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.