters, the blogosphere has been abuzz with articles positing that the decision gave employers the green light to engage in wholesale wage theft and take a wait and see approach with regard to paying employees their wages. Several management-side attorneys have even gone as far as to suggest that a thieving employer could tender payment of wages/liquidated damages alone on the courthouse steps on the eve of a jury verdict and simply avoid paying mandatory fees and costs under 216(b). Not so, holds Judge James D. Whittemore, in the first case on the issue post-Dionne.
In Klinger v. Phil Mook Enterprises, the defendants-employers attempted just this strategy. After Klinger filed a lawsuit seeking the payment of her unpaid wages and liquidated damages, her former employers tendered what it deemed “full payment” of her unpaid wages and liquidated damages. However, it denied liability and refused to pay reasonable attorneys fees and costs. Instead, it filed a Motion to Dismiss, asserting that the case was now moot. The Court rejected the defendants’ contention that the case was moot absent payment of attorneys fees and costs and denied defendants’ motion.
Significantly, the Court noted:
“Defendants’ mere tender of payment does not provide Plaintiff with all the relief she seeks and would be entitled to as a prevailing party in this action, to wit: an enforceable judgment, attorney’s fees, and costs. Allowing Defendants to avoid responsibility for Plaintiff’s attorneys fees merely by tendering full payment after litigation has commenced would run counter to the FLSA’s goal of fully compensating the wronged employee. See Silva v. Miller, 307 Fed. App’x 349, 351 (11th Cir. 2009)(“FLSA requires judicial review of the reasonableness of counsel’s legal fees to assure… that counsel is compensated adquately…”. Further, Defendants’ tender effectively circumvents the requirements of Rule 68(a), Fed.R.Civ.P.”
As such, the Court denied the defendants’ motion.
Click Klinger v. Phil Mook Enterprises to read the entire Order.
DISCLAIMER: It is not this author’s assertion that the defendants in this particular case engaged in willful wage theft. Absent further research into the facts giving rise to the underlying claim, the author makes no representations whatsoever as to the specific facts of this case. Instead, this post is a commentary on the procedural history of the case once filed.
W.D.Mo.: Court Has Subject Matter Jurisdiction Over Claims That Could Be Brought By Members of Putative Class, But Could Not Be Brought By Named Plaintiffs
Nobles v. State Farm Mut. Auto Ins. Co.
This case concered off-the-clock claims that were brought as a so-called hybrid case, so named because the claims asserted were a hybrid of several state wage and hour laws, as well as under the FLSA. As discussed here, the plaintiffs, employees of one State Farm entity (State Farm Fire) sued both their employer, and another State Farm entity (State Farm Mutual), alleging identical wage and hour violations were committed by both against similarly situated employees. By Motion to Dismiss, State Farm Mutual challenged the named-plaintiffs’ standing to assert claims against it, asserting that the named plaintiffs lacked standing to do so, because it was not their employer. The court rejected these arguments, in granting plaintiffs’ motions for conditional and class certification.
Addressing this issue the court explained:
“In its pending Motion to Dismiss, State Farm Mutual contends that because Plaintiffs lack standing to assert joint employer status, the Court lacks subject matter jurisdiction, and therefore that claim should be dismissed under Federal Rule of Civil Procedure 12(b)(1). Alternatively, State Farm Mutual contends that Plaintiffs have failed to state a claim for joint employer status and therefore it should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6).
State Farm Mutual argues that “[o]nly State Farm Fire employees could possibly have standing to assert joint employment claims under Plaintiffs’ … theory, and there are no such plaintiffs in this case.” [Doc. # 111, at 13]. Neither Nobles nor Atchison are employees of State Farm Fire. However, standing issues “must be assessed with reference to the class as a whole, not simply with reference to the individual named plaintiffs.” Payton v. County of Kane, 308 F.3d 673, 680 (7th Cir.2002). Here, unnamed class members of the certified classes and collective include State Farm Fire employees who would have standing to bring claims under State Farm Mutual’s status as a joint employer with State Farm Fire. Thus, the Plaintiffs in this litigation have standing to assert joint employment status for members of the class.
Two recently decided cases in this district, Gilmor v. Preferred Credit Corp., No. 10–0189–CV–W–ODS, 2011 WL 111238 (W.D. Mo. Jan 13, 2011), and Wong v. Bann–Cor Mortgage, No. 10–1038–CV–W–FJG, 2011 WL 2314198 (W.D. Mo. June 9, 2011), also concluded that the court had subject matter jurisdiction over claims that could be brought by members of the certified class, but could not have been brought by any of the named plaintiffs. However, as a practical matter, it may be prudent to have a specific named Plaintiff whose named employer is State Farm Fire. See Gilmor, 2011 WL 111238, at *7. Therefore, Plaintiffs shall file an appropriate motion to designate such an employee prior to the close of discovery on the merits.”
Addressing (and rejecting) the defendants’ contention that plaintiffs had failed to sufficiently plead joint employment, the court reasoned:
“To determine whether an individual or entity is an employer, courts analyze the economic reality of the relationship between the parties.” Loyd v. Ace Logistics, LLC, No. 08–CV–00188–W–HFS, 2008 WL 5211022, at *3 (citation omitted). Although the Eighth Circuit has not yet stated a test to determine joint employer status, four factors are typically examined by courts to make this determination. They are: “whether the alleged employer: (1) had the power to hire and fire the plaintiff; (2) supervised and controlled plaintiff’s work schedules or conditions of employment; (3) determined the rate and method of payment; and (4) maintained plaintiff’s employment records.” Id. at * 3 (citing Schubert v. BethesdaHealth Grp., Inc., 319 F.Supp.2d 963, 971 (E.D.Mo.2004)).
State Farm Mutual asserts that Plaintiffs have failed to allege the elements of joint employer status or single enterprise status. This argument rests on the contention that because all of the named plaintiffs in the litigation are not employees of State Farm Fire, none of their allegations concern State Farm Mutual’s power to hire or fire any plaintiff who is an employee of State Farm Fire. [Doc. # 111, at 7].
The Court finds that this argument is a re-characterization of State Farm Mutual’s standing argument. As previously stated, Plaintiffs in this case include the certified classes. See Gilmor, 2011 WL 111238, at *6 (citing Sosna v. Iowa, 419 U.S. 393, 399 (1975)). Plaintiffs in this case include State Farm Fire employees who were subject to State Farm Mutual’s policies; and the Second Amended Complaint alleges that State Farm Mutual had the power to hire or fire them.
Second, State Farm Mutual asserts that even if the Court finds that Plaintiffs have alleged the elements of joint employment status, Plaintiffs’ factual allegations are “broad, unsupported statements” that do not provide the required factual support for Plaintiffs’ joint employment claim. [Doc. # 111, at 9]. The Court disagrees with State Farm Mutual’s characterization of Plaintiffs’ allegations. The Plaintiffs allege in their Second Amended Complaint that (1) the human resources department in State Farm Mutual retains the power to promote, retain, and discipline State Farm Fire employees, (2) State Farm Fire employees’ work and compensation are subject to State Farm Mutual’s written pay and timekeeping policy, and (3) State Farm Mutual’s and State Farm Fire’s timekeeping records are housed together, which the Court liberally construes to imply that State Farm Mutual maintains State Farm Fire’s timekeeping records.
For these reasons, the Court finds that Plaintiffs have sufficiently stated a joint employer claim.”
Click Nobles v. State Farm Mutual Automobile Insurance Company to read the entire Order.
3d Cir.: Defendant May Not “Pick Off” a Putative Collective Action by Tendering Full Relief to Named-Plaintiff at Outset
Symczyk v. Genesis Healthcare Corp.
In an issue that has now been addressed by several circuits in recent years, the Third Circuit was presented with the question of whether a defendant-employer in an FLSA case may “pick off” a putative collective action (prior to conditional certification), where it tenders full relief to the named-Plaintiff. Consistent with other circuits to have taken up this issue, the Third Circuit held that a defendant may not do so and that such an offer of judgment (OJ) does not moot a putative collective action. As such, the court reversed the decision below, dismissing the case on mootness grounds.
In dismissing the case initially, the trial court below reasoned, “[Plaintiff] does not contend that other individuals have joined her collective action. Thus, this case, like each of the district court cases cited by Defendants, which concluded that a Rule 68 offer of judgment mooted the underlying FLSA collective action, involves a single named plaintiff. In addition, Symczyk does not contest Defendants’ assertion that the 68 offer of judgment fully satisfied her claims….”
After discussing the application of full tender relief offers in the Rule 23 context, the court concluded that the same reasoning precludes picking off the named-plaintiff in a representative action brought pursuant to 216(b). Instead, the court held that a motion for conditional certification in an FLSA case made within a reasonable time “relates back” to the time of the filing of the Complaint and thus such a representative action may proceed, notwithstanding to purportedly “full tender” offer to the named-plaintiff. The court explained:
“Although the opt-in mechanism transforms the manner in which a named plaintiff acquires a personal stake in representing the interests of others, it does not present a compelling justification for limiting the relation back doctrine to the Rule 23 setting. The considerations that caution against allowing a defendant’s use of Rule 68 to impede the advancement of a representative action are equally weighty in either context. Rule 23 permits plaintiffs “to pool claims which would be uneconomical to litigate individually.” Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 809, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985). Similarly, § 216(b) affords plaintiffs “the advantage of lower individual costs to vindicate rights by the pooling of resources.” Hoffmann–La Roche, 493 U.S. at 170. Rule 23 promotes “efficiency and economy of litigation.” Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 349, 103 S.Ct. 2392, 76 L.Ed.2d 628 (1983). Similarly, “Congress’ purpose in authorizing § 216(b) class actions was to avoid multiple lawsuits where numerous employees have allegedly been harmed by a claimed violation or violations of the FLSA by a particular employer.” Prickett v. DeKalb Cnty., 349 F.3d 1294, 1297 (11th Cir.2003).
When Rule 68 morphs into a tool for the strategic curtailment of representative actions, it facilitates an outcome antithetical to the purposes behind § 216(b). Symczyk’s claim-like that of the plaintiff in Weiss—was “acutely susceptible to mootness” while the action was in its early stages and the court had yet to determine whether to facilitate notice to prospective plaintiffs. See Weiss, 385 F.3d at 347 (internal quotation marks omitted). When the certification process has yet to unfold, application of the relation back doctrine prevents defendants from using Rule 68 to “undercut the viability” of either’ type of representative action. See id. at 344.
Additionally, the relation back doctrine helps safeguard against the erosion of FLSA claims by operation of the Act’s statute of limitations. To qualify for relief under the FLSA, a party plaintiff must “commence” his cause of action before the statute of limitations applying to his individual claim has lapsed. Sperling v. Hoffmann–La Roche, Inc., 24 F.3d 463, 469 (3d Cir.1994). For a named plaintiff, the action commences on the date the complaint is filed. 29 U.S.C. § 256(a). For an opt-in plaintiff, however, the action commences only upon filing of a written consent. Id. § 256(b). This represents a departure from Rule 23, in which the filing of a complaint tolls the statute of limitations “as to all asserted members of the class” even if the putative class member is not cognizant of the suit’s existence. See Crown, Cork & Seal Co. 462 U.S. at 350 (internal quotation marks omitted). Protracted disputes over the propriety of dismissal in light of Rule 68 offers may deprive potential opt-ins whose claims are in jeopardy of expiring of the opportunity to toll the limitations period—and preserve their entitlements to recovery—by filing consents within the prescribed window.
In sum, we believe the relation back doctrine helps ensure the use of Rule 68 does not prevent a collective action from playing out according to the directives of § 216(b) and the procedures authorized by the Supreme Court in Hoffmann–La Roche and further refined by courts applying this statute. Depriving the parties and the court of a reasonable opportunity to deliberate on the merits of collective action “conditional certification” frustrates the objectives served by § 216(b). Cf. Sandoz, 553 F.3d at 921 (explaining “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”). Absent undue delay, when an FLSA plaintiff moves for “certification” of a collective action, the appropriate course—particularly when a defendant makes a Rule 68 offer to the plaintiff that would have the possible effect of mooting the claim for collective relief asserted under § 216(b)—is for the district court to relate the motion back to the filing of the initial complaint.
Upon remand, should Symczyk move for “conditional certification,” the court’ shall consider whether such motion was made without undue delay, and, if it so finds, shall relate the motion back to December 4, 2009the date on which Symczyk filed her initial complaint. If (1) Symczyk may yet timely seek “conditional certification” of her collective action, (2) the court permits the case to move forward as a collective action (by virtue of Symczyk’s satisfaction of the “modest factual showing” standard), and (3) at least one other similarly situated employee opts in, then defendants’ Rule 68 offer of judgment would no longer fully satisfy the claims of everyone in the collective action, and the proffered rationale behind dismissing the complaint on jurisdictional grounds would no longer be applicable. If, however, the court finds Symczyk’s motion to certify would be untimely, or otherwise denies the motion on its merits, then defendants’ Rule 68 offer to Symczyk—in full satisfaction of her individual claim—would moot the action.
For the foregoing reasons, we will reverse the judgment of the District Court and remand for proceedings consistent with this opinion.”
Thus, while ultimately the OJ might have the effect of mooting the case, it could not do so prior to a reasonable opportunity to plaintiff of seeking conditional certification of same.
Click Symczyk v. Genesis Healthcare Corp. to read the entire decision.
D.Neb.: Defendant Limited To Full Discovery For 2 Plaintiffs and Representative Discovery From 15% of Class Where Almost 300 Opt-ins
Morales v. Farmland Foods, Inc.
This matter was before the court on the plaintiffs’ Motion for Protective Order, seeking protection from responding to discovery requests including interrogatories, requests for production, and requests for admission served on nearly all of the almost 300 FLSA opt-in plaintiffs.
Granting Plaintiffs’ Motion, the court reasoned:
“As a starting point, “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense-including the existence, description, nature, custody, condition, and location of any documents …” Fed.R.Civ.P. 26(b)(1). However, “[t]he District Court does have discretion to limit the scope of discovery.” Credit Lyonnais v. SGC Int’l, Inc ., 160 F.3d 428, 431 (8th Cir.1998). To determine if a matter is discoverable, the court must first evaluate whether the sought discovery is relevant to a claim or defense. Accordingly, although limited, relevant evidence includes “any matter that could bear on, or that reasonably could lead to other matter that bears on” the claims or defenses of any party. Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978). “Some threshold showing of relevance must be made before parties are required to open wide the doors of discovery and to produce a variety of information which does not reasonably bear upon the issues in the case.” Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th Cir.1992). “Determinations of relevance in discovery rulings are left to the sound discretion of the trial court and will not be reversed absent an abuse of discretion.” Hayden v. Bracy, 744 F.2d 1338, 1342 (8th Cir.1984). Once the requesting party meets the threshold relevance burden, generally “[a]ll discovery requests are a burden on the party who must respond thereto. Unless the task of producing or answering is unusual, undue or extraordinary, the general rule requires the entity answering or producing the documents to bear that burden.” Continental Ill. Nat’l Bank & Trust Co. of Chicago v. Caton, 136 F.R.D. 682, 684-85 (D.Kan.1991) (citation omitted).
The defendant has met its burden of showing the discovery sought is relevant to the claims and defenses in this matter, in a broad sense. Similarly, the plaintiffs have met their burden to show the plaintiffs are subject to unusual, undue or extraordinary burden by having to respond on behalf of each separate opt-in class member. Allowing the defendant to obtain the discovery sought from each opt-in class member is inappropriate in this FLSA lawsuit. See Reich v. Homier Distr. Co., 362 F.Supp.2d 1009, 1015 (N.D.Ind .2005) (“The individual discovery required … would destroy ‘the economy of scale envisioned by the FLSA collective action procedure.’ ”). The defendant seeks to obtain information about the differences between each opt-in class member, however the defendant fails to explain how the representative sampling method suggested by the plaintiffs is deficient for the purpose of establishing (or refuting) similarity between the opt-in class members. Furthermore, the extensive nature of the discovery sought outweighs the benefit. See Geer v. Challenge Fin. Investors Corp., No. 05-1109, 2007 WL 1341774 (D.Kan. May 4, 2007) (finding “the burden and expense the requested discovery (depositions of [each of the 272] opt-in plaintiff[s] ) would impose on Plaintiffs clearly outweighs the likely benefit of such discovery”); see also Fast v. Applebee’s Int’l, Inc., No. 06-4146, 2008 WL 5432288 (W.D.Mo. Dec. 31, 2008) (denying motion to compel interrogatory responses from each opt-in plaintiff). The plaintiffs’ generous proposal of limiting discovery to a random sample of fifteen percent of the opt-in class members is reasonable. See Nerland v. Caribou Coffee Co., Inc., 564 F.Supp.2d 1010, 1016 (D.Minn.2007) (noting the court had “authorized individualized discovery for eighty-five randomly selected opt-in plaintiffs through completion of questionnaires and a limited number of depositions”). The court will not determine the content of the discovery requests as it appears the parties will be able to resolve the issue without court intervention. Upon consideration,
IT IS ORDERED:
The plaintiffs’ Motion for Protective Order (Filing No. 158) is granted as follows.
1. The defendant may take full discovery of the two named plaintiffs.
2. The defendant may serve discovery on a random sample of fifteen percent of the FLSA opt-in class members.
3. No opt-in class member will be allowed to testify at trial unless first responding to the discovery discussed in paragraph 2 above.”
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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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.