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11th Cir.: Absent Judgment in Plaintiff’s Favor, Offer Did Not Moot FLSA Claims; Mandatory Attorney’s Fees Due
Wolff v Royal American Management, Inc.
Following an order approving the settlement between the parties and an award of attorneys’ fees and costs to the plaintiff, as the prevailing party, the defendant appealed arguing that their tender of damages to plaintiff in exchange for a general release mooted the claims. Rejecting this assertion, the Eleventh Circuit affirmed the order below and held that an FLSA defendant cannot moot a claim for unpaid wages, absent an offer of judgment in favor of the plaintiff.
Summarizing the relevant facts and procedural history, the Eleventh Circuit explained:
The relevant background is this. After filing a complaint alleging FLSA violations, Wolff calculated that RAM had failed to pay her $1800 in overtime wages. Liquidated damages under the FLSA in the same amount brought her total itemized damages claim to $3600. In December 2011, RAM tendered $3600 to plaintiff through her attorney, and moved to dismiss the complaint; Wolff’s counsel returned the check. In December 2012, RAM offered to settle the case for $5000, but Wolff’s counsel claimed that he never submitted the offer to Wolff because it was never put into writing. Nevertheless, in February 2012, Wolff received a 1099 form reflecting a payment of $3600, and called RAM to determine the reason for the 1099. RAM informed Wolff for the first time of the prior tender to her counsel, and Wolff said she wanted to settle the case. Wolff then met with RAM, signed a general release and took the $3600 check. Thereafter, the parties moved the court to determine whether the payment and release rendered the action moot, stripping Wolff of attorneys’ fees on the ground that there was no judgment in the case to indicate that Wolff was the prevailing party. The district court ultimately approved the settlement as reasonable, even though the parties reached the settlement without the participation of Wolff’s counsel. The district court further found that the settlement had not mooted the lawsuit, and later awarded Wolff’s counsel $61,810.44 in fees and costs. This timely appeal follows.
Discussing recent FLSA jurisprudence regarding mandatory fees and the ability (or lack thereof) of a defendant to moot a claim for same, the Court explained:
Under the FLSA,
Any employer who violates the provisions of section 206 or section 207 of this title shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages …. The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.
29 U.S.C. § 216(b). We have said that because the FLSA seeks to protect employees from “inequalities in bargaining power between employers and employees,” Congress had made its provisions mandatory. Lynn’s Food Stores, Inc. v. U.S. Dep’t. of Labor, 679 F.2d 1350, 1352 (11th Cir.1982). Thus, “FLSA rights cannot be abridged by contract or otherwise waived because this would nullify the purposes of the statute and thwart the legislative policies it was designed to effectuate.” Id. (quotation omitted). We’ve also held that “[t]he FLSA plainly requires that the plaintiff receive a judgment in his favor to be entitled to attorney’s fees and costs.” Dionne v. Floormasters Enters., Inc., 667 F.3d 1199, 1205 (11th Cir.2012).
The Supreme Court, considering the fee-shifting provisions in “[n]umerous federal statutes [that] allow courts to award attorney’s fees and costs to the ‘prevailing party,’ ” has recognized that a plaintiff is a prevailing party only when she obtains either (1) a judgment on the merits, or (2) a settlement agreement “enforced through a consent decree.” Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t. of Health & Human Res., 532 U.S. 598, 603–604 (2001), superseded by statute on other grounds, Open Government Act of 2007, Pub.L. No. 110–175, 121 Stat. 2524. The Buckhannon Court reasoned that a prevailing party needs a judgment or consent decree to prove that there has been an “alteration in the legal relationship of the parties.” Id. at 605. Thus, in the absence of a judgment on the merits, to be a prevailing party, the FLSA plaintiff needs a stipulated or consent judgment or its “functional equivalent” from the district court evincing the court’s determination that the settlement “is a fair and reasonable res[o]lution of a bona fide dispute over FLSA provisions.” Lynn’s Food Stores, 679 F.2d at 1355;
American Disability Ass’n, Inc. v. Chmielarz, 289 F.3d 1315, 1317, 1320 (11th Cir.2002) (holding that the district court’s approval of the terms of a settlement coupled with its explicit retention of jurisdiction are the functional equivalent of a consent decree, which renders the settlement a “judicially sanctioned change in the legal relationship of the parties” for purposes of the “prevailing party” determination necessary for attorneys’ fees).
In Dionne, we held that an employer, who denied liability for nonpayment for overtime work, did not need to pay attorneys’ fees and costs under the FLSA if the employer tendered the full amount of overtime pay claimed by an employee, and the employee conceded that “the claim for overtime should be dismissed as moot.” 667 F.3d at 1200. In other words, we concluded that Dionne was not a prevailing party under the FLSA because in granting the defendant’s motion to dismiss for lack of subject matter jurisdiction, the district court did not award a judgment to the plaintiff. Notably, however, we expressly limited our holding, emphasizing on rehearing that:
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.
Id. at 1206 n. 5 (emphasis added).
Thereafter, in Zinni, we held that a settlement offer for the full amount of statutory damages requested under the Fair Debt Collection Practices Act (“FDCPA”), without an accompanying offer of judgment, did not offer full relief to an FDCPA plaintiff and therefore did not render the plaintiff’s claim moot. 692 F.3d at 1167–68. Zinni involved three cases that were consolidated on appeal: in each case, the debt collector offered to settle for $1,001, an amount exceeding by $1 the maximum statutory damages available to an individual plaintiff under the FDCPA, as well as an unspecified amount of attorneys’ fees and costs. Id. at 1164–66. None of the plaintiffs accepted the settlement offers. Id. The district court granted the defendants’ motions to dismiss for lack of jurisdiction because the offers left the plaintiffs with “no remaining stake” in the litigation. Id. at 1164.
On appeal, we reversed, holding that “the failure of [the debt collectors] to offer judgment prevented the mooting of [the plaintiffs’] FDCPA claims.” Id. at 1168. We said that a settlement offer for the “full relief requested” means “the full amount of damages plus a judgment.” Id. at 1166–67. The court explained that judgment is important to a plaintiff because it is enforceable by the district court, whereas a settlement offer without an offer of judgment is “a mere promise to pay” which, if broken, required the plaintiff to sue for breach of contract in state court. Id. at 1167–68 (quoting from and relying on Simmons v. United Mortg. & Loan Inv., LLC, 634 F.3d 754, 766 (4th Cir.2011) (FLSA overtime case)). We also noted that “even if the [settlement] check had been tendered [to the plaintiff], that fact would not change our ultimate conclusion.” Id. at 1164 n. 5. In fact, we said that even if the plaintiff accepted the offer, without an offer of judgment, full relief had not been offered. Id. at 1167 n. 8 (“The issue of whether the offer was accepted or rejected, while argued by the parties, is not relevant to our analysis because Appellees never offered full relief.”).
Applying these principles to the case at bar, the Eleventh Circuit concluded that absent an offer of judgment in plaintiff’s favor, the defendant could not and did not moot the plaintiff’s claims, not withstanding the plaintiff’s acceptance of the monies tendered:
Here, RAM’s settlement offer to Wolff did not include an offer of judgment in Wolff’s favor and against RAM. Rather, Wolff signed a release providing that she “acknowledge[d] receipt of [the $3600] check as full and complete satisfaction of any monies owed to [Wolff] from Royal American.” As a result, under Zinni—which expressly relied on a FLSA case from the Fourth Circuit—we are compelled to conclude that RAM’s offer did not constitute full relief of Wolff’s FLSA claim. We recognize that in Zinni, the plaintiff did not accept the settlement check, but here, Wolff accepted the check and signed a release. However, Zinni made clear that so long as a settlement agreement does not include an offer of judgment against a defendant (and it did not in this case), whether a plaintiff accepted the settlement makes no difference. Thus, RAM’s settlement with Wolff did not moot her FLSA claim, and she was entitled to seek attorneys’ fees and costs from RAM.
Rejecting the defendant’s contention that the Supreme Court’s recent decision in Genesis required a different result, the court stated:
RAM argues that the Supreme Court’s recent decision in Genesis Healthcare Corp. v. Symczyk, 133 S.Ct. 1523 (2013), requires a different result. There, the Supreme Court held that a “collective action” brought under the FLSA—wherein an employee brings an action to recover damages for FLSA violations on behalf of himself and other “similarly situated” employees—became non justiciable when the lone plaintiff’s individual claim became moot. Id. at 1526. However, Genesis involved a settlement offer that included an offer of judgment-unlike the offer here, and unlike the one in Zinni. See id. at 1527 (“When petitioners answered the complaint, they simultaneously served upon respondent an offer of judgment under Federal Rule of Civil Procedure 68.”). What’s more, Genesis explicitly said that it was “assum[ing], without deciding, that [an employer’s] Rule 68 offer mooted [an employee’s] individual claim.” See id. at 1529; see also id. n. 4 (“[W]e do not resolve the question whether a Rule 68 offer that fully satisfies the plaintiff’s claims is sufficient by itself to moot the action.”). Accordingly, Genesis is not directly on point, and expressly does not answer the question before us.
Affirming the district court’s award of attorneys fees to plaintiff, the Court reasoned:
We also find unavailing RAM’s claim that the district court abused its discretion in awarding the fees in this case. As for RAM’s claim that Wolff was not a prevailing party for purposes of obtaining FLSA attorneys’ fees, we are unpersuaded. As we’ve said, to be entitled to fees under the FLSA, a plaintiff must “receive a judgment in [her] favor.” Dionne, 667 F.3d at 1205. Here, the district court plainly found that the settlement—which RAM admits included the full amount of back pay as well as an equal amount for liquidated damages—was reasonable, and by doing so, the district court entered a judgment in Wolff’s favor. See Lynn’s Food Stores, 679 F.2d at 1355;
Chmielarz, 289 F.3d at 1317, 1320. RAM provides us with no reason to depart from Lynn, which directs a district court to enter a judgment after “scrutinizing” for fairness a proposed settlement entered into between the employee and the employer in an action brought for back wages under the FLSA. Id. at 1353. Further, unlike in Thomas v. State of La., 534 F.2d 613, 615 (5th Cir.1976), it is unclear in this case whether Wolff received “everything to which [she was] entitled under the FLSA at the time the agreement [wa]s reached,” since the district court found that the parties did not intend the settlement agreement to preclude attorneys’ fees under the FLSA.
As for RAM’s claim that it was denied due process when the district court entered the judgment, the record shows that RAM was given an opportunity to respond to Wolff’s motions on this matter, and that RAM expressly made arguments regarding its liability in its papers before the district court. Nor has RAM shown, based on the record of this case—including the record of attorney and party conduct on both sides—that the district court abused its considerable discretion in granting attorneys’ fees using the lodestar analysis. This is especially true given that in cases like this one where attorney fees are allowed to the prevailing party by federal statute, the compensable fees include time spent litigating both the entitlement to and amount of fees incurred; i.e. “fees for litigating fees.” Thompson v. Pharmacy Corp. of Am., Inc., 334 F.3d 1242, 1245 (11th Cir.2003) (statutory fees for civil rights litigants includes “fees for litigating fees”). Accordingly, we affirm.
Click Wolff v Royal American Management, Inc. to read the entire unpublished Per Curiam Opinion.
N.D.Ala.: Arbitration Agreements Obtained By Defendant in Required Meetings After Putative Collective Commenced Unenforceable
Billingsley v. Citi Trends, Inc.
This case was before the court following the court’s order prohibiting enforcement of arbitration agreements that the defendant obtained from opt-ins (prior to the time they opted in to the case). The court previously had ruled that such arbitration agreements were unenforceable, because of the manner in which they were obtained from current employees, following an evidentiary hearing regarding same. This case is particularly important because it addresses the common situation in which a defendant-employer, at least arguably, crosses the line from attempting to mount a defense to a potential collective/class action, and begins to improperly exercise its unequal power over its current employees/putative class members. Denying the defendant’s motion for reconsideration, the court expanded on the reasoning of its prior order.
As the court explained:
This Fair Labor Standards Act case presents the court with a dilemma: enforce arbitration agreements against Defendant Citi Trends Store Managers, who are potential opt-in Plaintiffs in this collective action that were obtained during the conditional certification stage of this case and gut the collective action mechanism Congress provided for the protection of employees or refuse to enforce the arbitration agreements and run afoul of the federal policy favoring their enforcement. Because of the particular events surrounding the roll-out of the arbitration agreement in this case, as specifically discussed below, the court finds it cannot approve employer conduct like that involved in this case specifically targeting only potential class members during a critical juncture in this case with the definite goal of undercutting the Congressional intent behind the collective action process. The court will DENY the Defendant’s motion to compel arbitration and preserve the viability of the collective action mechanism.
Summarizing the parties’ respective contentions, the court explained:
Defendant Citi Trends, Inc. argues that this court’s ruling at the January 2013 hearing that it could not seek to compel arbitration against those opt-in Plaintiffs who signed mandatory arbitration agreements was an error of law. The Plaintiffs argue that the court’s ruling was appropriate and necessary to correct Citi Trends’s wrongful action—intimidating its employees into waiving their rights to join this lawsuit by signing mandatory arbitration agreements. On April 19, 2013, the court granted the motion to reconsider its ruling and set an evidentiary hearing to hear evidence surrounding presentment of the arbitration agreements to determine if any coercion, duress, or intimidation occurred.
While the court had previously denied the plaintiff’s motion for protective order and/or to strike declarations obtained from current employees, that was not the end of its inquiry as to whether the arbitration agreements should be enforced. Rather, the court held an evidentiary hearing because the
high standard had not been met on the parties’ submission alone, and thus, the court decided it needed to hold a hearing to determine if any coercion, duress, intimidation, or other abusive conduct occurred at the time SMs were required to sign the Agreement. The question of enforcement of or invalidation of the Agreement invokes a different standard than did the motion to strike or to enter a protective order, which was the requested relief before the court previously.
The court summarized the evidence received at the hearing as follows:
At the evidentiary hearing on May 14 and 15, 2013, the court heard testimony from opt-in Plaintiffs Roilisa Prevo and Katina Alfred, former Citi Trends SMs; Ivy Council, Executive Vice President of Human Resources for Citi Trends; Rashad Luckett, Human Resources Coordinator for Citi Trends; Vanessa Davis, Director of Human Resources for Citi Trends; and LaKesha Wilkins, an “independent third party witness” hired by Citi Trends to sit in SM meetings with Ms. Davis. The court will briefly summarize that testimony here but will also reference it as needed in the discussion below.
Citi Trends devised and implemented its new ADR policy in the late spring and early summer of 2012—shortly after it was served with the complaint on February 27, 2012 (doc. 6), and after the court on May 16, 2012, set a scheduling conference for May 31, 2012. (Doc. 17). On May 31, 2012, this court issued a Scheduling Order requiring the Plaintiffs to file their motion for conditional certification of the class on or before July 31, 2012 with briefing to be completed by September 10, 2012. (Doc. 18). Just a couple weeks after the Order, in mid-June, Citi Trends began the process of rolling out its new Alternative Dispute Resolution (“ADR”) plan, including the mandatory Agreement. Ms. Davis testified that as of mid-June she had virtually completed the new employee handbook she was working on, which did not include an ADR policy; she learned for the first time in mid-June that the updated handbook would include the new ADR policy. Citi Trends, under the direction of Ms. Council, sent Ms. Davis, Mr. Luckett, and other HR representatives to have two-on-one private meetings with SMs across the country as early as June 30, 2012 to roll out the new ADR policy. The HR representatives met with all SMs individually throughout the summer.
District Managers (“DMs”) told the SMs that they must attend the meetings that concerned the issuance of a new employee handbook. DMs were only asked to sign the Agreement if the HR Representatives happened to see them at the SM meetings, but Citi Trends distributed the Agreement to DMs, other corporate employees, and store associates at a later date.
When the SMs arrived at the meetings, they were greeted by an HR Representative and another individual, who Ms. Prevo claimed was never introduced to her and whom Ms. Alfred identified as another Citi Trends corporate employee. The HR Representatives gave the SMs four documents: the SM Disclosure, the Agreement, the SM Declaration, and a photocopied version of a new employee handbook. The two-on-one private meetings took place in small, back rooms in Citi Trends retail stores, the same places where interrogations or investigations of employees occurred. The HR Representatives who met with the SMs played an advisory role in the employment decisions of Citi Trends employees, and both Ms. Prevo and Ms. Alfred testified that they believed the HR representatives conducting the meetings had authority to make employment decisions about them, such as hiring and firing.
Ms. Alfred and Ms. Prevo testified that they signed the documents but came away from those meetings having felt intimidated by the HR Representatives and pressured to sign the Agreement or lose their jobs. The SMs were not given copies of the documents they signed at the meeting or at anytime afterward, even if they specifically requested copies.
After finding the agreements at issue to be both procedurally and substantively unconscionable, the court weighed the related public policy concerns as well:
The biggest public policy concern that the court has to consider about actions of Citi Trends, however, is the effect of the Defendant’s efforts on the purpose of an FLSA collective action. The court’s decision on this issue is bigger than this one case, and that concern is what has plagued the court about this situation from the first mention of the Agreement. The purposes of the FLSA and its collective action procedure factor into the court’s decision on this motion.
Congress passed the FLSA during the Great Depression to protect workers from overbearing practices of employers with greatly unequal bargaining power over them. See Roland Elec. Co. v. Walling, 326 U.S. 657, 668 n. 5 (1946) ( “The Bill was introduced May 24, 1937, [and] … accompanied by a Presidential message by Franklin D. Roosevelt …. ‘to protect the fundamental interests of free labor and a free people we propose that only goods which have been produced under conditions which meet the minimum standards of free labor shall be admitted to interstate commerce. Goods produced under conditions which do not meet rudimentary standards of decency should be contraband and ought not to be allowed to pollute the channels of interstate trade.’ “) (quoting 81 Cong. Rec. 4960, 4961). To further that purpose, § 216(b) of the FLSA authorizes an employee to file suit for and on behalf of himself and others similarly situated. See 29 U.S.C. § 216(b). Those employees who wish to join the lawsuit must give written consent or opt-in to the lawsuit, but they only know that they can do so once court-approved notice has been sent to them. See id…
In this case, the court finds that such goals are defeated if the court approves actions taken by defendants, such as those taken by Citi Trends in this case, that are designed and used to prevent employees from vindicating their rights in an FLSA collective action. The court wishes to make clear that it is not addressing a pre-lawsuit or pre-employment arbitration agreement between an employer and employee that would preclude participation in a collective action. Instead, this ruling only addresses the Agreement in this case that was presented to the specifically-targeted potential class of employees in the specific manner that gave those potential opt-in Plaintiffs no meaningful choice or known opportunity to refuse to sign without the fear of termination in a setting that was ripe for and calculated to produce perceived intimidation or coercion and when its very purpose and effect was to preclude participation in this lawsuit.
For these reasons, the court finds that the Agreement at issue in this case reeks of both procedural and substantive unconscionability in the context in which it was presented and obtained. The Agreement cannot and will not be enforced against Ms. Prevo, Ms. Alfred, or Ms. Cunningham, and the court will DENY Citi Trends’s motion to compel arbitration against them. In making this decision, the court notes that it found the testimony presented by the Defendant, specifically that from Ms. Council and Ms. Davis, particularly enlightening. In addition to the language of the documents themselves, the court finds that the concurrent timing of the ADR roll-out and the Plaintiffs’ preparation of the motion for conditional certification and court approved notice, and the manner in which the Agreement was presented weigh in favor of invalidating the Agreement as it relates to the SMs who were presented the Agreement during its initial roll-out in the summer of 2012.
The court truly believes it would be a derogation of the court’s responsibility if it were to approve employer conduct like that in this case that specifically undercuts the Congressional intent behind creating the FLSA collective action process for aggrieved employees, and the court does not take such action lightly.
In light of this reasoning, the court denied the defendant’s motion for reconsideration and held that the arbitration agreements, obtained from current employees were unenforceable.
Click Billingsley v. Citi Trends, Inc. to read the entire Memorandum Opinion.
A review of the docket shows that the defendant has filed an appeal to the Eleventh Circuit. Thus, this issue will likely get further review. Stay tuned for further developments….
U.S.S.C.: Where Named Plaintiff Acknowledged That Unaccepted OJ Mooted Her Claim, Collective Action Mooted and May Not Proceed
Genesis Healthcare Corp. v. Symczyk
What effect, if any, does an unaccepted “full relief” offer of judgment have on the ability of a named plaintiff to continue with his or her putative collective action claims under the FLSA? This was the question FLSA practitioners had eagerly awaited the answer of from the Supreme Court, ever since the Court accepted certiorti of the Symczyk v. Genesis Healthcare Corp. However, in a decision of almost no real world value, the Court elected to dodge this question and instead answer its own hypothetical question/issue, so limited in scope, that Justice Kagan (in her dissent) points out, it has absolutely no value in practical application. For this reason, at least one practitioner surveyed regarding the opinion stated, “I don’t care about this decision at all. Really pretty meaningless.” In order to understand why such a seemingly important opinion actually means so little we must examine exactly what the Court decided and on what facts it made its decision.
As stated by the Court, its actual holding was that:
a collective action brought by single employee on behalf of herself and all similarly situated employees for employer’s alleged violation of the Fair Labor Standards Act (FLSA) was no longer justiciable when, as conceded by plaintiff-employee, her individual claim became moot as result of offer of judgment by employer in amount sufficient to make her whole.
Describing the relevant facts the Court explained:
In 2009, respondent, who was formerly employed by petitioners as a registered nurse at Pennypack Center in Philadelphia, Pennsylvania, filed a complaint on behalf of herself and “all other persons similarly situated.” App. 115–116. Respondent alleged that petitioners violated the FLSA by automatically deducting 30 minutes of time worked per shift for meal breaks for certain employees, even when the employees performed compensable work during those breaks. Respondent, who remained the sole plaintiff throughout these proceedings, sought statutory damages for the alleged violations.
When petitioners answered the complaint, they simultaneously served upon respondent an offer of judgment under Federal Rule of Civil Procedure 68. The offer included $7,500 for alleged unpaid wages, in addition to “such reasonable attorneys’ fees, costs, and expenses … as the Court may determine.” Id., at 77. Petitioners stipulated that if respondent did not accept the offer within 10 days after service, the offer would be deemed withdrawn.
After respondent failed to respond in the allotted time period, petitioners filed a motion to dismiss for lack of subject-matter jurisdiction. Petitioners argued that because they offered respondent complete relief on her individual damages claim, she no longer possessed a personal stake in the outcome of the suit, rendering the action moot. Respondent objected, arguing that petitioners were inappropriately attempting to “pick off” the named plaintiff before the collective-action process could unfold. Id., at 91.
The District Court found that it was undisputed that no other individuals had joined respondent’s suit and that the Rule 68 offer of judgment fully satisfied her individual claim. It concluded that petitioners’ Rule 68 offer of judgment mooted respondent’s suit, which it dismissed for lack of subject-matter jurisdiction.
Although discussed in detail by Justice Kagan in her dissent, the Court’s majority opinion, penned by Justice Thomas ignored the fact that the plaintiff actually received no money, no judgment and no settlement as a result of the unaccepted offer of judgment. Nonetheless, the Court reasoned, because the plaintiff had ostensibly stipulated at the district court that her claim was mooted by the unaccepted offer of judgment, and she had failed to cross-appeal to the Supreme Court (a decision which was entirely in her favor), the Court refused to entertain the plaintiff’s argument that the unaccepted OJ could not have mooted the case in the first place. Instead, charging ahead, under the false pretense that the unaccepted OJ had in fact mooted the plaintiff’s individual claim, the Court went on to hold that under such (imagined) circumstances, a defendant could “pick off” an FLSA collective action, where the plaintiff has not sought conditional certification of a collective action at the time he or she receives an offer of judgment that he or she acknowledges moots his or her individual claim.
While the Court’s majority went to great length to distinguish the collective action mechanism of 216(b) from the Rule 23 class action mechanism on which the reasoning of Circuit Courts have relied in reaching the opposite conclusion, the Court failed to acknowledge it was deciding an issue that was really not even before it, and in practicality unlikely to ever appear before any court ever again.
In a stinging must-read dissent Justice Kagan pointed this out and ridiculed the conservative majority for essentially wasting everyone’s time with a meaningless opinion. The Court ultimately failed to answer the real issue of interest- what effect does an unaccepted “full relief” offer of judgment have on the ability of a named-plaintiff to pursue a collective action. As Justice Kagan noted, the text of Rule 68 dictates it should have no effect at all. Pointing out that the plaintiff had actually received no recovery in the case, because the offer of judgment at issue was not accepted, Kagan went reasoned, the majority’s opinion had virtually no application outside of the contrived facts on which it was based. Kagan began:
The Court today resolves an imaginary question, based on a mistake the courts below made about this case and others like it. The issue here, the majority tells us, is whether a ” ‘ collective action’ ” brought under the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. § 201 et seq., “is justiciable when the lone plaintiff’s individual claim becomes moot.” Ante, at ––––. Embedded within that question is a crucial premise: that the individual claim has become moot, as the lower courts held and the majority assumes without deciding. But what if that premise is bogus? What if the plaintiff’s individual claim here never became moot? And what if, in addition, no similar claim for damages will ever become moot? In that event, the majority’s decision—founded as it is on an unfounded assumption—would have no real-world meaning or application. The decision would turn out to be the most one-off of one-offs, explaining only what (the majority thinks) should happen to a proposed collective FLSA action when something that in fact never happens to an individual FLSA claim is errantly thought to have done so. That is the case here, for reasons I’ll describe. Feel free to relegate the majority’s decision to the furthest reaches of your mind: The situation it addresses should never again arise.
Although this was a case watched most by FLSA practitioners for obvious reasons, it is a case which further highlights the absurd pro-big business mentality employed by today’s conservative majority on the court. In fact, as an aside Kagan took another parting shot at the similarly limited opinion just issued by the court in the Comcast case. (In footnote 2 to her dissent, she notes, “[f]or similarly questionable deployment of this Court’s adjudicatory authority, see Comcast Corp. v. Behrend, 569 U.S. ––––, ––––, 133 S.Ct. 1426, 1437, ––– L.Ed.2d –––– (2013) (joint opinion of GINSBURG and BREYER, JJ.) (observing in dissent that “[t]he Court’s ruling is good for this day and case only”).”).
In sum, this decision will leave practitioners scratching their heads. It is unclear what, if any, actual effect it will have on future cases. For this reason, one has to wonder- why did the Court take up the case in the first place. It would seem that absent a stipulation by a plaintiff that his or her case is mooted by a Rule 68 offer of judgment (which in fact is an impossibility) or an acceptance of such an offer of judgment, a defendant still may not moot a putative collective action with an offer of judgment.
Click Genesis Healthcare Corp. v. Symczyk to read the Court’s entire opinion and Justice Kagan’s dissent.
C.D.Cal.: Motion for Corrective Action Granted Where Defendant Provided Insufficient Info to Putative Class Members When Obtaining Releases
Gonzalez v. Preferred Freezer Services LBF, LLC
This case was before the court on the plaintiff’s motion for corrective action, under Federal Rules of Civil Procedure 23, on grounds that the defendant had improperly contacted potential plaintiffs to this putative class action in efforts ‘to obtain releases from its employees concerning the claims pled by [Gonzalez] in this action.’ The plaintiff sought an order requiring the defendant to release the names and contact information of individuals from whom the defendant had attempted to extract releases. The court granted the plaintiff’s motion, applying Rule 23’s protections to an FLSA case.
The court described the relevant facts/procedural history as follows:
Gonzalez brought a collective action on behalf of himself and other of Preferred Freezer’s employees for unpaid overtime pay under California law and the Fair Labor Standards Act, 29 U.S.C. § 216(b). (Mot.2.) In August 2012, Preferred Freezer unilaterally drafted a “Release Agreement” that it provided to its employees, who are potential plaintiffs to this putative class action. (Mot.6–7.) The Agreement explained that in exchange for a settlement payment “in full satisfaction of all claims that Employee has, had or could have had arising out of the lawsuit or in any way related thereto,” the employee waived any and all claims arising out of a “former employee[‘s]” wage-and-hour lawsuit or in any way related to the lawsuit. (Mot.7.) But the Release Agreement did not state when this unnamed lawsuit was filed, the name of the former employee, the names of the employee’s attorneys, the attorneys’ contact information, or the period of time covered by the release. (Id.)
The court explained that the plaintiff learned of the defendant’s actions that were the subject of the motion, when a putative class member who had been approached by the defendant contacted plaintiff’s counsel. After discussing the general concept that settlements are favored, the court explained how the manner in which the defendant obtained the general releases here was misleading:
The waiver Preferred Freezer tendered its employees was misleading in many ways. It did not include any information regarding this class action, except that a former employee had brought a lawsuit against Preferred Freezer. (Sinay Decl. Exs. A, B.) The waiver did not attach the Complaint, any information on when the case was filed, nor any information regarding the essence of the case. (Mot.7.) Preferred Freezer also did not include Gonzalez’s counsel’s contact information. (See Gamez Decl. Ex. 1.) Even when Preferred Freezer’s agents spoke to the potential plaintiffs, the agents never provided them with the name of the case. (Gamez Decl. ¶ 6.) Furthermore, Preferred Freezer’s counsel never contacted Gonzalez’s counsel to confer over possible communication to Preferred Freezer’s employees regarding the potential settlement. (Mot.6.) Thus, the waiver misleadingly failed to provide the potential plaintiffs with adequate notice of this case in order to make an informed decision regarding waiver of their rights.
While the facts surrounding the manner in which the defendant had obtained the releases were uncontested, the defendant argued that corrective action was inappropriate and that: (1) defendant’s first amendment right to communicate with the putative class should not be hindered; (2) putative class members of a 216(b) collective actions are not entitled to the same protections as those in a Rule 23 class action; (3) the DOL supervised the settlements at issue; and (4) they did provide enough information to the settling class members, so as to alleviate concerns that the releases were obtained based on misleading information.
Noting that the plaintiff was not seeking to invalidate the releases at this juncture, and was not seeking to stop the defendant from communicating with putative class members, the court granted the plaintiff’s motion. The court granted the plaintiff’s motion as follows:
In response to Preferred Freezer’s misleading contact with putative class members in this action, Gonzalez asks that the Court orders Preferred Freezer to provide names, addresses, and telephone numbers for each and every person contacted by Preferred Freezer regarding the waiver. (Mot.25.) Gonzalez also requests that any communication to potential plaintiffs should include all the important information relating to Gonzalez’s case. (Mot.24.) For the reasons discussed above, the Court finds this request reasonable and therefore GRANTS Gonzalez’s motion.
Preferred Freezer is therefore ORDERED to provide Gonzalez with the contact information of all of those prospective plaintiffs in this case with whom Preferred Freezer has had contact regarding settlement. Furthermore, any communication that either party has with putative plaintiffs must include the following information: (1) the name of this case; (2) the case number; (3) a summary of the basis of Gonzalez’s claims; (4) the name of Gonzalez’s attorneys and their contact information; and (5) a statement concerning the effect of executing Preferred Freezer’s released documents will have on its employees’ ability to participate in this lawsuit.
Click Gonzalez v. Preferred Freezer Services LBF, LLC to read the entire Order Granting Plaintiff’s Motion for an Order for Corrective Action.
D.Md.: Compensatory Damages for Emotional Distress Are Available Under §§ 215 and 216(b) for Retaliation Claims
Randolph v. ADT Sec. Services, Inc.
This case was before the court on several pretrial motions of the parties. As discussed here, among the issues briefed before the court was whether compensatory damages are available to a plaintiff-employee pursuing a claim of retaliation under the FLSA. The court answered this question in the affirmative, noting the issue was one of first impression within the Fourth Circuit.
Restating the parties’ respective positions, the court explained:
ADT maintains that, as a matter of law, Plaintiffs are precluded from seeking emotional distress damages because such damages are unavailable under “the very similar damages provision of the ADEA.” (ECF No. 101, at 18). Plaintiffs disagree, pointing to several circuit court opinions upholding such awards. On this issue, Plaintiffs have the better end of the argument.
The court noted that the issue presented was one of first impression in the Fourth Circuit and then examined case law from other circuit and district level courts:
Neither the Fourth Circuit nor any district court within this circuit has previously determined whether a plaintiff may recover compensatory damages from emotional distress in an FLSA action. Four circuit courts of appeal—the Sixth, Seventh, Eighth, and Ninth Circuits—have, however, either directly or indirectly addressed the issue, and all have permitted the recovery of emotional distress damages. Moore v. Freeman, 355 F.3d 558, 563–64 (6th Cir.2004) (explaining that “consensus on the issue of compensatory damages for mental and emotional distress [in FLSA cases] seems to be developing”); Broadus v. O.K. Indus., Inc., 238 F.3d 990, 992 (8th Cir.2001) (upholding a compensatory award that may have included damages for emotional distress); Lambert v. Ackerley, 180 F.3d 997, 1011 (9th Cir.1999) (affirming an award of emotional distress damages in an FLSA action); Avitia v. Metro. Club of Chi., Inc., 49 F.3d 1219, 1226–30 (7th Cir.1995) (reducing an award for emotional distress damages after finding the award excessive, but noting that such damages are available under the FLSA (citing Travis, 921 F.2d at 111–12)).
The compensatory nature of the remedies in § 216(b) supports the outcome in these cases. “The [FLSA’s] statutory scheme contemplates compensation in full for any retaliation employees suffer from reporting grievances.” Moore, 355 F.3d at 563 (citing Snapp, 208 F.3d at 934; Lanza, 97 F.Supp.2d at 740); Republic Franklin Ins. Co. v. Albemarle Cnty. Sch. Bd., 670 F.3d 563, 568 (4th Cir.2012) (citing Snapp and Lanza for the proposition that the relief provided in § 216(b) “is compensatory in nature”). The text of § 216(b) expressly provides for “such legal or equitable relief as may be appropriate to effectuate” this compensatory purpose, employing the broad phrase “without limitation” to indicate that the enumerated remedies within that section are not exhaustive. 29 U.S.C. § 216(b). “[L]ike the forms of relief mentioned [therein], damages for mental anguish are intended to compensate the injured party for harm suffered.” Moore, 355 F.3d at 564.
Certainly, an argument could be made that the availability of liquidated damages [under § 216(b) ] would be sufficient to fully compensate a plaintiff with proof of actual economic damages but only minor, subjective mental anguish occasioned by an employer’s violation of the [FLSA]. However, in a case involving only nominal economic losses but proved retaliation consisting of concerted, directed harassment, resulting in grave emotional distress, such nominal economic damages or the available doubling of those damages would be insufficient to make the plaintiff whole. Damages for mental anguish would be the necessary compensatory legal relief “appropriate to effectuate the purposes of [the anti-retaliation provision].” Bogacki v. Buccaneers Ltd. P’ship, 370 F.Supp.2d 1201, 1203 (M.D.Fla.2005) (quoting 29 U.S.C. § 216(b)); cf. Snapp, 208 F.3d at 937 (reasoning that “district courts may have to exercise some creativity in awarding relief in retaliation cases” beyond those forms set forth in the statutory text).
The court then rejected the contrary holdings of courts that had held ADEA cases to be persuasive based upon the fact that the ADEA was patterned after the FLSA, noting that such reasoning:
fails to consider that the relief authorized under both statutes must be determined ‘not in isolation, but in conjunction with the other provisions of the Act[s], the policies they further, and the enforcement framework[s] they envision.’ Dean, 559 F.2d at 1038.” The court further distinguished the ADEA legislative framework by pointing out that “[t]he ADEA includes an administrative conciliation process that is critical to its enforcement framework… [and] [l]ooking to this process, circuit courts have repeatedly held that emotional distress damages are unavailable in ADEA actions because they would impede mediation and conciliation by discouraging early resolution of ADEA claims.
Thus, the court concluded:
Because “full compensation is the evident purpose and paramount policy” in an FLSA retaliation action, “the more reasoned approach” would permit a plaintiff who makes a proper showing to recover damages for emotional distress. Id.; Moore, 355 F.3d at 563–64. Neither party here has addressed the strength or weakness of Plaintiffs’ evidence of alleged emotional distress. Until the parties do so at trial, the court cannot conclude—as a matter of law—”that damages for mental anguish should be disallowed.” Id. at 1205–06. Plaintiffs will be permitted to seek emotional distress damages through a jury trial, and their motion on this issue will, therefore, be granted.
In light of the continuing disagreement of courts regarding this issue, this might be one to watch for further appellate level developments in the future.
Click Randolph v. ADT Sec. Services, Inc. to read the entire Memorandum Opinion.
N.D.Ill.: Plaintiffs’ Motion for “Partial Decertification,” Seeking Subclasses by State Granted
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.
