Authored by Alex Passantino

‘Twas the week before Christmas, 2-0-1-5
When the poetry elves on the blog came alive.
Crafting their rhymes with a purpose so clear:
Presenting the wage-hour gems of the year.

In January, for new regs in this year our breath bated.
Then for six painful months, we speculated and waited.
And just as we geared up to celebrate Independence,
Out came a proposal that will create more defendants.

With a salary level that for 10 years has been flat,
They looked at New York’s and said “higher than that.”
More than double the old; and then they got clever …
The proposed sal’ry level will increase for forever.

Anticipated changes to duties caused quite a fuss
When DOL said “If you’ve got some ideas, just tell us.”
Of the Department’s proposal, employers were understandably wary,
So we wrote down some ideas on how to make it less scary.

Nearly 300 thousand comments they have to review,
It will be late into next year before they are through.

Next up on the list of your wage-hour joy,
Are the efforts to change what it means to employ:
ContractorsJoint employment. Fissured industry.
Interns. The “third way” and gig economy.

Economic realityRight to control.
They’re integral to your business? Now you’re in a deep hole.
So many angles, it can drive you berserk.
As agencies and courts figure out what is “work.”

And if divergent decisions bring you a sense of elation,
Then please focus attention on class certification.
Approvals, denials, and some decerts, too.
No matter the side, there’s a case for you.

But as summer approached, there arose quite a stir,
A case that’d explain what the class cert rules were.
A Supreme explanation, o my-o, o me-o
We’d learn about class via Bouaphakeo.

They’ve argued, but there’s no decision, not yet,
And a limited ruling on records might be all that we get.
But the cases keep coming. Their numbers broke the charts.
Whether giant class actions or cases broken in parts.

And the response to those filings? The employers’ retort?
A wide range of ways to get them out of court.

Some cases get mooted. Some cases do not.
At Genesis’s open question, SCOTUS might take a shot.
Does an offer of judgment that’s not been accepted
Mean the plaintiff cannot proceed with his class as expected?

Increasingly used as a litigation life saver
Arbitration agreements with a class action waiver;
And when asked if state laws could class waivers prevent, yo,
The Supremes laid the smack-down to dear Sacramento.

With all of these options, it comes as a surprise then,
That one resolution keeps on getting the Heisman.
For reasons that many cannot understand,
To settle wage claims courts think they must hold your hand.

That’s our year in review, we whipped you right through it.
Next year? The new regs and a mad dash to review it.
But before 2015 joins the past’s ranks,
You keep on reading our blog, and for that we give thanks!

THANKS TO ALL OF OUR READERS. BEST WISHES FOR A HAPPY, HEALTHY, AND PROSPEROUS NEW YEAR!

Authored by Michael W. Kopp

In a case that is certain to provide an important sequel to the Wal-Mart Stores, Inc. v. Dukes and Comcast Corp. v. Behrend decisions, the Supreme Court will hear argument next week on Tyson Foods Inc. v. Bouaphakeo, to address (1) the use of statistical averaging in class actions to prove liability and damages, and (2) whether courts may certify a class that includes individuals with no injury.

Tyson Foods is important because it likely will set further limits on use of statistical proof in Rule 23(b)(3) cases, and address for the first time the standard for certification of collective actions under the Fair Labor Standards Act.

The road to the Supremes. Tyson Foods reached the Supreme Court by way of a divided Eighth Circuit opinion affirming a $5.8 million verdict on an off-the-clock class claim. Plaintiffs claimed that Tyson’s Iowa meat processing facility had not paid over 3,000 plant workers for the time they spent changing in and out of various types of work gear and walking to and from the production line. The district court found there was a common question as to whether the challenged time was compensable, and certified the case as a collective action as to the FLSA claim, and as Rule 23 class action as to the state law wage and hour claims.

Tyson unsuccessfully attempted to decertify the class, and argued neither liability nor damages were “capable of classwide resolution … in one stroke,” as required by Dukes. Tyson pointed to variations in the type and amount of equipment worn by employees in the hundreds of classifications at issue, and highlighted the disparities in the routines and amount of time employees spent on these tasks. Unpersuaded, the district court permitted a nine-day jury trial on the class claims, where plaintiffs used an expert’s model to calculate the “average” time employees spent on the donning, doffing and walking activities at issue. These average activity times were then extrapolated to the class members. Although plaintiffs’ expert conceded that the actual times for these activities varied considerably – and more than 200 class members suffered no injury at all – the jury nonetheless awarded a lump sum verdict, to be divided among all class members.

Divided approaches to Dukes. The divided Eighth Circuit panel’s majority opinion and dissent highlight the inconsistent approaches lower courts have taken in interpreting Dukes. The panel majority found that there was a common question concerning whether the activities were compensable under the FLSA and state law, and that plaintiffs had “prove[n] liability for the class as a whole, using employee time records to establish individual damages.”

The dissent took the majority to task for ignoring the considerable differences in donning and doffing times, employee routes to their work stations, the amount of time Tyson allotted for such activities, shortened time shifts, “and a myriad of other relevant factors.” The dissent highlighted the fact that a rigorous inquiry into Rule 23’s requirements may overlap with the merits, and that in a wage-hour case the merits may be intertwined with damages questions. Using statistical models to gloss over differences pertinent to both liability and damages violated Dukes’ requirement that the action generate “common answers apt to drive the resolution of the litigation” and its prohibition against “trial by formula.”

For example, an employee who clocks 38 hours and alleges another 1.5 hours of off-the-clock work does not have a claim under federal law so long as he is paid no less than minimum wage for all of his work time taking into account his uncompensated time. If he claims a total of 2.5 hours of off-the-clock work, however, he would allege an FLSA violation that, if proven, would result in an hour of pay at the appropriate overtime rate. In such cases (and commonly for wage-hour claims), determining liability and damages is an inherently intertwined inquiry requiring the same evidence. For this reason, the common issues involved in determining liability would predominate over any individualized damages issues under Rule 23(b)(3), and bifurcation of a liability-only class would be inappropriate.

Why This Case Matters. First, the Supreme Court will have the opportunity to clarify the extent of Dukes’ limitations on the use of statistical techniques to establish damages and liability under Rule 23. Second, the case has particular significance in the wage and hour context, because it provides the opportunity for the Supreme Court to weigh in for the first time as to the standards that apply to certification of FLSA collective actions. Third, the case provides the opportunity for the court to address Tyson Foods’ constitutional argument that an award of monetary damages to uninjured class members is impermissible.

Stay Tuned … This case is set for oral argument on Tuesday, November 10, so be on the lookout for a follow up blog post here when a decision is reached.

Authored by Geoffrey Westbrook

After more than four years of litigation, Citibank hauled in a significant victory last week against putative class and collective actions in Ruiz v. Citibank. Personal bankers from California, New York, Washington D.C. and other states alleged that Citibank withheld overtime pay under a nationwide scheme encouraging off-the-clock work. Although finding “systematic violations at the branch level,” a New York federal district court held that the plaintiffs failed to produce sufficient evidence to connect those violations to an uniform, overarching company practice. The court denied the plaintiffs’ bid for class certification of state law claims and decertified a collective action under the Fair Labor Standards Act.

Ruiz is part of a growing trend among trial courts emphasizing the need for evidence of an unlawful company policy in nationwide class and collective actions. Modern class actions must satisfy the “rigorous” Rule 23 certification standard articulated by the U.S. Supreme Court in Wal-Mart Stores, Inc. v. Dukes. Collective actions, however, are assessed under the FLSA’s “similarly situated” test. As explained below, the court in Ruiz blurred the lines between these two distinct standards, requiring evidence of an illegal company policy or uniform nationwide managerial conduct supporting the plaintiffs’ claims in both types of actions. Without such evidence, even with nationwide violations at the local level, under Ruiz both must fail.

Background

Digna Ruiz, a New York resident, filed a complaint seeking to represent a nationwide collective action under the FLSA and a class action under state labor law. He alleged that Citibank failed to compensate its personal bankers for overtime hours by setting high production targets and strictly limiting overtime work. A month later, residents of Washington, D.C., Illinois, Virginia and California filed nearly identical collective and class actions under the FLSA and laws of their respective states. These matters were consolidated in the U.S. District Court for the Southern District of New York.

After limited discovery, the court granted conditional certification of the FLSA collective action. More than 400 personal bankers opted in, and discovery proceeded in anticipation of the plaintiffs’ motion for class certification and Citibank’s motion to decertify the collective action.

Denial of State Law Class Certification Based on Rule 23 and Dukes

Class certification was denied based almost entirely on the “commonality” requirement of Rule 23. To certify a nationwide class, among other requirements, there must be some evidence of a common policy or management practice that is subject to testing at the class-wide level. The court likened the case to Dukes, where written corporate policies were lawful and managers were lawfully given significant discretion over pay and promotions. In the absence of an illegal policy, Dukes requires evidence showing an unlawful corporate practice connecting Citibank’s more than 900 branch offices across the country. Evidence of a local or even regional policy will not likely be sufficient to certify a nationwide class.

The plaintiffs failed to show Citibank’s lawful policies uniformly translated themselves into unlawful managerial behavior across the country. Anecdotal evidence demonstrated conflicting experiences among bankers nationwide in which some personal bankers felt pressured to work off the clock, while others had no issue meeting performance goals. There was significant evidence that certain managers pressured bankers not to report overtime hours, but at those and other branches many were properly paid overtime, indicating at best an inconsistent practice. Knowledge of overtime violations rarely percolated above the district level, and when it did, immediate efforts were made by area management to rectify the violations. Thus, the plaintiffs could not establish a common management approach — on a nationwide basis — in exercising their considerable discretion and resulting in unpaid overtime through Citibank branches as a whole. Evidence of even systematic violations at the branch level (and in some cases reaching up to senior management) was not sufficient to certify a nationwide class.

Decertification of FLSA Collective Action

In decertifying the FLSA collective action, the court followed a rising trend analogizing the “commonality” requirement of Rule 23 to the “similarly situated” test for collective action ultimate certification. In this vein, the Ruiz court granted Citibank’s decertification motion. It relied on the same evidence underlying its class action certification denial, holding that “Plaintiffs have advanced the ball very little in demonstrating a common plan or scheme.” Secondhand statements regarding an alleged companywide policy to force unpaid overtime by branch managers, in the face of Citibank’s lawful overtime and performance policies, was not sufficient to show personal bankers across the country were “similarly situated.” All told, evidence of individual overtime violations at the district level will not alone carry the day for purposes of class and collective action certification.

Conclusion

Ruiz represents a growing movement of the courts seeking to bridge the analytical differences between class and collective actions. The result of this trend is a greater uniformity in wage and hour decisions based on parallel theories. Logically, a putative class of plaintiffs failing to meet Rule 23 “commonality” requirements should not be permitted to proceed with a collective action either. We will continue to track district courts throughout the country in hopes that this common sense line of cases increases in popularity.

Leading employment law firm Seyfarth Shaw has updated its definitive guide to the litigation of wage and hour lawsuits. Co-authored by three Seyfarth partners and edited by the chair of the firm’s national wage-hour practice, Wage & Hour Collective and Class Litigation is an essential resource for practitioners. The unique treatise provides insight into litigation strategy through all phases of wage & hour lawsuits, and is now updated with additional significant cases through 2014.

Among many other topics, the treatise’s authors examine how employers in multiple industries are targeted for wage-hour lawsuits and provides substantive procedural and practical considerations that determine the outcome of such actions in today’s courts. Principally designed to assist employment litigators and in-house counsel, the treatise also proves useful to senior management seeking to fend off wage-hour actions before they strike.

Authors Noah Finkel, Brett Bartlett and Andrew Paley, who practice in the firm’s Chicago, Atlanta and Los Angeles offices respectively, as well as Boston-based Richard Alfred, who is Chair of Seyfarth’s National Wage & Hour Litigation Practice Group, are each experienced wage and hour litigators who have handled numerous collective and class actions asserting violations under both state and federal law.

“The growth of wage and hour decisions at the appellate level has continued, and will have a significant impact on pending and future litigation,” said Alfred. “Our updated edition arrives at the perfect time for corporations looking for the most current insight and strategy on wage & hour litigation. New have touched on pleading requirements, the enforcement of class waivers in arbitration agreements, exemptions, and use of statistical evidence and sampling in class trials, among others. This handbook delves into these new developments and offers practical litigation advice to all employers navigating this complex space.”

Wage & Hour Collective and Class Litigation covers the complex rules surrounding all types of wage and hour lawsuits. These include claims under the Fair Labor Standards Act, claims under state wage and hour laws, or hybrid cases involving both, as well as special issues involving government contractors. It provides readers guidance around: how to respond to a wage and hour complaint; what to consider when deciding whether to remove a case to federal court; how to assess the particular merits of a claim; whether to settle; how to oppose plaintiffs’ motion to facilitate notice for conditional certification; what kinds of affirmative defenses are best; and how to tilt the odds in favor of the defense.

In its fourth update to the treatise, Wage & Hour Collective and Class Litigation features discussions of recent decisions from appellate and trial courts and their effect on wage and hour litigation, emphasizing the following developments:

  • Recent federal appellate court decisions, including the Third Circuit’s decision in Davis v. Abington Memorial Hospital, analyzing what is necessary to plead a plausible claim for relief to avoid a motion to dismiss in wage and hour cases.
  • The California Supreme Court’s recent decision in Duran v. U.S. Bank.  This case establishes important principles in the class action setting on the use of statistical evidence and sampling, on employers’ due process rights to present evidence on their affirmative defenses and the use of trial plans to determine if class actions are manageable.  Although controlling law only in California, Duran establishes principles that may be helpful to employers litigating class actions in any forum.
  • The Second Circuit decision in Pippins v. KPMG on the application of the professional exemption to entry-level accountants.
  • The California Supreme Court’s decision in Iskanian v. CLS Transportation Los Angeles, LLC, which overruled its prior decision in Gentry v. Superior Court.  The Iskanian ruling provides California employers with far more flexibility to utilize arbitration agreements in the employment setting and avoid class action litigation.
  • The Third Circuit’s decision in Thompson v. Real Estate Mortgage Network  applying a more lax federal common law standard to determine successor liability under the FLSA.

The 2015 update to Wage & Hour Collective and Class Litigation is published by American Lawyer Media’s Law Journal Press.  It is available online at www.lawcatalog.com.

Authored by Noah Finkel

California has long been regarded as the epicenter of wage and hour litigation.  It is where the most cases are filed. It has the most onerous wage and hour laws. And those laws contain the most draconian remedies.  Because of this, California wage and hour claims tend to carry higher settlement value than FLSA claims or wage and hour claims from other states.

We all know that intuitively.  But sometimes it takes a stark statistic to drive the point home.

Take, for example, the case of Gonzalez v. Universal Alloy Corp. in the U.S. District Court for the Central District of California.  There, plaintiff factory workers claimed that they worked off the clock, missed meal and rest breaks, and did not have bonuses included in the regular rate of pay in the calculation of overtime pay.  Last week, the plaintiffs filed a motion for approval of a settlement of up to $4.75 million that would include two sub-classes: 380 FLSA collective action members (who presumably worked for the company outside California), and 390 California settlement class members (who worked for the company inside California).

According to the plaintiff’s motion, the average FLSA collective action member will receive $840.  But the average California class member will receive $7,476.

Why does a California employee receive nearly nine times what an employee outside California receives?  Each settlement is different and involves various considerations, and we can only speculate about the thought process of both parties.  The factors could include:

  • California provides for daily overtime.  The FLSA does not.
  • California’s overtime law contains a three-year limitations period that, under the Unfair Competition Law, is extended to four years.  The FLSA’s non-willful limitations period is two years.
  • California law defines compensable “hours worked” in a broader manner than the FLSA.
  • California requires meal and rest breaks.  An employer who fails to provide a required meal or rest break is liable to the employee for an hour of pay.  The FLSA contains no equivalent.
  • California provides for up to 30 days of pay for late final payments to separated employees.  If an employer miscalculates that pay by a penny, it may be liable to the employee for 30 days of full pay.  The FLSA contains no equivalent.
  • California law also provides for penalties for wage statements that are inaccurate in certain circumstances.  Again, if an employer miscalculates that pay by a penny (or doesn’t include all required elements on a wage statement), it may be liable to an employee for wage statement penalties.  The FLSA contains no equivalent.

Anyone need more reason to ensure compliance with California’s wage and hour peculiarities?  To get a start, please subscribe to Seyfarth Shaw’s California Peculiarities blog.

Co-authored by Coby M. Turner and Laura J. Maechtlen

California is bringing Comcast home—last week, California employers were the beneficiary of some down-home wisdom coming out of San Francisco. 

Giving some sage advice to the wage and hour community, Judge Alsup in Lou et. al. v. Ma Laboratories, Inc., denied conditional and class certification to a broad class of Ma Labs workers under the FLSA and Rule 23.  The Court looked at last year’s Supreme Court decision in Comcast Corp. v. Behrend (see our analysis here) and asked what seems like it should be a simple question:  can I try all of these plaintiffs’ claims in one case?  The answer:  where plaintiffs have not presented common proof of liability or a method of determining classwide damages, Comcast means no certification. 

In its ruling, the Court considered whether certification was suitable in a case alleging, among other things, unpaid off-the-clock work by Ma Labs’ employees.  Plaintiffs presented expert testimony of Dr. Richard Drogin—a repeat player for plaintiffs seeking class certification—who proposed individualized calculations for each class member based on an analysis of time clock, telephone, and email records of a small number of putative class members.  The parties also presented declarations with conflicting testimony as to whether work was performed off the clock, whether overtime was paid or approved, and what employees were told with respect to payment of overtime.

The Court held that the “collective variations” in declarations submitted by the parties “cause plaintiffs’ off-the-clock claims to necessarily dissolve into mini-trials,” making certification inappropriate.  The Court also found that Dr. Drogin’s proposed calculations were not a proper method of determining classwide damages because there was no indication his sampling was actual proof of off-the-clock work or that it was representative of the proposed class. 

A few additional gems stem from this ruling:

  1. Proposing one broad class, when there are different policies in place during the class period (here, employees’ exempt status changed and new time clock interfaces were implemented) means plaintiffs are unlikely to meet a required showing of predominance and commonality for Rule 23; and
  2. Plaintiffs’ counsel cannot concurrently serve as class counsel in more than one class case against the same defendant.  Don’t forget:  adequacy of counsel is always an element of class certification.

In the end, while it denied plaintiffs’ motion, the Court left open the possibility of eventual first step FLSA collective certification with new counsel.  But, the Court cautioned that since it had already determined classwide proof made it impossible for a Rule 23 class to proceed, there will likely be “similarities in problems of classwide proof at step two” of FLSA certification. 

Employers can learn from this decision the importance of gathering declarations early in the process of defending a class or collective action—showing differing experiences amongst putative class members has the potential to defeat Rule 23 certification and get the court thinking early on about the impropriety of eventual FLSA collective certification.

We also hope that the Court’s guidance will serve as a caution to plaintiffs’ counsel that simply making broad allegations of unpaid work is not enough to garner class certification.  Classwide proof of liability, as well as a method of determining damages on a classwide basis that is tied to the theory of liability must be proven, not speculated at with expert statistical analysis or anecdotal experiences.

Ninth Circuit.jpgBy Noah Finkel and Richard Alfred

We have long argued that the best path for defeating a hybrid state law wage and hour claim is not through a motion to dismiss but by making a strong lack of superiority argument to defeat class certification.

It is therefore not surprising to us that the Ninth Circuit joined several other Circuits last week in finding that the opt-in requirement of an FLSA collective action does not mandate dismissal of a state law opt-out class action.  In Busk v. Integrity Staffing Solutions, Inc., [HERE] a Nevada district court had dismissed a state law overtime class action under Fed. R. Civ. P. 12(b)(6) on the basis of the conflicting mechanisms of the FLSA’s opt-in and Rule 23(b)(3)’s opt-out requirements. But the Ninth Circuit reversed, reasoning that nothing in the FLSA’s text or legislative history suggests that a hybrid state opt-out claim must be dismissed or that permitting such a hybrid state class action would thwart Congressional intent.

Some plaintiffs’ attorneys and even some courts may now believe that hybrid wage-hour lawsuits — those that are brought under both the FLSA’s collective action mechanism and under state wage-hour laws pursuant to Rule 23 — may proceed together so long as plaintiffs are able to meet their burden of meeting the Rule 23(a) and 23(b)(3) factors. 

Of course, adding a class claim to an FLSA collective action dramatically increases the exposure for defendants and the settlement value of the case.  This is because FLSA opt-in rates are typically between 10% and 20% of the potential plaintiffs, while the opt-out rates of class members are negligible. The effect of this is that collective members who choose not to opt-in may nevertheless find themselves included in a class in the very same lawsuit unless they take affirmative steps to write and file an opt-out notice.   

Employers defending hybrid FLSA collective and state law class actions have in the past tried to eliminate the state opt-out class claim at the early stages of litigation through a motion to dismiss or to strike, usually arguing that collective and class actions are “inherently incompatible.” Those efforts have met some success, but the Ninth Circuit’s decision in Busk, the fifth Circuit Court to rule similarly, increases the headwinds for the success of such an approach.  This by no means portends clear sailing for plaintiffs asserting hybrid state law class claims.

Enter Rule 23(b)(3)’s superiority requirement.  Under this requirement, a plaintiff must prove that a state class action is “superior to other available methods of the fair and efficient adjudication of the controversy.” The FLSA’s opt-in procedure is just such an “other available method.”  How can a plaintiff argue that including class members by default is superior to allowing those same individuals the free choice to join or not to join the same lawsuit by opting-in?

We view this rhetorically.  In the vast majority of cases it will be very difficult for a plaintiff to demonstrate that an opt-out class action asserting overtime or minimum wage violations is superior to the FLSA’s straight-forward collective action mechanism, especially with the low burden of proof that most courts currently apply in ruling on a plaintiff’s motion for conditional certification/to facilitate notice.  Even in cases where state overtime or minimum wage laws provide additional remedies or a longer limitations period, superiority usually cannot be established because there is nothing that prevents an FLSA opt-in plaintiff, once in the case, from asserting a state law claim in addition to an FLSA claim.  

The only circumstance that may allow for a plaintiff to prove superiority of a class claim is where there is sufficient evidence of actual or threatened retaliation that chills potential plaintiffs from joining the lawsuit.  But, this must be shown with actual evidence not a plaintiff’s frequent unsupported claim of retaliation “in the air.”

As the Supreme Court has repeatedly emphasized, most recently in Comcast Corp. v. Behrend as we have discussed in recent posts [HERE and HERE], a class action is “an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only” and that Rule 23 “does not set forth a mere pleading standard.”  Rather, Rule 23 must be satisfied through “evidentiary proof” rigorously analyzed by the courts.  This is especially the case for Rule 23(b)(3) class actions, which the Supreme Court has called an “adventuresome innovation” designed for situations in which “class-action treatment is not as clearly called for.” 

Rulings such as Busk that reject an employer’s attempts to dismiss class claims at the pleading stage should not be read as a green light for hybrid wage-hour collective/class actions.  Rather, defendants should focus on the demanding  hurdles for class certification including, in this context, superiority.

Seventh Circuit.jpgCo-authored by Laura Reasons, Giselle Donado, and Noah Finkel

In an opinion likely to make it more difficult for wage-hour plaintiffs to certify a class action and maintain certification of a collective action, the Seventh Circuit affirmed the Western District of Wisconsin’s decertification decision in Espenscheid v. DirectSat USA, LLC on the grounds that trial was not manageable under the plan submitted by plaintiffs, where determining damages would require 2,341 separate evidentiary hearings.  We previously discussed the District Court’s decision here (and thus will not rehash the background facts).  Espenschied is a very important decision that could shape the wage-hour certification landscape because of its holding that ultimate certification of a collective action is subject to the same standard as a Rule 23 class action, its requirement that damages in a wage-hour case be capable of being determined through common proof, and its emphasis on a workable, trial plan as a predicate for class and collective action certification.

In the Seventh Circuit’s opinion, Judge Posner started from the premise that, for certification purposes, there is no reason to treat a state-law wage-hour class action brought pursuant Federal Rule of Civil Procedure 23 differently from a collective action under Section 216(b) of the FLSA.  It explained that the district court correctly held that plaintiffs had not presented a feasible trial plan.  Determining damages would require 2,341 separate evidentiary hearings.  This was not a case where, for example, each technician worked from 8 a.m. to 5 p.m. and was forbidden to take a lunch break.  The court reasoned that, in such a case, damages could be calculated formulaically by a computer program.  But in this case, damages for each individual plaintiff would have to be determined separately by a trier of fact, as such determinations would turn on individual facts such as a workers’ effort and efficiency, different tasks performed, and the reasons the workers did not record certain tasks.  Those same factors are present in several off-the-clock collective or class actions

The Seventh Circuit also upheld the district court’s rejection of plaintiffs’ proposal to present trial testimony from 42 “representative” members of the 2,341-person class.  This proposal was problematic because it did not appear that the “representatives” were chosen in a statistically sound manner.  Moreover, extrapolating damages of the “representatives” to the whole could result in conferring a windfall on some, while shorting others.  Indeed, plaintiffs themselves acknowledged at argument that it would be “[d]ifficult for Plaintiffs to provide an objective framework for identifying each class member within the current class definitions without making individualized findings of liability.”

The court stated that class counsel “must think that like most class actions suits this one would not be tried — that if we ordered a class or classes certified DirectSat would settle.  That may be a realistic conjecture, but class counsel cannot be permitted to force settlement by refusing to agree to a reasonable method of trial should settlement negotiations fail.”  The court wrote that class counsel essentially had “asked the district judge to embark on a shapeless, free-wheeling trial that would combine liability and damages and be would virtually evidence free as far as damages were concerned.”  This, the Seventh Circuit would not allow and thus upheld the district court’s decertification decision.

With this opinion, the Seventh Circuit has given employers some improved tools to defend against class and collective claims.  This decision demonstrates an emerging trend to treat Section16(b) collective actions and Rule 23 class actions as one for purposes of analyzing certification.  Judge Posner expressly stated that “there isn’t a good reason to have different standards for the certification of two different types of action, and the case law has largely merged the standards, though with some terminological differences.”  With that in mind, Judge Posner reviewed the district court’s decision to decertify the three subclasses, treating “the entire set of suits before [the court] as if it were a single class action.”  Few appellate courts, or district courts for that matter, have set forth the level of common proof that collective action plaintiffs must set forth at the ultimate certification stage.  The Sixth Circuit, for example, has suggested that it may be similar to the standard for joinder under Federal Rule 20.  O’Brien v. Ed Donnelley Enterprises, Inc. 575 F.3d 567, 584-86 (6th Cir. 2009).  The Seventh Circuit takes the different view that the standard is more in line with the rigorous standard under Rule 23.  In doing so, Espenschied  brings the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes into the fold for 216(b) collective actions by using Rule 23’s commonality standard to drive the certification decision. 

This decision also puts the onus on plaintiffs seeking certification of large classes based on a “representative” sample to provide evidence that the claims and damages of all class members can be readily ascertained from the sampling in order to satisfy Rule 23’s commonality standard.  Indeed, plaintiffs’ inability to articulate how their “representative” sample was truly representative was fatal to certification.  Importantly, Judge Posner suggests that even differences in damages among the class members might be reason enough not to allow certification.  Offering a purportedly “representative” sample of class members, without more, likely will no longer be sufficient.  Here, Dukes’ guidance on statistical evidence will prove useful to employers by providing a high threshold for what statistical evidence plaintiffs may use as the glue that binds the claims and damages of class members.  With that in mind, employers would be wise to prepare a discovery plan that demands that plaintiffs establish the validity of the “representative” nature of their class sample with respect to their claims and damages.  This strategy may prove useful in limiting the class to the individual representatives, and foster an early settlement given the heavy burden plaintiffs will face to validate their “representative” sample. 

Finally, Espenschied makes clear that practical considerations are not to be ignored at the ultimate certification stage.  The Seventh Circuit gave much weight to the fact that the plaintiffs did not offer a feasible way for determining liability and damages based upon their representative sample, and noted that while, as a practical reality, most certified classes do go on to settle, that does not obviate the need to provide evidence that plaintiffs are able to calculate damages in a meaningful way for all class members.  Employers would be wise to demand a trial plan from plaintiffs explaining how they will attempt to ask the court to determine liability and damages for the class, particularly in those cases where plaintiffs rely on a representative sample.  Any failure by plaintiffs to provide a feasible plan to ascertain the claims and damages should prove useful in opposing certification.  Indeed, these practical considerations also may be worth raising at the conditional certification stage.  While the standard is a lenient one, alerting the court that plaintiffs’ claims present significant practical hurdles that cannot be cured may sway the court.  The court’s message in Espenscheid  was clear–judicial resources should not be wasted simply to facilitate a settlement of a class whose claims are not ascertainable and damages are not readily calculable without individualized findings.

green light.bmpAuthored by Kyle Petersen

Last week, in Fisher v. Rite Aid Corp., Case Nos. 11-1684 & 11-11685, the Third Circuit ruled that FLSA opt-in plaintiffs may simultaneously pursue their own parallel state-law Rule 23 opt-out class actions.  In doing so, the court held that Rule 23 opt-out class actions based on state laws that are co-extensive with the FLSA are not “inherently incompatible with the FLSA’s opt-in procedures.”  Although the Second, Seventh, Ninth, and D.C. circuit courts have previously ruled that hybrid FLSA and state law claims in the same suit are not inherently compatible, this marks the first time an appellate court has addressed the issue in the context of simultaneous, separate lawsuits.

 After filing their consents to join a nationwide FLSA collective action alleging that Rite Aid misclassified its assistant store managers as exempt employees, two of the opt-in plaintiffs filed their own putative Rule 23 class actions under Pennsylvania’s and Ohio’s wage payment laws, both of which substantively mirror the FLSA.  The respective state-law claims were each filed in federal court, based on diversity and CAFA jurisdiction, and, through various procedural machinations, all three lawsuits made their way to the Middle District of Pennsylvania.  Relying on a prior Third Circuit case, DeAsencio v. Tyson Foods, 342 F.3d 301 (3d Cir. 2003) (a hybrid FLSA/Rule 23 class action case in which the Third Circuit ruled that it was improper for the lower court  to exercise supplemental jurisdiction over the state law overtime claims), Rite Aid moved to dismiss the Rule 23 claims, arguing that they were inherently incompatible with the FLSA’s opt-in procedures.  The district court agreed with Rite Aid and dismissed the state law actions.  

The Third Circuit reversed the lower court, holding that nothing in the text of the FLSA nor its legislative history evinces “a clear congressional intent to bar opt-out actions based on state law.”  In rejecting the inherent incompatibility argument, the court distinguished its prior DeAsencio decision on the grounds that jurisdiction in DeAsencio was inappropriate because the state wage claims presented novel state law issues and the size of the state law class was disproportionately large as compared to the FLSA collective — not because of a conflict between the Rule 23 and FLSA procedures. 

 Although the inherently incompatible argument may no longer provide grounds for dismissal of parallel state law claims in the Third Circuit, this decision does not have a materially adverse impact on defense strategy in hybrid cases.  Moreover, the decision still allows for the possibility of dismissing state law claims or defeating class certification in a hybrid action where the specific facts and circumstances establish that supplemental jurisdiction is inappropriate or that Rule 23(b)(3) is otherwise not a superior method of adjudication.

law-book-271x300.jpgAuthored by:  Noah Finkel, Brett Bartlett, Andrew Paley and Richard Alfred

Members of Seyfarth Shaw’s Wage and Hour Litigation Practice Group have authored Wage & Hour Collective and Class Litigation, the first-of-its kind treatise on wage and hour litigation. Published by American Lawyer Media’s Law Journal Press, the 912-page volume is the most comprehensive guide published to date that focuses on litigation strategy through all phases of wage and hour lawsuits, the area of high-stakes litigation that, as readers of this blog well know, has plagued employers in recent years.  Indeed, wage and hour lawsuits have outpaced all other types of workplace class actions in recent years, and have surged by more than 325% since the early 2000s.

The book blueprints the mechanics of wage and hour cases, examines how employers in multiple industries are targeted for wage and hour lawsuits, and provides substantive procedural and practical considerations that determine the outcome of such actions in today’s courts.  Principally designed to assist employment litigators and in-house counsel, Seyfarth’s book should also prove useful to senior management seeking to fend off wage-hour actions before they strike.

The guide has already received praise from the Honorable Elaine L. Chao, the 24th U.S. Secretary of Labor, who stated: “Given the recent explosion of wage and hour litigation, both management- and plaintiff-side attorneys will find this publication to be an invaluable reference. With its painstaking attention to the law and procedure, this treatise will certainly be the go-to resource when practitioners ponder questions of strategy and substance in the context of wage and hour cases.”

The book was authored by Noah Finkel, Brett Bartlett and Andrew Paley, who practice in the firm’s Chicago, Atlanta and Los Angeles offices respectively. Richard Alfred, Boston-based chair of  Seyfarth’s national Wage & Hour Litigation Practice, served as senior editor.  More than 70 other Seyfarth attorneys, many of them regular contributors to this blog, contributed to the book, which will be updated regularly.

Wage & Hour Collective and Class Litigation takes up 27 chapters and covers the complex rules surrounding all types of wage and hour lawsuits. These include claims under the Fair Labor Standards Act, claims under state wage and hour laws, or hybrid cases involving both, as well as special issues involving government contractors. It advises employers on:  how to respond to a wage and hour complaint; what to consider when deciding whether to remove a case to federal court; how to assess the particular merits of a claim; whether to settle; how to oppose plaintiffs’ motion to facilitate notice for conditional certification; what kinds of affirmative defenses are best; and how to tilt the odds in favor of the defense.

Among topics covered by the book:

  • The certification process and the impact of conditional certification
  • Decertification and its sometimes unexpected consequences
  • Defending against state law wage and hour class actions brought under Federal Rule of Civil Procedure 23
  • Discovery issues and strategies in class and collective actions
  • Special considerations under California law, one of the country’s leading venues for wage-hour cases
  • Issues raised by ERISA claims in wage and hour cases
  • Coordinating or consolidating multiple simultaneous class actions
  • Meeting the duty to preserve information, including electronically stored information
  • The pros and cons of arbitration
  • Motions for summary judgment and the optimal time to file
  • Civil remedies, including calculation of unpaid overtime and liquidated damages
  • Actions by the Secretary of Labor to recover unpaid wages and overtime
  • Defending  “independent contractor”  cases
  • Calculating the  “regular rate”  for purposes of the FLSA

Wage & Hour Collective and Class Litigation can be purchased from Law Journal Press by clicking here.  Readers of Seyfarth’s Wage & Hour Litigation blog can use discount code 2128982 at checkout to obtain a special discounted introductory price of $195 for the print & online access bundle or $163 for online access only. The purchase price includes a one-year long subscription to all updates.