EFFECTIVE DEFENSE STRATEGIES FOR
EMPLOYMENT-RELATED
CLASS ACTIONS
2006/2007: The Year In Review, And The Year Ahead
GERALD L. MAATMAN, JR.
Partner
Seyfarth Shaw LLP
2007 PLUS PROGRAM
June 4, 2007 – Bermuda
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TABLE OF CONTENTS
Page
I.
II.
III.
IV.
V.
OVERVIEW OF THE YEAR IN WORKPLACE CLASS ACTION LITIGATION .........1
A.
Legislative Activity At The Federal Level ..............................................................1
B.
Trends In Workplace Class Action Litigation In 2006 ............................................2
C.
Implications Of These Developments For 2007 ......................................................4
SIGNIFICANT CLASS ACTION SETTLEMENTS IN 2006 ............................................5
A.
Top Ten Private Plaintiff-Initiated Monetary Settlements.......................................5
B.
Top Ten Government-Initiated Monetary Settlements ..........................................10
C.
Noteworthy Injunctive Relief Provisions In Class Action Settlements .................12
SIGNIFICANT FEDERAL EMPLOYMENT DISCRIMINATION CLASS ACTION
AND EEOC PATTERN OR PRACTICE RULINGS .......................................................15
A.
Employment Discrimination Class Actions Under Title VII Of The Civil
Rights Act Of 1964 ................................................................................................15
B.
EEOC Pattern Or Practice Cases ...........................................................................24
C.
Other Federal Rulings Affecting The Defense Of Workplace Class Action
Litigation ................................................................................................................37
SIGNIFICANT COLLECTIVE ACTION RULINGS UNDER THE AGE
DISCRIMINATION IN EMPLOYMENT ACT ...............................................................75
A.
Cases Certifying Or Refusing To Certify ADEA Class Actions ...........................76
B.
Other Federal Rulings Affecting The Defense Of ADEA Collective Action
Claims ....................................................................................................................78
SIGNIFICANT COLLECTIVE ACTION RULINGS UNDER THE FAIR LABOR
STANDARDS ACT...........................................................................................................87
A.
Cases Certifying Or Refusing To Certify FLSA Collective Actions .....................88
B.
Other Federal Rulings Affecting The Defense Of FLSA Collective Action
Claims ..................................................................................................................106
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VI.
CONCLUSION ................................................................................................................125
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I.
OVERVIEW OF THE YEAR IN WORKPLACE CLASS ACTION LITIGATION
The plaintiffs’ employment bar filed significant class action and collective action
lawsuits against employers in 2006. As a result, federal and state courts faced a myriad of new
theories and defenses in ruling on class action and collective action litigation issues.
Three key issues are manifested by developments over the past year. First, the U.S.
Congress enacted significant reforms to federal class action procedures in February of 2005 with
passage of the Class Action Fairness Act of 2005 (“CAFA”). The CAFA impacts all class
actions, although that impact is different for particular types of workplace litigation. The past
twelve months saw significant case law developments on novel issues under the CAFA. The
plaintiffs’ bar continues to devise techniques to address this reform measure, and rulings on the
scope, meaning, and application of the law are already numerous for a statute of such recent
vintage.
Second, the volume of wage & hour litigation continues to increase exponentially. FLSA
collective actions pursued in federal court were reflected by more rulings on that subject in 2006
than for employment discrimination class actions. The most significant growth in wage & hour
litigation, however, is at the state court level and especially in California, Florida, Illinois,
New Jersey, New York, and Texas. This trend is likely to continue in 2007.
Third, the financial stakes in workplace class action litigation increased yet again in
2006. Plaintiffs’ lawyers continued to push the envelope this past year in crafting damages
theories to expand the size of classes and the scope of their recoveries. This trend is also
unlikely to abate in 2007. The leading class action and collective action settlements for 2006 are
discussed below.
A.
Legislative Activity At The Federal Level
Congressional enactment of the Class Action Fairness Act of 2005 was a significant
development for employers facing class action litigation. President Bush signed the CAFA into
law on February 18, 2005. The CAFA was intended to address the abuses of state court judges
certifying class action lawsuits involving plaintiffs from numerous states in jurisdictions with a
reputation for a lack of fairness toward out-of-state defendants. As a result, the CAFA allows
defendants to remove what were formerly “non-diverse” state law-based class actions if one
member of the class and one defendant are citizens of different states, the class involves more
than 100 people, and the aggregate amount in controversy exceeds $5 million.
The statute’s impact over the past year has been significant. More class actions are being
filed in federal courts, and more intrastate class actions are being heard in federal courts through
the removal mechanisms under the CAFA. Because the law’s provisions are designed to prevent
plaintiffs’ counsel from keeping class actions in state court that are more appropriately litigated
in federal court, the CAFA forecloses the pleading tactic of requesting damages of less than
$75,000 per class member (i.e., the jurisdictional limit for a federal court to hear a claim
involving plaintiffs and defendants of different states) to stymie a defendant from removing the
lawsuit to federal court. Over the last year, employers repeatedly and successfully invoked the
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statute to effectuate the removal of class actions filed in state court to federal court. In turn,
federal courts issued a myriad of rulings on novel issues arising under the CAFA.
The CAFA also addresses the issue of abusive “coupon” settlements whereby plaintiffs’
attorneys in the past have received awards of millions in fees while members of the putative class
received coupons having little to no value. Under the CAFA, plaintiffs’ attorneys may not
receive a contingency fee based on the potential aggregate value of coupons available to class
members; instead, their fees must be calculated based on the value of coupons actually redeemed
by class members. To date, this aspect of the CAFA has seen little case law developing in the
employment law context.
The CAFA also established a class action “bill or rights” for litigants, which includes
various protections for class members such as judicial review and approval of “injunctive relief
only” settlements, protection against losses to the class because of payments to class counsel,
more standardized settlement notification information, and specific requirements regarding the
notification of federal and state officials of proposed class action settlements. In the context of
workplace class actions, this feature of the CAFA has not resulted in any court rulings to date.
The statute, however, has had profound effects on considerations underlying case strategy
and the structuring of class actions. In this context, the CAFA’s impact on workplace class
actions is both varied and evolving. Class actions and collective actions under Title VII, the
ADEA, the FLSA, and ERISA typically are brought and litigated in federal court. The CAFA
may have limited impact on strategic decisions in those cases relative to choice of venue in a
federal court or state court. Class actions in state law-based wage & hour litigation are another
matter. The plaintiffs’ bar and defense bar alike are confronting novel CAFA issues in these
types of cases, for the fight over venue is often a key driver of exposure and risk. Employers
sued in state law wage & hour class actions are increasingly confronted by plaintiffs’ lawyers
seeking to avoid removal to federal court by various stratagems, including prayers for relief of
less than $5 million, the filing of multiple “baby” class claims on behalf of less than 100
plaintiffs, and limiting the scope of the class to residents of one state.
B.
Trends In Workplace Class Action Litigation In 2006
While shareholder and securities class action filings decreased dramatically in 2006,
employment-related class action flings increased significantly. Anecdotally, surveys of
corporate counsel confirmed that workplace litigation – and especially class action and multipleplaintiff lawsuits – is the chief exposure driving corporate legal budget expenditures.
In terms of decisions, there were no class action rulings in 2006 quite like the
certification order in Dukes, et al. v. Wal-Mart Stores, Inc., 222 F.R.D. 137 (N.D. Cal. 2004),
which certified a Title VII gender discrimination claim challenging pay and promotions
involving 1.5 million class members. The U.S. Court of Appeals for the Ninth Circuit heard
argument on the appeal of the Dukes certification order on August 8, 2005. Many expected a
ruling in 2006, but none came. The Ninth Circuit’s future ruling in Dukes – and further appellate
proceedings thereafter – likely will be one of the top class action developments in 2007 and
beyond.
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At the same time, the certification order in Dukes, et al. v. Wal-Mart Stores, Inc.
impacted many class action developments in 2006. The plaintiffs’ bar increasingly used the
theories in the Dukes case to seek certification of “punitive damages” only classes under
Rule 23(b)(2), as well as pressing for certification of mega-classes involving pay and promotion
claims of employees in multiple facilities on a nationwide basis. Employers fought these
theories with good success, as 2006 witnessed may pro-employer victories in class certification
battles.
FLSA collective action litigation increased again in 2006 and far outpaced employment
discrimination class action filings. While plaintiffs continued to achieve certification of wage &
hour claims, employers also secured several significant victories in defeating conditional
certification and obtaining decertification of § 216 (b) collective actions. Of particular
significance were a series of FLSA collective actions in the financial services industry.
Plaintiffs’ attorneys initiated lawsuits against many industry leaders on behalf of brokers and
financial advisors. They alleged that while brokers and financial advisors are paid commissions
and fees earned toward their employer over the course of the year, they also received draws or
monthly advances against commissions; further, because the draws do not qualify as a
guaranteed salary and the employees act as salespeople, plaintiffs argued that they are not
covered under the FLSA administrative exemption for overtime because the brokers and
financial advisors were not paid on a salary basis. Some companies elected to resolve these
lawsuits in 2006 for significant sums, including $98 million in the Citigroup case, $89 million in
the UBS cases, $42.5 million in the Morgan Stanley case, and $37 million in the Merrill Lynch
case. Big impact FLSA collective actions are expected to continue this trend in 2007.
Given the enormous financial stakes, trials of class actions are rare. The key event and
driver of risk and exposure in class actions is the court’s decision on plaintiffs’ motion for class
certification. However, several ERISA class actions, wage & hour collective actions, and EEOC
pattern or practice actions proceeded to trial in 2006. These verdicts and judgments included:
•
A liability judgment of $123.5 million in Rios, et al. v. Cmacho, et al., Case No.
SP208-93 (Superior Court of Guam), on October 5, 2006, in a class action
involving 4,000 current and former employees suing for cost-of-living allowances
and compensation benefits;
•
A liability verdict of $78.5 million in a jury trial in Braun, et al. v. Wal-Mart
Stores, Inc., Case No. 3217 (Court of Common Pleas of Philadelphia County,
Penn.), on October 12, 2006, in a wage & hour class action involving 187,000
current and former employees alleging that Wal-Mart forced hourly employees to
work through rest periods and after their shifts ended;
•
A liability judgment of $46.2 million in West, et al. v. AK Steel Corp. Retirement
Accumulation Pension Plan, Case No. 02-CV-1 (S.D. Ohio), on February 24,
2006, in an ERISA class action over miscalculated lump-sum cash balance
payments; and,
•
A liability verdict of $1.76 million in a jury trial in EEOC v. John Pickle Co.,
Case No. 02-CV-85 (N.D. Okla.), on August 22, 2006, in an EEOC pattern or
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practice lawsuit alleging national origin discrimination in a “human trafficking”
scheme involving workers lured to Oklahoma from India.
If trials of class actions were rare, settlements of class actions in 2006 reflected a
continuing trend from past years where significant monetary payments were made in mega-class
actions. Settlements in FLSA collective actions and ERISA class action outpaced employment
discrimination class action settlements in terms of overall settlement values. Of particular note
were a series of ERISA settlements stemming from the meltdown of Enron.
C.
Implications Of These Developments For 2007
It is a fact of the modern American workplace that class action and collective action
litigation is very attractive to the plaintiffs’ bar. Passage of the CAFA seems to have little to no
effect on the pace and volume of overall workplace class action filings in 2006. Instead, the
battleground for class actions impacted by the CAFA centers on venue issues.
At the same time, the U.S. Equal Employment Opportunity Commission became
increasingly activist on the litigation front in 2006. The Commission announced a new strategic
enforcement and litigation plan in April of 2006; that plan centers on systemic discrimination
cases with broad impact and affecting large numbers of workers, such that prosecution of pattern
or practice lawsuits is now an agency-wide priority. As a result, the EEOC is focusing its
investigations and resources on systemic discrimination issues, and institution of EEOC pattern
or practice lawsuits increased dramatically in 2006. Employers are likely to face even more such
claims in 2007.
The lesson to be drawn from 2006 is that the private plaintiffs’ bar and government
enforcement attorneys are apt to be equally if not more aggressive in 2007 in their pursuit of
class action and collective action litigation against employers. Identifying, addressing, and
remediating class action vulnerabilities, therefore, ought to be at or near the top of corporate
counsel’s priorities list for 2007.
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II.
SIGNIFICANT CLASS ACTION SETTLEMENTS IN 2006
From a strictly monetary measure, the private plaintiffs’ bar and government enforcement
attorneys secured many substantial settlements in 2006. This section of this paper evaluates the
top ten private plaintiff-initiated monetary settlements, government-initiated monetary
settlements, and injunctive relief provisions in class action settlements.
A.
Top Ten Private Plaintiff-Initiated Monetary Settlements
Plaintiffs’ lawyers secured hefty settlements in 2006 for employment discrimination,
wage & hour, and ERISA class actions. The top ten settlements totaled over $1 billion.
Settlements In Private Plaintiff Employment Discrimination Class Action Lawsuits
For employment discrimination cases, the monetary value of the top ten private plaintiff
settlements entered into or paid in 2006 totaled $91.2 million.
1.
$30 million – State of Washington
2.
$15 million – C.H. Robinson Worldwide, Inc.
3.
$12 million – University of California
4.
$9 million – Treasury Department
5.
$8.4 million – N.Y. Convention Center Operating Corporation
6.
$5.5 million – Sprint Corporation
7.
$5 million – Woodward Governor Company
8.
$2.8 million – Goodman Manufacturing Co.
9.
$2.2 million – Bureau of Land Management
10.
$1.3 million – Northshore Mining Company
1.
$30 million – Storti, et al. v. State of Washington, Case No. 04-2-16973
(Wash. Super. Ct. Mar. 17, 2006) (settlement agreement in a class action
brought by faculty members claiming discrimination by the university in its duty
to provide various pay increases under the university’s compensation plan).
2.
$15 million – Carlson, et al. v. C. H. Robinson, Case No. 02-CV-3780 (D.
Minn. Sept. 18,2006) (final approval of consent decree for a class action
settlement involving approximately 2,000 female employees and ex-employees
claiming gender discrimination in promotions and compensation).
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3.
$12 million – Garcia, et al. v. University of California, et al., Case No. 03-CV1404 (D. N.Mex. June 1, 2006) (preliminary approval of national origin
discrimination class action claims by a class of Hispanic employees that worked
at the Los Alamos National Laboratory, operated by the University of California,
alleging pay and promotional disparities).
4.
$9 million – Wylie, et al. v. Treasury Department, Case No. 07-A-40012
(EEOC Mar. 31, 2006) (approval of settlement involving a class of 132 former
and current female employees alleging sex discrimination, harassment, and
retaliation).
5.
$8.4 million – Cokely, et al. v. N.Y. Convention Center Operating Corp., Case
No. 00-CV-4637 (S.D.N.Y. Aug. 22, 2006) (final approval of consent decree for
a class action settlement of race discrimination claims of African-American and
Hispanic employees in the terms and conditions of employment).
6.
$5.5 million – Cavanaugh, et al. v. Sprint Corp., Case No. 04-CV-3418 (N.D.
Ga. July 27, 2006) (settlement agreement covering 462 plaintiffs in an age
discrimination collective action alleging that a series of lay-offs were illegal).
7.
$5 million – Bell, et al. v. Woodward Governor Co., Case No. 03-CV-5090
(N.D. Ill. Oct. 5, 2006) (final approval of consent decree in a Title VII class
action brought by minority employees alleging discrimination with respect to
wages, promotions, and training).
8.
$2.8 million – Colindres, et al. v. Goodman Manufacturing Co., et al., Case
No. 01-H-4319 (S.D. Tex. Dec. 11, 2006) (settlement of class action in Title VII
national origin discrimination case alleging disparate treatment and disparate
impact in pay, transfers, promotions, and terms and conditions of employment).
9.
$2.2 million – Michael, et al. v. Bureau of Land Management, Case No. 320A1-8039 (EEOC July 28, 2006) (settlement of age discrimination claims
involving personnel decisions requiring employees to relocate or be terminated).
10.
$1.3 million – Mathers, et al. v. Northshore Mining Co., Case No. 99-CV-1938
(D. Minn. Feb. 21, 2006) (settlement of a gender discrimination class action
lawsuit involving forty-one current and former employees alleging unequal terms
and conditions of employment).
Settlements In Private Plaintiff ERISA Class Actions
For ERISA cases, the monetary value of the top ten private plaintiff settlements entered
into or paid in 2006 totaled $511 million.
1.
$173 million – City of San Diego
2.
$100 million – AOL Time Warner Inc.
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3.
$47.5 million – Sprint
4.
$37.5 million – Qwest
5.
$37.5 million – Enron Corp.
6.
$35 million – Dillard’s
7.
$28.75 million – HealthSouth Corp.
8.
$28 million – CMS Energy
9.
$12 million – Polaroid Corp.
10.
$11.75 million – Kmart Corp.
The collapse of Enron and other major companies fueled a significant number of ERISA
class actions that reached settlement in 2006. In many of these situations, separate class actions
were brought alleging violations of securities laws as well as ERISA.
1.
$173 million – McGuigan, et al. v. City of San Diego, No. GIC-849883
(Cal. Super. Ct. June 8, 2006) (preliminary settlement related to under funding
of municipal pension plan for city workers).
2.
$100 million – In Re AOL Time Warner ERISA Litigation, Case No. 02-CV8853 (S.D.N.Y. Sept. 27, 2006) (final approval of a settlement for 65,000 class
members in ERISA class action alleging breach of fiduciary duties for imprudent
investments and failing to disclose material information).
3.
$47.5 million – In Re Sprint Corp. ERISA Litigation, Case No. 03-CV-2202
(D. Kan. Aug. 4, 2006) (class action settlement for an ERISA breach of fiduciary
duties against employer, Board of Directors, and plan’s administrators for
allowing imprudent investments and failing to disclose material information to
participant’s in the company’s retirement plan).
4.
$37.5 million – In Re Qwest ERISA Litigation, Case No. 01-CV-1451 (D.
Colo. Sept, 29, 2006) (settlement in an ERISA class action alleging breach of
fiduciary duties for imprudent investments and failing to disclose material
information).
5.
$37.5 million – In Re Enron Corp. ERISA Litigation, MDL No. 1446 (S.D.
Tex. April 20, 2006) (partial settlement in an ERISA class action alleging breach
of fiduciary duties for imprudent investments and failing to disclose material
information).
6.
$35 million – Clevenger, et al. v. Dillard’s Department Stores, Case No. 02CV-558 (S.D. Ohio Dec. 7, 2006) (preliminary settlement of an ERISA class
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action alleging improper amendments to the company’s pension plan, and
miscalculation of distributions under the plan).
7.
$28.75 million – In Re HealthSouth Corp. ERISA Litigation, Case No. 03CV-1700 (N.D. Ala. June 28, 2006) (final approval of an ERISA class action
settlement over breach of fiduciary duties for imprudent investments and failing
to disclose material information).
8.
$28 million – In Re CMS Energy ERISA Litigation, Case No. 02-CV-72834
(E.D. Mich. June 27, 2006) (final approval of settlement of an ERISA class
action for imprudent investments and failing to disclose material information).
9.
$12 million – In Re Polaroid ERISA Litigation, Case No. 03-CV-8335
(S.D.N.Y. Sept. 29, 2006) (settlement in an ERISA class action alleging breach of
fiduciary duties for imprudent investments and failing to disclose material
information).
10.
$11.75 million – Rankin, et al. v. KMart Corp., Case No. 02-CV-71045 (E.D.
Mich. June 27, 2006) (final approval of an ERISA class action over breach of
fiduciary duties by continuing to invest 401(k) monies in Kmart stock at a time
when the company was in serious financial decline and which resulted in
significant losses to the Plan).
Settlements In Private Plaintiff Wage & Hour Class Actions
For wage & hour cases, the monetary value of the top ten private plaintiff settlements
entered into or paid in 2006 totaled $488.8 million.
1.
$98 million – Citigroup
2.
$89 million – UBS Financial Services
3.
$87 million – United Parcel Service
4.
$65 million – IBM Corp.
5.
$42.5 million – Morgan Stanley & Co.
6.
$37 million – Merrill Lynch, Inc.
7.
$27.5 million – Siebel Systems, Inc.
8.
$15 million – Sears Roebuck & Co.
9.
$14.9 million – Electronic Arts, Inc.
10.
$12.9 million – Pacific Maritime Association
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1.
$98 million – Bahramipour, et al. v. Citigroup Global Markets, Inc., f/k/a
Salomon Smith Barney, Case No. 04-CV-4440 (N.D. Cal. May 24, 2006)
(preliminary settlement in FLSA and state law wage & hour overtime pay class
action involving approximately 20,000 brokers in California, New Jersey, and
New York).
2.
$89 million – Bowman, et al. v. UBS Financial Services, Inc., Case No. 04CV-3525 (N.D. Cal. Nov. 17, 2006); Glass, et al. v. UBS Financial Services,
Inc., Case No. 06-CV-3525 (N.D. Cal. July 28, 2006) (final approval of
settlement in Bowman class action of FLSA and state law wage & hour overtime
pay claims of financial advisors and trainees in California for $44 million; and
preliminary approval of settlement in Glass class action of FLSA and state wage
& hour overtime pay claims of financial advisors and trainees in Connecticut,
New Jersey, and New York for $45 million).
3.
$87 million – Cornn, et al. v. United Parcel Services, Inc., Case No. 03-CV2001 (N.D. Cal. Nov. 6, 2006) (preliminary settlement of FLSA and state law
wage & hour overtime pay claims of 20,000 drivers relative to claims that the
company improperly deducted a standard lunch period from drivers’ timesheets
and failed to provide meal and rest periods).
4.
$65 million – Rosenburg, et al. v. IBM Corp., Case No. 06-CV-430 (N.D. Cal.
Nov. 22, 2006) (preliminary settlement of FLSA and state law wage & hour
overtime pay class action of 32,000 technical services and information technology
employees).
5.
$42.5 million – Garett, et al. v. Morgan Stanley & Co., Case No. 04-CV-1858
(S.D. Cal. Mar. 3, 2006) (preliminary settlement of FLSA and state law wage &
hour overtime pay class action involving over 5,000 financial advisors).
6.
$37 million – Burns, et al. v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Case No. 04-CV-4135 (N.D. Cal. Feb. 17, 2006) (final approval of settlement in
FLSA and state wage & hour overtime pay class action involving 3,250 brokers in
California).
7.
$27.5 million – Lin, et al. v. Siebel Systems, Case No. CIV-435601 (Cal.
Super. Ct. Nov. 16, 2006) (preliminary approval of FLSA and state law wage &
hour overtime class action involving 800 software engineers).
8.
$15 million – Lenahan, et al. v. Sears Roebuck and Co., Case No. 02-CV-45
(D.N.J. July 24, 2006) (preliminary approval of four class actions to resolve
claims of in-home serve technicians alleging that the company did not properly
compensate employees under the FLSA and state wage & hour laws for
commuting time).
9.
$14.9 million – Hasty, et al. v. Electronic Arts, Inc., Case No. 444821 (Cal.
Super. Ct. – May 16, 2006) (preliminary approval of settlement in overtime
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wage & hour claim where engineers were classified as exempt although allegedly
performing duties incompatible with exempt status).
10.
$12.9 million – Wisniewski, et al. v. Pacific Maritime Association, Case No.
BC 293134 (Cal. Super. Ct. Aug. 18, 2006) (preliminary approval of settlement
in state wage & hour overtime pay class action lawsuit involving payments over
travel time, docked work time, and deduction of fees)
All but one of these settlements included California-based employees or claims. Four of
the class action settlements involved the financial services industry.
B.
Top Ten Government-Initiated Monetary Settlements
The monetary value of the top ten government-initiated settlements in 2006 totaled
$466.75 million.
Settlements Of Government-Initiated Class Action And Pattern Or Practice
Lawsuits
Four of the largest government-initiated settlements were EEOC pattern or practice
claims, and three were ERISA claims brought by the U.S. Department of Labor.
1.
$280 million – City of New York
2.
$133.95 million – Enron Corp.
3.
$70 million – Ralph’s Grocery Co.
4.
$48.9 million – Bell Atlantic
5.
$30 million – ING, Inc.
6.
$12 million – Enron Corp.
7.
$3.6 million – Stillwater School District
8.
$3.1 million – Eastern Engineered Wood Products, Inc.
9.
$3 million – Enron Corp.
10.
$2.2 million – J.P. Morgan Chase & Co.
The EEOC and the U.S. Department of Labor aggressively litigated enforcement actions
in 2006. Based on preliminary figures for the U.S. Government’s FY 2006, the EEOC
filed 370 lawsuits, resolved 216 cases, and secured $385 million in settlements for
allegedly injured victims. The OFCCP garnered $51.5 million for alleged victims of job
discrimination. Additionally, the DOL recovered $171.5 million in back pay wages for
an estimated 246,000 workers in FY 2006.
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1.
$280 million – New York City v. United States, Case No. 03-CV-5112
(S.D.N.Y. Sept. 21, 2006) (final approval of settlement over social security and
medicare taxes wrongfully imposed on 73,000 city firefighters, policeman,
correctional officers, and sanitation workers).
2.
$133.95 million – Chao v. Enron Corp., Case No. 01-H-3913 (S.D. Tex.
Feb. 16, 2006) (final approval of settlement of DOL lawsuit to recover funds for
participants in Enron’s retirement plans).
3.
$70 million – United States v. Ralph’s Grocery Co., Case No. 05-CR-1210
(C.D. Cal. July 26, 2006) (plea agreement to resolve a criminal indictment
related to charges that the company illegally rehired thousands of locked-out
workers during a supermarket labor dispute in 2003 and 2004).
4.
$48.9 million – EEOC v. Bell Atlantic, Case No. 97-CV-6723 (S.D.N.Y.
June 5, 2006) (final approval of consent decree in pregnancy discrimination
pattern or practice lawsuit where female employees of Bell Atlantic in 13 states
were denied pension credits for their pregnancy and maternity leaves in alleged
violation of Title VII of the 1964 Civil Rights Act and the Equal Pay Act).
5.
$30 million – In Re ING, Inc. (New York Attorney General Investigation
Oct. 10, 2006) (settlement agreement based on investigation undertaken by the
New York Attorney General to secure restitution to 66,000 members of the New
York State United Teachers Fund who participated in a variable annuity plan to
fund retirements of union members).
6.
$12 million – Chao v. Enron Corp., Case No. 03-H-2257 (S.D. Tex. Sept. 7,
2006) (final approval of consent decree to settle lawsuit filed by the U.S.
Department of Labor against Kenneth Lay, the deceased former CEO of Enron,
for monies to be repaid to the company’s retirement plans for the benefit of
workers and retirees).
7.
$3.6 million – EEOC v. Stillwater School District, Case No. 05-CV-2908 (D.
Minn. Aug. 18, 2006) (final approval of consent decree in EEOC pattern or
practice case alleging age discrimination in various early retirement incentive
programs).
8.
$3.1 million – EEOC v. Eastern Engineered Wood Products, Inc., Case Nos.
04-CV-4490 & 05-CV-4786 (E.D. Pa. June 13, 2006) (final approval of consent
decree in EEOC pattern or practice case alleging same-sex sexual harassment and
retaliation).
9.
$3 million – Chao v. Enron Corp., Case No. 03-H-2257 (S.D. Tex. Nov. 16,
2006) (final approval of settlement of ERISA claims for alleged mismanagement
of corporate pension plans on behalf of workers and retirees against Jeffrey
Skilling, the former CEO of Enron).
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10.
C.
$2.2 million – EEOC v. J.P. Morgan Chase & Co., EEOC Investigation
(EEOC Nov. 22, 2006) (settlement agreement involving the EEOC’s allegations
that J.P. Morgan violated the Americans With Disabilities Act in discriminating
against 222 employees who were medically released to return to work after leaves
of absence exceeding six months, but who were not properly accommodated.
Noteworthy Injunctive Relief Provisions In Class Action Settlements
Generally, the types of relief obtained in employment discrimination class action
settlements can be grouped into five categories, including modification of internal personnel
practices and procedures; oversight over corporate practices; mandatory training of supervisory
personnel and employees; compensation for named plaintiffs and class members; and an award
of attorneys’ fees and costs for class counsel. In addition to substantial payments for overtime
liability, settlements of FLSA collective actions often involve changes to payroll practices and
procedures. In an ERISA class action settlement, the terms typically include monetary payments
along with injunctive orders barring fiduciaries and third parties from serving as plan fiduciaries
or managers.
Class action settlements involving private plaintiffs generally contain one or more of
these items of non-monetary injunctive relief, but rarely contain all of them. Attorneys
representing the U.S. Government also secured several class action settlements in 2006 which
had noteworthy injunctive relief provisions. This reflects in some measure the significant
“public interest” component of government-initiated class action litigation.
The top ten settlements involving injunctive relief provisions in 2006 include:
1.
Spitzer, et al. v. Federal Express Corp., Case No. 01-CV-4366 (E.D. Pa.
Jan. 12, 2006). The New York Attorney General, Eliot Spitzer, and the EEOC brought claims
under Title VII alleging that Federal Express failed to accommodate the beliefs of New York
City couriers who wore their hair in dreadlocks as a religious practice, and terminated the
couriers for failing to comply with the company’s personal appearance policy. The Court
approved a settlement providing for adjustments in Federal Express’s personal appearance
policy, managerial guidelines in handling employee requests for accommodation of religious
beliefs, and periodic reporting on how the company has responded to the requests. Federal
Express is also obligated by the settlement to provide a guidance document to managers
responsible for administering the personal appearance policy. The guidance document mandates
that accommodation must be made for employees who hold a sincere religious belief or have a
certifiable medical condition. The guidance document also lays out examples of potential
reasonable accommodations, such as head coverings, if consistent with the employee’s beliefs;
adjustments in job duties, work schedules, or scope of work; and job transfers to positions with
comparable pay and benefits. The settlement also requires Federal Express to submit periodic
reports to the New York Attorney General’s office detailing the company’s responses to specific
requests for accommodation or complaints.
2.
EEOC v. Massachusetts, Case No. 99-CV-11233 (D. Mass. May 16, 2006). The
EEOC sued Massachusetts for age discrimination in connection with its implementation of
various retirement and disability plans. Under the terms of the settlement, Massachusetts agreed
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to change its retirement and disability plans to pay retroactive double benefits to employees who
had been denied disability pensions due to alleged discriminatory age cut-offs. In addition, the
settlement also obligates Massachusetts to pay $165,176 per year to various state, local, and
municipal ex-employees who were alleged victims of discrimination in applying for accidental
disability retirement benefits; the payments are required for the remainder of each ex-employee’s
life.
3.
United States v. City Of Virginia Beach, Case No. 06-CV-189 (E.D. Va. Apr. 3,
2006). The U.S. Department of Justice sued the City of Virginia Beach, Virginia on the grounds
that its police department used a hiring test that had a disparate impact on African-American and
Hispanic applicants. The parties settled the lawsuit, and the City agreed to the terms of a consent
decree preventing its further use of certain math, reading, and grammar tests by the police
department. In addition to creating a monetary settlement fund of $160,000, the City agreed to
implement priority hiring measures for the accelerated hiring of African-American and Hispanic
individuals for entry-level police officer positions.
4.
Lewis, et al. v. Wal-Mart Stores, et al., Case No. 02-CV-944 (N.D. Okla. Dec. 4,
2006). Families of deceased employees of Wal-Mart filed a class action alleging that the
company benefited from “dead peasant insurance” policies it procured from AIG Life Insurance
Company and Hartford Life Insurance Company for low-level employees without their consent
or knowledge. The families of the deceased employees alleged that Wal-Mart did not advise the
employees or their families of the life insurance policies. The settlement established a trust
against the policies and provided a distribution of benefits to the estates of 73 former employees.
5.
Bell, et al. v. Woodward Governor Co., Case No. 03-CV-5090 (N.D. Ill. Oct. 5,
2006). The EEOC and minority employees asserted claims of illegal employment discrimination
at two of the company’s manufacturing facilities, and alleged that African-Americans, Hispanics,
Asians, and women were disadvantaged with respect to wages, promotions, and training. The
consent decree obligates the company to appoint an outside monitor to provide comprehensive
oversight and implementation of the settlement. In addition to a monetary payment of $5 million
to 335 individuals, the consent decree requires the employer to hire an industrial psychologist to
analyze various jobs held by minority employees, and to implement recommendations of the
industrial psychologist relative to adjustments in job assignments and compensation.
6.
In Re Tyson Foods Litigation, Case No. 05-CV-1704 (N.D. Ala. Nov. 7, 2006).
The EEOC and African-American workers filed suit claiming that Tyson maintained a racially
hostile work environment, including a locked restroom to be used exclusively by white
employees that sometimes was posted with “white only” or “out of order” signs; the EEOC also
alleged that Tyson retaliated against African-American workers who complained of the alleged
discrimination. The consent decree obligates the company to pay $871,000 to thirteen AfricanAmerican employees, and to establish a consent decree coordinator available on a 24/7 basis to
discuss questions, concerns, and complaints about race discrimination and retaliation, explain
company policies, and oversee investigations of internal complaints. The consent decree also
requires the company to file semi-annual reports with the EEOC, establish a centralized recordkeeping procedure for internal complaints and inquiries, and actively monitor employee
discipline for evidence of disparate treatment of African-American workers.
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7.
EEOC v. S&Z Tool & Die Co., Case No. 03-CV-2023 (N.D. Ohio Aug. 15,
2006). The EEOC filed a pattern or practice lawsuit alleging race and gender discrimination for
refusing to hire African-American and female applicants. The EEOC also alleged that the
employer destroyed employment records in violation of Title VII’s record-keeping obligations.
The Court approved a consent decree requiring the company to establish a fund of $940,000 for
the benefit of rejected applicants and a claims process to locate and identify additional applicants
who were denied a job due to discrimination. The consent decree also obligates the employer to
provide annual EEO training to managers and HR personnel; appoint a special EEO coordinator;
modify job descriptions for entry level jobs; and implement a job advertising and recruitment
program to target women and African-American candidates.
8.
Santos, et al. v. Pechiney Plastic Packaging, Inc., Case No. 05-CV-149 (N.D.
Cal. July 7, 2006). Employees and the United Steelworkers Union filed a class action under
both the Labor-Management Relations Act and the Employee Retirement Income Security Act
alleging that the company had violated its obligations to employees for healthcare benefits
relative to lower deductibles, out-of-pocket annual maximums, and a cap on prescription drug
costs for retirees. The Court approved a settlement requiring the employer to provide healthcare
benefits at no premium cost for the life of all retirees and their surviving spouses subject to a new
lifetime maximum cap of $1 million per person for combined in-network and out-of-network
healthcare providers. The settlement also provides that the company may not increase the level
of co-payments, deductibles, and out-of-pocket limits for benefits at any time in the future.
9.
United Auto Workers v. Ford Motor Co., Case No. 05-CV-74730 (E.D. Mich.
July 13, 2006). The UAW filed a class action lawsuit under both the Labor-Management
Relations Act and the Employee Retirement Income Security Act to allow the union’s
membership to benefit from a labor-management agreement reached on December 14, 2005, to
change retirees’ healthcare benefits. The Court approved a settlement implementing new
healthcare premium systems for retired hourly employees, their spouses, and dependents of the
retirees. The costs at issue exceeded over $1 billion.
10.
EEOC v. Trans Bay Steel Corp., 06-CV-7766 (N.D. Cal. Dec. 7, 2006). The
EEOC brought a pattern or practice lawsuit alleging that the company had discriminated against
a class of workers of Thai descent based on their national origin. The company had recruited the
workers for steel retro-fitting of the San Francisco-Oakland Bay Bridge. The Commission
claimed that the employer held the workers against their will, confiscated their passports, and
forced them to work without pay. In addition to settling the case for a payment of $1 million
divided amongst 48 workers, the company agreed to provisions in a consent decree to guarantee
future work to the 48 claimants on the Bay Bridge project; to provide housing and a housing
stipend to the workers; to pay for tuition and books at a local college for training in welding; to
provide visa sponsorship to the claimants; to guarantee minimum pay and a supplemental base
pay once the claimants finish a training period; and pay the claimant’s moving expenses.
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III.
SIGNIFICANT FEDERAL EMPLOYMENT DISCRIMINATION CLASS
ACTION AND EEOC PATTERN OR PRACTICE RULINGS
This section of this paper examines rulings in employment discrimination class action
cases arising under Title VII of the Civil Rights Act of 1964, as well as “pattern or practice”
enforcement actions brought by the U.S. Equal Employment Opportunity Commission. This
section of the paper also discusses other federal rulings which implicate the defense of workplace
class action litigation. Rulings are divided into three substantive sections, and sub-divided into
the federal circuits in which the appellate or district court rendered the decision.
A.
Employment Discrimination Class Actions Under Title VII Of The Civil Rights Act
Of 1964
(i)
First Circuit
No reported cases.
(ii)
Second Circuit
No reported cases.
(iii)
Third Circuit
Gutierrez, et al. v. Johnson & Johnson, 2006 WL 3779751 (D.N.J. Dec. 19, 2006). In
this case, a group of African-American and Hispanic former employees filed a class
action alleging that Johnson & Johnson discriminated against minority employees
through its compensation and promotion practices. Plaintiffs alleged that their employer
utilized “excessively subjective” practices, which had an adverse impact on minority
employees. The Plaintiffs sought to certify a class of 8,600 employees at 35 different
operating divisions of the company, each of which had its own headquarters, facilities,
and senior management. Plaintiffs’ motion for class certification sought to certify a class
of “all persons of African and/or Hispanic descent employed … in any permanent
salaried exempt or non-exempt position in the United States from November 15, 1997 to
the present.” Id. at *2. The Court denied Plaintiffs’ motion for class certification. The
Court held that Plaintiffs had failed to identify any policy or practice manifesting an
adverse impact, or proof that the company’s human resources department abused its
discretion in carrying out corporate personnel policies. The Court also determined that
Plaintiffs had failed to make any showing that their employer’s personnel policies
permitted excessive subjectivity in compensation, evaluation, or promotional practices.
Plaintiffs had presented expert statistical reports suggesting that minority employees
received lower pay and fewer promotions than white employees. The Court, however,
rejected this argument and determined that the expert report was insufficient to show
commonality. The Court reasoned that Plaintiffs’ expert report had failed to demonstrate
a nexus between their purported adverse impact statistics and any alleged discriminatory
policy or practice. The Court characterized this as a “failure of proof,” and observed that
commonality was highly unlikely by virtue of the “unprecedented” scope of Plaintiffs’
proposed class stretching over 35 different operating units of the company. Id. at *8.
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(iv)
Fourth Circuit
No reported cases.
(v)
Fifth Circuit
Colindres, et al. v. Goodman Manufacturing Co., et al., 235 F.R.D. 347 (S.D. Tex.
2006). In this case, a group of current and former Latino employees sued their employer
and its parent company in a class action alleging violations of Title VII in pay,
promotions, and terms and conditions of employment. Plaintiffs alleged that Defendants
channeled them into low paying jobs, and segregated Latinos into a department in the
companies’ manufacturing facility which had dangerous working conditions. Plaintiffs
also alleged that Defendants imposed an illegal “English only” language requirement in
the plant without any business purpose, and used the personnel policy to impede the
promotion of Latinos into higher paying positions. Plaintiffs sought injunctive relief, and
monetary damages, including back pay, front pay, compensatory damages, and punitive
damages. Plaintiffs asserted both disparate impact and disparate treatment theories of
national origin discrimination. After Plaintiffs moved for class certification, the Court
held a four day evidentiary hearing at which 15 witnesses, class representatives, and
company managers testified, along with the parties’ respective statistical and labor
experts. The evidence adduced at the hearing showed that conditions at the
manufacturing facility had changed significantly during the class liability period and after
the institution of the lawsuit, and that Latino rates of hiring, promotion, and transfers into
and out of working units at the facility had improved. During the hearing, Plaintiffs
dropped their claims for punitive damages after the Court expressed skepticism about
whether Plaintiffs could certify a Rule 23 (b)(2) class for punitive damages along with
back pay; after the hearing and in supplemental briefing, Plaintiffs also abandoned their
claims for compensatory damages. The Court denied Plaintiffs’ motion for class
certification. The Court determined that Plaintiffs had satisfied the first three factors of
Rule 23(a) - numerosity, commonality, and typicality - but that Plaintiffs failed to
demonstrate adequacy of representation under Rule 23(a)(4). The Court noted various
concerns that Plaintiffs would have to address, satisfy, and surmount in certifying any
class, including: (i) whether certification would ever be proper due to the improved
personnel practices and promotion/transfer numbers over time (or whether predominance
under Rule 23(b)(3) could not be satisfied in these circumstances); (ii) whether classwide back pay violated the Fifth Circuit’s standards for Rule 23(b)(2) incidental relief
expressed in Allison v. Citgo, 151 F.3d 402 (5th Cir. 1998); (iii) whether Plaintiffs could
be adequate representatives under Rule 23(a)(4) given that they had waived claims for
punitive damages and compensatory damages; (iv) the impact of Seventh Amendment
concerns on any revised trial plan based on Plaintiffs’ abandonment of various claims
during and after the class certification hearing; and (v) whether the disparate treatment
and disparate impact claims could be certified concurrently. In essence, the Court
identified additional problems that Plaintiffs would have in certifying any class if they
sought only injunctive, declaratory, and back pay relief. The Court also determined that
even if Plaintiffs satisfied Rule 23(a) and the significant barriers to certification set out
above, certification nonetheless was inappropriate under Rule 23(b) because Plaintiffs
had sought compensatory damages and punitive damages. The Court reasoned that
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Plaintiffs’ request for class-wide punitive damages was defective, both under Allison and
as individual class members “suffered differently under alleged discriminatory practices,
[thereby making] class-wide punitive damages inappropriate.” Id. at 378. Therefore, the
Court concluded that Plaintiffs could not show certification was warranted under
Rule 23(b)(2). For similar reasons, the Court determined that Plaintiffs’ request for classwide punitive damages also precluded certification under Rule 23(b)(3) because such
relief would require “individualized and independent proof of injury” to class members,
and such individual issues would predominate over questions common to the class. Id. at
381.
The ruling in Colindres is one of the key defense victories of 2006 in confronting and
defeating the “punitive damages” class certification theory espoused by the plaintiffs’ bar
in the wake of Dukes, et al. v. Wal-Mart Stores, Inc., 222 F.R.D. 137 (N.D. Cal. 2004).
The author of the opinion in Colindres - Judge Lee Rosenthal - is the former chair of the
Federal Judiciary’s Rule 23 Committee, and for that reason, the opinion is influential and
apt to guide other federal courts in considering the class certification issues which are
inherent in Title VII class actions.
(vi)
Sixth Circuit
Reeb, et al. v. Ohio Dept. Of Rehabilitation & Corrections, 435 F.3d 639 (6th Cir.
2006). In this gender discrimination case, the Sixth Circuit vacated the district court’s
class certification order. Plaintiffs alleged gender discrimination at Belmont Prison
within the Ohio Department of Rehabilitation and Corrections due to alleged disparate
treatment. Plaintiffs asserted that the disparate treatment included the denial of leave and
overtime, the issuance of reprimands for instances where male employees were not
reprimanded, the denial of training, and favoritism to female employees who allegedly
performed sexual favors for the warden and supervisors. Plaintiffs sought both injunctive
relief and monetary damages. The district court granted Plaintiffs’ motion for class
certification. On appeal, the Sixth Circuit reversed on several grounds. As to the
commonality requirement under Rule 23(a), the Sixth Circuit determined that the
incidents, people involved, motivations, and consequences regarding each of the named
Plaintiffs’ claims must be examined. The Sixth Circuit concluded that the district court
failed to conduct the proper analysis because it failed to examine the nature of Plaintiffs’
claims and the likely claims of other members of the class. Concerning factors under
Rule 23(b)(2), the Sixth Circuit reasoned that the defining issue is the similarity of the
class members’ interests; thus, the more that individualized determinations come into
play, the more divergent the interests of the class members become. The Sixth Circuit
concluded that class certification was inappropriate because of plaintiffs’ demand for
compensatory damages, since compensatory damages include future pecuniary losses,
emotional pain, suffering, inconvenience, mental anguish, loss of enjoyment of life, and
other non-pecuniary losses. The Sixth Circuit reasoned that such factors require an
individual analysis. Accordingly, the Sixth Circuit held that claims for compensatory
damages cannot be certified under Rule 23(b)(2) because such individual claims will
always predominate over injunctive or declaratory relief, thereby making the proposed
class action unmanageable.
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The ruling in Reeb is one of the key defense victories of 2006. The Sixth Circuit
essentially adopted the defense-friendly analyses previously embraced by the Fifth
Circuit in Alison v. Citgo, 151 F.3d 402 (5th Cir. 1998), and the Eleventh Circuit in
Cooper v. The Southern Company, 390 F.3d 695 (11th Cir. 2004).
(vii)
Seventh Circuit
Saunders, et al. v. American Warehousing Services, Inc., et al., No. 04 C 7455 (N.D.
Ill. Sept. 13, 2006). Two brothers sued their former employer for race discrimination
under Title VII and 42 U.S.C. § 1981, and sought a class action for their § 1981 claim.
After reviewing each requirement for class certification under Rule 23, the Court denied
certification, but left open the possibility of certifying a class in the future. Both brothers
had worked as “pickers” in Defendants’ warehouse until they were fired in 2002 and
2003. They alleged that their employer allowed racist graffiti to exist at the warehouse,
condoned racist remarks by Caucasians, limited African-Americans’ use of certain
bathroom and parking facilities, and generally discriminated against them with respect to
promotions, discipline, and duties. In analyzing Plaintiffs’ claims under Rule 23, the
Court found that the class was numerous enough because Plaintiffs provided a list of 65
African-Americans who worked in the warehouse during the relevant time period and
alleged that all of them would have been affected by the discrimination. As for
commonality, the Court limited the proposed class to employees who worked at the
warehouse between March 2001 and April 2003. Despite a year of discovery, Plaintiffs
had not presented any evidence of discrimination or harassment occurring after that point
and Defendants provided numerous affidavits by African-American employees flatly
denying that they had ever suffered discrimination at the company. Therefore, the Court
held that the only common claims of the class occurred during the tenure of the two
named Plaintiffs. As for typicality, the Court held that the claims of one brother were
typical of the class even though he did not suffer the exact same kind of discrimination as
other members of the class allegedly experienced. The Court pointed out that factual
distinctions between class members did not eliminate typicality as the named Plaintiffs
made the same general complaints of discrimination as the other class members. As for
the other brother, the Court noted that his claims eventually might prove atypical because
he was accused of certain behaviors against the company that were unique to him and
could raise additional defenses against his claim in the future. As to adequacy of
representation, Defendants presented affidavits from several employees objecting to the
named Plaintiffs as class representatives. However, the Court found that the objections
of a small number of putative class members were not enough to show a conflict with the
named Plaintiffs. Finally, the Court analyzed Rule 23(b) in the context of a racial
harassment class action under § 1981, and found that only 23(b)(3) would be appropriate
for class certification. Plaintiffs did not have standing to sue for injunctive relief under
Rule 23(b)(2) because as former employees, they could not pursue injunctive relief. At
the same time, Plaintiffs provided almost no evidence as to why their claims should be
certified under Rule 23(b)(3), which offers certification if questions of law or fact that are
common to the class predominate over individual issues affecting only certain class
members, and that class treatment is a superior method of adjudication over other means
of resolution. For these reasons, the Court denied class certification.
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Smith, et al. v. Nike Retail Services, Inc., 234 F.R.D. 648 (N.D. Ill. 2006). In this case,
current and former employees of Nike filed a class action alleging race discrimination in
violation of Title VII and 42 U.S.C. § 1981. They alleged that Nike discriminated against
black employees at its “Niketown Chicago” location by, among other things, segregating
black employees in the worst-paid positions, denying promotions to black employees,
and inflicting harsher discipline on black employees. Furthermore, Plaintiffs alleged the
existence of a hostile work environment which included coercive interrogations regarding
theft, closer monitoring (as compared to white employees), and racial epithets. Plaintiffs
moved for class certification of one overall class and four sub-classes. The overall
“hostile work environment” class comprises all African-Americans employed by
Niketown at any time between December 17, 1999 and the present. That overall class
consists of four sub-classes: (1) the “job segregation/wage disparity” sub-class consisting
of employees who were assigned to lower paid positions in the stockroom or as cashiers
because of their race; (2) the “promotion” sub-class consisting of those who were denied
promotions because of their race; (3) the “discipline” sub-class consisting of those who
suffered from the racially-biased application of workplace rules and regulations; and
(4) the “benefits” sub-class consisting of those who were denied benefits because of their
race. The Court certified the class and each of the sub-classes. After the Court found
that Plaintiffs had met Rule 23(a)’s requirements, it turned to an analysis of Rule 23(b) to
determine whether Plaintiffs were entitled to class certification. As Plaintiffs sought both
equitable and monetary relief, they made arguments in favor of certification under several
sections of Rule 23(b), and separated their requests for equitable relief from their requests
for monetary relief. The Court found that Plaintiffs qualified for equitable relief under
Rule 23(b)(2), which requires that a defendant acted or refused to act on grounds
generally common to all class members, thereby making a single form of equitable relief
appropriate for the class as a whole. However, the Court only conditionally certified the
class on this ground because former employees cannot seek injunctive relief, so Plaintiffs
were ordered to submit a showing of standing for each of the named Plaintiffs. Rule
23(b)(3) also offers certification in the alternative if questions of law or fact that are
common to the class predominate over individual issues affecting only certain class
members, and that class treatment is a superior method of adjudication over other means
of resolution. Nike argued that Plaintiffs’ allegations of a racially hostile work
environment and requests for compensatory and punitive damages raised highly
individualistic issues, thereby making the proposed class action unmanageable under
Rule 23(b)(3). The Court rejected these contentions. As with its analysis of Rule 23(a)
issues, the Court found that questions and issues common to the class would be the focus
of the litigation, and any difference in potential damage recoveries did not affect that
finding. Finally, the Court determined that class treatment was superior to other methods
of adjudication because it could handle the claims of the class of over 200 individuals
with the use of a main class and four sub-classes, as opposed to dozens, or even hundreds
of individual lawsuits. The Court conditionally certified the class and sub-classes,
subject only to Plaintiffs’ amendment of the complaint to conform their pleadings to the
definitions of the sub-classes and to a showing that each named Plaintiff had standing to
sue for injunctive relief.
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(viii)
Eighth Circuit
Arnold, et al. v. Cargill Inc., 2006 U.S. Dist. LEXIS 41555 (D. Minn. June 20, 2006).
Plaintiffs in this case sought class certification, alleging that their employer engaged in a
pattern or practice of discrimination against African-American employees. Plaintiffs
claimed that Defendant’s evaluation process was discretionary and resulted in adverse
impact relative to the compensation, promotions, and termination of African-American
employees. The proposed class consisted of approximately 1,600 current and former
African-American employees who held salaried positions through a defined salary grade.
The Court denied class certification on the basis that Plaintiffs could not meet Rule
23(a)’s commonality requirement. The Court reasoned that where the proposed class is
spread across various business units and was subject to decision-making by various
management teams affecting promotions, compensation, and termination, class treatment
is not appropriate. Plaintiffs argued that commonality existed because the company had a
deeply-rooted homogenous culture that influenced the behavior of managers and
employees throughout the organization in a way that fostered discrimination. In support
of their “culture of discrimination” argument, Plaintiffs pointed to a statement made by a
former CEO to human resource managers that they should “recruit and hire people that
looked and talked like him.” Id. at *33. The Court rejected Plaintiffs’ argument that this
alleged statement demonstrated a common discriminatory culture against AfricanAmericans, particularly given that the statement was made long before the start of the
liability period. The Court supported its conclusion as to the lack of commonality
because the evidence showed that although the company implemented corporate policies
throughout its organization, it did not have a centralized evaluation system. Rather,
individual business units customized performance evaluation processes to meet the needs
of their particular businesses. The Court also found that Plaintiffs’ claim that the
company engaged in a pattern and practice of discrimination against African-American
employees ignored Cargill’s economic and business realities. The evidence showed that
the actual promotion of employees occurred at the individual business unit level, of
which there were many; open positions were filled in a multitude of ways, and the
process by which promotions were made varied by business unit and by business needs.
The record also demonstrated that Cargill did not have a centrally designed and managed
compensation system. Rather, compensation plans at Cargill were designed and
implemented at the business unit level. Finally, the Court concluded that Cargill’s
termination procedure did not support a finding of commonality because, although
Cargill issued corporate-level policy guidelines, termination decisions were also made at
the business unit level. The Court also found that Cargill’s diverse and complex business
structure weighed against a finding of commonality. The Court found it significant that
the named Plaintiffs worked at only 13 of the 87 business units at the time the lawsuit
was filed. In these circumstances, the Court held that there were too many differences
between Plaintiffs in each of the business units to justify a finding of commonality. For
these reasons, the Court denied Plaintiffs’ motion for class certification.
Stocking, et al. v. AT&T, 436 F. Supp. 2d 1014 (W.D. Mo. 2006). The representative
Plaintiff in this case filed a class action against her employer, alleging that the health care
program she had selected contained a restriction that violated Title VII of the 1964 Civil
Rights Act and the Pregnancy Discrimination Act (“PDA”). The health care program
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restriction in question did not provide coverage for contraceptives prescribed for birth
control. Plaintiff alleged that the exclusion of contraceptives constituted sex
discrimination and pregnancy discrimination under the PDA, which prohibits bias based
upon pregnancy-related conditions. The claim relied not upon alleged discrimination
arising from Plaintiff’s actual pregnancy, but rather from a woman’s potential to become
pregnant. The Court granted summary judgment in favor of Plaintiff on the issue of
liability, stating that potential pregnancy is a medical condition that is sex-related and
only women can become pregnant. With respect to the issue of class certification,
Defendants argued that members of the class would have so many individualized medical
histories that it would be very burdensome to develop damage claims with any precision
or uniformity. The Court rejected this argument and granted class certification.
(ix)
Ninth Circuit
Colbern, et al. v. Selig, 447 F.3d 748 (9th Cir. 2006). Plaintiffs, a class of retired
Caucasian Major League Baseball (“MLB”) players who did not play long enough to
qualify for pension and medical benefits, alleged that the MLB violated Title VII when it
provided benefits to former Negro League players who did not qualify for regular
benefits. Plaintiffs also alleged that the MLB committed battery against them by
subjecting them to cortisone shots and other drugs without their informed consent. The
district court granted the MLB’s motion for summary judgment on the Title VII and
battery claims, and the Ninth Circuit affirmed. The Ninth Circuit held that Plaintiffs had
failed to make out a prima facie case of race discrimination under Title VII. It concluded
that Plaintiffs were unable to show that class members were subjected to an adverse
employment action since the benefits were not awarded to the black players on the basis
of an employment relationship, but rather, the plan was voluntarily created to provide
benefit coverage to former Negro League players who were excluded from the MLB
because of their color. The Ninth Circuit reasoned that had the players not been excluded
from the MLB because of their color, many would have played long enough to qualify for
regular MLB benefits. Furthermore, the Ninth Circuit determined that Plaintiffs failed to
show that they were similarly situated to those who received the benefits. The white
players were never excluded from the MLB on account of their race, nor did they play in
the Negro League, a requirement for eligibility for the special benefit plans.
Alternatively, the MLB offered a legitimate, non-discriminatory reason for adopting the
special benefit plans, which the class failed to rebut. The goal of the plans was to remedy
past discriminatory practices since the former Negro League players had been excluded
from MLB because of their color. For these reasons, the Ninth Circuit affirmed the
dismissal of the claims.
(x)
Tenth Circuit
Anderson, et al. v. Boeing Co., 2006 U.S. Dist. LEXIS 76964 (N.D. Okla. Oct. 18,
2006). Plaintiffs were a group of female salaried and hourly workers employed at
Defendant’s Oklahoma facilities who alleged that the company engaged in a pattern or
practice of discrimination against female workers. Plaintiffs alleged that Boeing had
adopted employment procedures that had a disparate impact on women in connection
with earnings and overtime opportunities. In 2004, the Court conditionally certified two
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sub-classes under Rule 23(b)(2), including one that addressed Plaintiffs’ claim that
female salaried workers earned less money than their male counterparts (“salary subclass”), and one that addressed Plaintiffs’ claim that female hourly workers were not
given the same opportunity to work overtime (“overtime sub-class”). At the close of
merits discovery, a little more than a year later, Defendant moved for summary judgment
or, in the alternative, for decertification. The Court granted the motion to decertify the
salary sub-class and granted summary judgment on Plaintiffs’ overtime sub-class claim.
The Court decertified Plaintiffs’ salary sub-class on the grounds that Plaintiffs had failed
to meet the Rule 23(a) requirements of commonality and typicality. With Plaintiffs
relying heavily on statistical evidence, the Court found that Plaintiffs’ evidence did not
support a finding of class-wide discrimination in pay between male and female
employees based on either disparate impact or disparate treatment. Rather, Plaintiffs’
evidence only showed pockets of disparate impact within certain job aggregation groups
(“JAGs”). In fact, in some instances the evidence showed that female workers were paid
more than their male counterparts. Thus, the Court concluded that the statistical evidence
did not show that there were common questions of law or fact as to whether there were
“statistically significant gender disparities in salaried compensation.” Id. at *12-13.
Plaintiffs’ anecdotal evidence also failed to show commonality among the salary subclass. For similar reasons, the Court held that the typicality requirement under Rule 23(a)
had not been met. Although the two class representatives claimed that they were paid
less than their male counterparts, the statistical evidence showed that other female
employees in the salary sub-class did not have similar experiences. Thus, the class
representatives did not have injuries or claims that were typical of the entire class. In
decertifying the salary sub-class, the Court recognized that its action did not preclude
“the possibility that plaintiffs [individually speaking] have a disparate impact and/or
disparate treatment claims with respect to certain JAGs.” Id. at *19. The Court declined
to decertify the overtime sub-class, ruling that it satisfied the requirements under Rule
23(a) and (b); Plaintiffs’ statistical evidence showed consistent disparities between male
and female employees with respect to the percentage of overtime hours worked and the
amount of overtime paid. However, the Court nevertheless dismissed Plaintiffs’ overtime
claim on summary judgment. The Court held that Plaintiffs failed to establish a prima
facie case of discrimination, because the statistical evidence failed to take into account all
the factors governing an employee’s eligibility for overtime. Specifically, the statistical
analysis did not incorporate the requirements pertaining to the assignment of overtime.
Thus, the statistical analysis did not isolate the effect of supervisor discretion from the
effect of the collectively bargained contractual provisions. The Court determined that as
with their salary claim, Plaintiffs’ anecdotal evidence was not so widespread as to
indicate discrimination on a class-wide basis.
Britton, et al. v. Car Toys, Inc., 2006 U.S. Dist LEXIS 87078 (D. Colo. Nov. 30, 2006).
In this case, Plaintiff alleged that Defendant had discriminatory promotion policies, and a
sexually hostile and retaliatory work environment, which prevented women from
attaining management positions within the workforce. Plaintiff sought certification of a
class of all women employed by Defendant or who applied for a management position
from 2000 to January 1, 2006, and who had been subjected to Defendant’s discriminatory
policies related to promotion, harassment, and retaliation. Based on the narrow scope of
Plaintiff’s EEOC charge, Defendant argued that the Court could only consider a class of
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women who could have timely filed a charge of discrimination that were denied a
promotion to management. The Court agreed and narrowed the class to women who
actually worked for Defendant, were denied a promotion, and could have filed a failureto-promote charge with the EEOC when Plaintiff filed her charge. The Court determined
that these were the only individuals who could piggy-back on Plaintiff’s EEOC charge,
and therefore assert class claims. The Court reasoned that because Plaintiff never alleged
a failure to hire in her EEOC administrative charge, and her claims of harassment and
retaliation was filed on her behalf alone and not with respect to a putative class, other
potential class members never exhausted their administrative remedies. The Court also
held that although Plaintiff met the threshold under Rule 23(a), she failed to satisfy Rule
23(b) because she could not show that issues common to the class predominated over
individual issues. In addition, the Court concluded that Plaintiff failed to identify a
specific employment policy applicable to the class that could be remedied by injunctive
or declaratory relief. For these reasons, the Court determined that it could not certify a
class action under Rule 23(b)(2) because the final relief would be predominately
monetary damages.
(xi)
Eleventh Circuit
Mauldin, et al. v. Wal-Mart Stores, Inc., 2006 U.S. Dist. LEXIS 85189 (N.D. Ga.
Nov. 22, 2006). In this case, Plaintiff alleged that Wal-Mart’s policy of denying its
employees health insurance coverage for prescription contraceptives discriminated
against women. Plaintiff brought suit on behalf of herself and other similarly situated
employees. Plaintiff filed a motion to certify the class, which the Court granted.
Subsequently, both parties filed motions for summary judgment on Plaintiff’s sex
discrimination claim. While these motions were pending, Defendant learned that
Plaintiff’s local counsel had made several irregular payments to Plaintiff, and Plaintiff’s
lead counsel – Millberg, Weiss Bershad & Schulman – was indicted in an ongoing
federal investigation concerning illegal payments to class representatives in securities
class actions. Defendant filed a motion to decertify the class action due to the inadequate
representative capacity of Plaintiff’s counsel under Rule 23(a)(4). In response, Plaintiff’s
lead counsel admitted that its local counsel had written four checks to Plaintiff, but that
lead counsel was unaware of the payments, and that local counsel intended to withdraw
from the litigation. In ruling on Defendant’s motion, the Court noted that the litigation
could not proceed without an adequate class representative, but found that dismissal
would not be appropriate. Accordingly, the Court gave Plaintiff’s counsel an opportunity
to locate an adequate class representative and file a motion to substitute the new
representative as the named Plaintiff in the case. Subsequently, Plaintiff’s counsel
identified a substitute class representative. In opposition, Defendant maintained that, as a
result of the irregular payments to Plaintiff, the class nonetheless should be decertified
and the class action should be dismissed. As an alternative, Defendant suggested that the
Court re-open discovery on certain limited issues, including the facts surrounding the
payments of the checks. The Court agreed with Defendant that limited discovery was
necessary to ensure that the proposed class representative was adequate to represent the
class. The Court held that once discovery was completed, Defendant could challenge the
proposed class representative’s adequacy to represent the class.
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Although the federal criminal indictment on May 18, 2006, of Millberg, Weiss, Bershad
& Schulman focused on alleged illegal kickback payments to named plaintiffs in class
action securities litigation, the ruling in Mauldin illustrates how this practice also might
infect employment discrimination class action litigation. The ruling also demonstrates
how compliance with the Rule 23(a)(4) requirement is subject to examination at all
phases of the litigation, even after initial certification.
(xii)
District Of Columbia Circuit
No reported cases.
B.
EEOC Pattern Or Practice Cases
“Pattern or practice” lawsuits brought by the U.S. Equal Employment Opportunity
Commission are not governed by Rule 23. Instead, Title VII governs these types of lawsuits.
Under the statute, the EEOC need not satisfy the Rule 23 requirements in order to sue on behalf
of a group of allegedly injured individuals. Nonetheless, EEOC pattern or practice cases tend to
involve litigation issues similar to private party Rule 23 class actions.
The EEOC launched a new systemic litigation initiative in 2006. As a result the volume
of EEOC pattern or practice lawsuits increased significantly, as did court rulings on issues
pertinent to EEOC-initiated litigation.
(i)
First Circuit
No reported cases.
(ii)
Second Circuit
EEOC v. Dresser-Rand Co., 2006 U.S. Dist. LEXIS 47997 (W.D.N.Y. Jul. 14, 2006).
In this case, the EEOC brought a pattern or practice lawsuit claiming that an employee of
Defendant was not offered a reasonable accommodation when he declined to work on a
project for a naval submarine. The employee, who was a Jehovah’s Witness, was a
skilled machine tool operator. He refused to work on the submarine project because one
of the tenets of his religion prohibited him from performing work on any product that
could be used as an implement of war. Defendant subsequently placed the employee on
suspension. Defendant moved for summary judgment and argued that it met its
accommodation obligations by offering the employee a position in its shipping
department, which he refused. Defendant contended that this was the only position
available that could have accommodated the employee’s beliefs. The EEOC argued that
the employee was not officially offered a position in the shipping department, and in any
event, the shipping department position was not a reasonable accommodation,
particularly in light of the fact that on past military projects, the employee had been
switched to another machine, not the shipping room. The Court denied summary
judgment, stating that there were several issues of fact regarding whether or not the offer
of a position in the shipping department (if it was even made) was reasonable under the
circumstances. The Court further stated that the term “reasonable accommodation” is a
relative term and cannot be given a hard and fast meaning. Id. at *7. Each case
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involving such a determination necessarily depends upon its own facts and
circumstances, and comes down to a determination of “reasonableness under the unique
circumstances of the individual employer-employee relationship.” Id. at *8.
EEOC v. Rappaport, Hertz, Cherson & Rosenthal, 448 F. Supp. 2d 458 (E.D.N.Y.
2006). In this case, the EEOC brought a pattern or practice lawsuit against a law firm for
sex discrimination on behalf of a former female employee. When the former employee
sought to intervene as a party in the lawsuit, the law firm moved to compel arbitration of
her claims. The Court ruled that the employee had to abide by an agreement to arbitrate
her claim of sex discrimination against her employer, but that because the agreement was
compulsory and “employer promulgated,” she need pay only $125 to file her claim. Id. at
*2. In granting the motion, the Court reasoned that allowing the imposition of large
arbitration fees would deter claimants from making discrimination claims and that Title
VII did not make an employee’s financial situation relevant to the merits of a claim. The
Court focused on whether the costs of arbitration were prohibitively expensive, without
looking at the financial circumstances of the claimant. The Court also distinguished
between an “employer promulgated plan” and an “individually negotiated plan,” where
the initial filing fees would be significantly higher. Id. at *3. The Court held that
because the employee had a position equivalent to that of a paralegal, it was unlikely that
she had negotiated the agreement with her employer on equal terms. Accordingly, the
Court determined that the agreement was an employer promulgated plan under which
filing fees would be capped at $125.
(iii)
Third Circuit
No reported cases.
(iv)
Fourth Circuit
EEOC v. Federal Express Corp., 2006 U.S. Dist. LEXIS 23062 (D. Md. Apr. 25,
2006). In this EEOC pattern or practice case, a jury found in favor of the EEOC in its
lawsuit against FedEx for violating the Americans With Disabilities Act (“ADA”). The
jury found that FedEx had engaged in intentional discrimination by failing to provide
reasonable accommodations for a deaf employee. The jury also determined that FedEx
had acted with malice or reckless indifference to the employee’s ADA rights. The jury
awarded $8,000 in compensatory damages, and $100,000 in punitive damages. FedEx
subsequently moved for judgment as a matter of law as to punitive damages, and for a
remittitur. The Court denied both motions, refusing to overturn the jury’s verdict and
determination of the proper amount of damages. The EEOC sought post-verdict relief in
the form of an injunction to obey the ADA. However, the Court refused to enjoin FedEx
to obey the law since the ADA remains in effect, and the Court concluded that an
injunction to obey that law would be meaningless.
(v)
Fifth Circuit
In Re EEOC Litigation, 2006 U.S. App. LEXIS 29261 (5th Cir. Nov. 28, 2006). In this
case, the EEOC refused to produce certain documents in discovery on the grounds of
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privilege. The district court ordered that an EEOC attorney be deposed and certain
internal documents be produced despite the EEOC’s assertion of privilege. The EEOC
appealed the order. The Fifth Circuit granted the EEOC’s writ of mandamus and
reversed the district court’s order, stating that the deposition and documents were
privileged and that there was no exception to the privilege shown by the employer. By
way of procedural history, the district court granted Defendant’s motion for summary
judgment on the grounds that the employee on whose behalf the EEOC had sued was not
disabled as defined by the Americans With Disabilities Act (“ADA”). Following the
district court’s decision, Defendant moved for an award of attorneys’ fees. Defendant
asserted that the EEOC attorney knew that the EEOC investigator had acted in bad faith
when writing the report upon which the ADA claim was based, and therefore wanted to
depose the EEOC attorney and subpoena the internal documents that supported the
allegation of bad faith. The Fifth Circuit held that both the attorney and the documents
were protected by the attorney-client privilege, and neither the necessity exception nor
the crime-fraud exception applied, even if that information would be helpful to
Defendant’s claim for an award of attorneys’ fees and costs.
EEOC v. Renal Care Group, Inc., 2006 U.S. Dist. LEXIS 43166 (S.D. Miss. June 9,
2006). The EEOC brought this case on behalf of an employee (Gray) alleging racially
disparate disciplinary practices and retaliation. Renal Care moved for summary judgment
on both claims. Gray allegedly made an internal complaint that African-American nurses
were treated more harshly in disciplinary matters than Caucasian nurses. Defendant
terminated Gray ten days later without first following its progressive discipline
procedures. In support of its motion for summary judgment, Defendant cited to
performance deficiencies to justify the termination. However, the EEOC presented
evidence demonstrating Gray’s exceptional performance reviews and raises. In support
of its pretext argument, the EEOC contended that Defendant’s failure to follow its own
disciplinary procedures denied Gray the opportunity to correct her alleged performance
deficiencies. Based on this evidence, the Court denied summary judgment on the
disparate treatment claim. With regard to the retaliation claim, the Court determined that
the temporal proximity of protected activity to an adverse employment action may be
used to infer the causal connection required in order to make a prima facie case of
retaliation. In this case, only ten days passed between Gray’s complaint of disparate
treatment and her termination. For this reason, the Court denied summary judgment
because sufficient factual issues remained for a jury to decide on the retaliation claim.
(vi)
Sixth Circuit
EEOC v. Digital Connections, Inc., 2006 U.S. Dist. LEXIS 69529 (M.D. Tenn.
Sep. 26, 2006). In this case, the EEOC alleged that an employer, who was referred an
employee from a temporary employment agency, cancelled the assignment when it
learned that the employee had filed a discrimination charge against a previous employer.
The employee in question had filed for bankruptcy, but in listing her assets, she did not
disclose the EEOC lawsuit (for which she might recover money) to the Bankruptcy
Court. Defendant filed a motion for summary judgment and contended that the EEOC’s
suit should be dismissed based on judicial estoppel because the employee failed to list the
lawsuit on her schedule of contingent and unliquidated claims. The Court held that
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although the employee should have disclosed her interest in the suit, she was not a party
of the case, and did not control the EEOC’s decision to file the suit. Therefore, the Court
denied the employer’s motion for summary judgment on the grounds that the employee’s
action could not impede the EEOC’s ability to sue.
EEOC v. SunDance Rehabilitation Corp., 466 F.3d 490 (6th Cir. 2006). In this case,
the EEOC sued Defendant under the anti-retaliation provisions of the Americans With
Disabilities Act, the Age Discrimination in Employment Act, the Equal Pay Act, and
Title VII. The EEOC alleged that a separation agreement that Defendant offered to
discharged employees in exchange for severance pay not otherwise owed to the
employees violated the statutory anti-retaliation provisions of these statutes because it
was a “preemptive strike against future protective activity.” Id. at 497. The district court
held that the separation agreement constituted retaliation to the extent that it conditioned
severance pay in exchange for the employee not filing a charge. For these reasons, it
granted the EEOC’s motion for summary judgment. On appeal, the Sixth Circuit
reversed. The Sixth Circuit held that Defendant’s offer of the separation agreement to all
employees terminated in a reduction in force, without more, did not constitute retaliation
under the four statutes. The Sixth Circuit further held that the charge-filing ban might be
unenforceable, but its inclusion in the agreement did not make it retaliatory. The Sixth
Circuit found it significant that employees who accepted the agreement received a benefit
outside the scope of their employment, and the employees who did not accept the
agreement did not give up any rights. Therefore, the Sixth Circuit ruled that the
separation agreement was not discriminatory on its face. Furthermore, the Sixth Circuit
concluded that the EEOC failed to establish a prima facie case of retaliation because a
failure to pay severance to an employee who refuses to sign a separation agreement is not
an adverse employment action.
(vii)
Seventh Circuit
EEOC v. Continental Airlines, 2006 U.S. Dist. LEXIS 88565 (N.D. Ill. Dec. 4, 2006).
In this pattern or practice case, the EEOC alleged that Defendant discriminated against an
employee on the basis of her race and sex through harassment, disciplinary actions, and a
demotion. The EEOC sought both injunctive and monetary relief. Previously, the Court
granted Defendant’s motion for summary judgment with respect to most of the EEOC’s
claims except the sex harassment claim. After this ruling, Defendant and the employee
began settlement negotiations. After reaching an agreement but before the settlement had
been finalized, Defendant moved to limit the scope of trial issues to preclude the EEOC
from seeking monetary relief on behalf of the employee. The Court denied the motion.
Defendant and the employee then concluded a settlement, and Defendant refiled its
motion. The Court again denied the motion, and held that in a pattern or practice action,
the EEOC does not file a lawsuit on behalf of the individual, but as an enforcement action
for the public interest; therefore, a settlement agreement to which the EEOC is not a party
does not preclude the EEOC from pursuing monetary relief on behalf of the public
interest. However, the Court determined that any monetary relief that the EEOC secured
may be offset post-judgment by the settlement amount between Defendant and the
employee.
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EEOC v. Fun In Motion, Inc., Case No. 05 C 6889 (N.D. Ill. Mar. 29, 2006). In this
pattern or practice lawsuit, the EEOC alleged that Fun In Motion, Inc. (“FIM”)
discriminated against a class of female employees by subjecting them to sexual
harassment. The lawsuit also alleged that one employee was retaliated against when she
was terminated after complaining about the alleged harassment. During the course of
litigation, Defendant filed a motion for a protective order seeking permission to review
and object to communications that the EEOC might send to potential class members and
witnesses. The Court denied Defendant’s motion on the grounds that the employer failed
to show sufficient grounds for such extraordinary relief. The Court, however, indicated
that the employer could renew its motion if there were specific facts developed in the
future supporting a need for such an order.
EEOC v. H & M International Transportation, Inc., 2006 U.S. Dist. LEXIS 1235
(N.D. Ill. Jan. 10, 2006). The EEOC sued H & M in a pattern or practice case on behalf
of a class of female employees alleging sex discrimination in violation of Title VII. H &
M moved to dismiss arguing that the EEOC could not file an action under § 707 which
governs pattern and practice cases when the action stemmed from administrative charges
filed by the individual employees. The Court rejected this argument. It determined that
the statute does not require an EEOC Commissioner’s charge to initiate a § 707 action.
The Court reasoned that limiting discrimination claims in that way would run afoul of the
broad Congressional intent and the power delegated to the EEOC by law to enforce Title
VII.
EEOC v. J.D. Street & Co. Inc., 2006 WL 839444 (S.D. Ill. Mar. 29, 2006). In this
case, the EEOC brought a pattern or practice lawsuit on behalf of female employees
allegedly subjected to sexual harassment and a hostile work environment. Only one of
the employees had filed an administrative charge, in which she alleged that she and other
female employees had been subjected to sexual harassment by one of Defendant’s
employees. On a motion to intervene by several female employees under Rule 24,
Defendant objected on the grounds that they had failed to exhaust their administrative
remedies. The Court rejected Defendant’s argument, stating that “piggy-backing” or the
“single-filing doctrine” is an exception to the charge-filing requirement that allows an
individual who did not file a timely administrative charge to intervene if her claim “arises
out of the same or similar discriminatory conduct, committed in the same period as the
claim in the suit in which she wants to intervene.” Id. at *2. The Court reasoned that,
under these circumstances, where the claims are the same or similar, the employer is on
notice of the claim and has had an opportunity to resolve it. Requiring another
administrative charge serves no purpose. However, the Court stated that at least with
respect to class actions not brought by the EEOC and based on discrete instances of
discrimination, the single-filing doctrine cannot revive the claims of those whose
limitations periods had already expired when the EEOC charge was filed. Therefore,
individuals who could not have filed a timely charge at or after the time the EEOC charge
was filed because their 300-day period for filing a charge had a already expired cannot
piggy-back into the case.
EEOC v. Primps LLC, 2006 U.S. Dist. LEXIS 15413 (N.D. Ill. Mar. 29, 2006). In this
case, the EEOC brought a pattern or practice lawsuit challenging an “English only” rule
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in Defendant’s hair salons. The Court ruled in favor of the EEOC in denying
Defendant’s motion for a protective order which sought to require the EEOC’s counsel to
submit to the Court and Defendant’s counsel certain proposed written communications
with members of the class. The Court held that it could not prohibit communications
with the class “without a specific record showing by the moving party of the particular
abuses by which it is threatened.” Id. at *1. The Court concluded that Defendant had
failed to meet that burden.
EEOC v. Target Corp., 460 F.3d 946 (7th Cir. 2006). In this case, the EEOC brought a
pattern or practice lawsuit alleging that Target engaged in race discrimination by failing
to hire or consider qualified African-American applicants for managerial positions. The
hiring process for managerial positions at Target included a resume pre-screening stage,
an initial telephone interview, and an “ELITE” interview and testing stage. The four
applicants who were the subject of the EEOC complaint made it to different stages of the
interview process but none were hired. The district court granted summary judgment in
favor of Target on the grounds that the recruiter’s burdensome work load was a sufficient
non-discriminatory reason for not offering interviews to three of the applicants, despite
the fact that immediately after telling one of the African-American applicants that he was
too busy to schedule an interview, he scheduled an interview with a Caucasian applicant.
The one other applicant made it to the ELITE stage, but Target stated that he was not
hired because he did not meet the job requirements, despite scoring exceptionally well on
the written test. The Seventh Circuit reversed the district court, stating, with regard to the
applicant who made it to the ELITE stage, that Target did not meet its burden of showing
a legitimate, non-discriminatory reason for his non-hire because it did not retain any
interview forms that detailed how he failed to meet company requirements. The Seventh
Circuit held that “[w]ithout more detail, this explanation does not frame the dispute such
that the EEOC can respond to Target’s asserted reason with specific evidence that this
reason was a pretext for a discriminatory motive.” Id. at 958. The Seventh Circuit also
held that triable issues existed as to whether Target’s reason for not interviewing the
other three applicants was pretext. Target argued that the recruiter never saw these
applicants so he could not have known their race. However, the EEOC presented expert
witness testimony showing that the recruiter could have determined the applicants’ race
by their names and the sound of their voices over the telephone. The Seventh Circuit
concluded that these facts were sufficient to preclude summary judgment.
EEOC v. Walsh Construction Co., 2006 U.S. Dist. LEXIS 61843 (N.D. Ill. Aug. 30,
2006). In this case, the EEOC alleged that an employee’s supervisor subjected her to
sexual harassment and created a hostile working environment. Defendant sought
summary judgment on the grounds that the alleged harasser’s conduct was not
sufficiently severe or pervasive to be actionable, the employee’s complaints about the
harassment were promptly and properly addressed, and the employee failed to comply
with Defendant’s sexual harassment policy when reporting the alleged harasser’s
behavior. The Court held that the alleged harasser’s conduct was objectively offensive
conduct. Specifically, the alleged harasser’s acts of rubbing his penis against the
employee and his multiple slaps to her rear-end, in combination with his repeated
requests for sex, satisfied the test for objective offensive conduct. In addition, the
employee complained about these acts to a supervisor who she believed was in a position
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to resolve her complaints. Although the employer might have dealt with the alleged
harassment effectively at one time, the Court held that there was a genuine issue of
material fact as to whether the employer properly and reasonably addressed the full
pattern of behavior by the alleged harasser. However, the Court granted Defendant’s
motion for summary judgment on Plaintiff’s intentional infliction of emotional distress
allegations because the alleged harasser was not a named defendant, and the employee
did not produce any evidence that Defendant intended to inflict severe emotional distress
on her.
Jane Doe, et al. v. Oberweis Dairy, 456 F.3d 704 (7th Cir. 2006). In this case, Plaintiff,
a minor, sued under Title VII alleging that her shift supervisor had sexually harassed her,
which eventually led to sexual intercourse. Subsequently, the shift supervisor was
imprisoned for statutory rape. The district court granted Defendant’s motion for
summary judgment because Plaintiff had failed to exhaust her administrative remedies,
the sexual intercourse was voluntary and had occurred outside the workplace, and the
shift manager’s behavior was not sufficient to amount to sexual harassment. The Seventh
Circuit reversed the district court’s decision. The Seventh Circuit held that although
Plaintiff denied the EEOC’s request to interview her, she still exhausted her
administrative remedies by completing the procedural requirements for the EEOC’s
in-take process. The Seventh Circuit also ruled that although Plaintiff had consented to
the sexual relationship, she was a minor, and the statutory rape provision conviction of
the harasser meant that the relationship non-consensual. Therefore, the case involved an
employee subjected to non-consensual sex with a supervisor which arose from the
employment relationship. For this reason, the Seventh Circuit concluded that the sex
harassment claim was viable. At the same time, however, the Seventh Circuit indicated
that Plaintiff’s consent could be considered as a mitigating factor when determining
damages.
(viii)
Eighth Circuit
EEOC v. Dial Corp., 469 F.3d 735 (8th Cir. 2006). In this case, the EEOC alleged that
Defendant had engaged in a pattern or practice of intentional discrimination against
women who had applied for work but were not hired. Defendant implemented a preemployment strength test due to a large number of workplace injuries. The district court
held that the strength test had a disparate impact on female applicants, and awarded back
pay and benefits to a class of applicants. Defendant appealed the denial of its motion for
judgment as a matter of law and from the judgment. On appeal, the Eighth Circuit
affirmed the district court’s judgment. The Eighth Circuit held that there was sufficient
evidence that there was a large difference between the number of men and women hired
at the plant after the introduction of the strength test, and the percentage of women who
passed the test declined each time the test was used. On this record, the Eighth Circuit
held that the EEOC had proved both intentional disparate treatment and disparate impact
discrimination. The EEOC also cross-appealed the district court’s ruling that an
applicant who was later found to have a criminal record should not be awarded back pay.
The Eighth Circuit remanded that claim for back pay because Defendant had the burden
of proving that it would have terminated the employee because of her criminal
background, and this issue was not addressed in the district court proceeding. Finally, the
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Eighth Circuit affirmed the district court’s awards of back pay to the class of applicants
without any reduction in the amounts based on evidence presented by Dial of the turnover
rates of job incumbents (which served to reduce the back pay damages sought for the
applicants by the EEOC). The Eighth Circuit reasoned that the district court’s
calculations for the back pay awards were consistent with the remedial purposes of Title
VII.
EEOC v. Husch & Eppenberger, 2006 U.S. Dist. LEXIS 4974 (E.D. Mo. Feb. 9, 2006).
In this case, the EEOC sued a law firm for a pattern or practice claim of sexual
harassment and retaliation. Defendant moved for summary judgment, arguing that the
EEOC’s delay and resulting prejudice to Defendant warranted dismissal of the suit. The
Court concluded that the EEOC did not inordinately delay its investigation and
conciliation, and had filed suit within two years of the first complaint by an employee.
Furthermore, the Court reasoned that even if the EEOC did delay, Defendant did not
suffer undue prejudice because the loss of certain evidence would equally affect both
parties, and Defendant’s employees who were no longer with the firm could be
subpoenaed for deposition and to appear at trial.
EEOC v. KCD Construction, Inc., 2006 U.S. Dist. LEXIS 12408 (D. Minn. Mar. 6,
2006). In this case, the EEOC alleged that Defendant violated Title VII’s prohibition on
discrimination based on national origin when it inquired into the immigration and
citizenship status of its employees. KCD asserted as an affirmative defense that the
EEOC must comply with the same requirements under Rule 23 as private parties who
bring class action lawsuits. The Court rejected this argument, and held that the EEOC
was not subject to the requirements of Rule 23 even though the agency sought monetary
as well as injunctive relief. While neither the U.S. Supreme Court nor the Eighth Circuit
had previously held that the EEOC was not subject to Rule 23 when seeking monetary
relief for allegedly injured parties, the Court followed the decision in General Telephone
Co. v. EEOC, 446 U.S. 318 (1980), which held the EEOC was not subject to Rule 23
requirements when it sought injunctive relief. The Court reasoned that the General
Telephone decision was not based on the type of relief available under Title VII, but
rather focused on the role of the EEOC to vindicate the public interest “albeit at the
behest of and for the benefit of specific individuals.” Id. at 326. Therefore, the Court
concluded that the fact the EEOC sought monetary versus equitable relief was not a
distinction that meant General Telephone should not apply.
This decision confirms the important concept that the EEOC can bring lawsuits similar to
class actions brought by private plaintiffs without satisfying Rule 23 requirements. This
is true whether the EEOC seeks injunctive relief or monetary relief, such as
compensatory and punitive damages.
EEOC v. UMB Bank, 432 F. Supp. 2d 948 (W.D. Mo. 2006). In this case, the EEOC
filed suit on behalf of Rodney Graves, a quadriplegic, alleging that UMB Bank refused to
hire Graves because of his disability in violation of the American With Disabilities Act
(“ADA”). Prior to suit, Defendant requested several times to meet with the EEOC for a
face-to-face conciliation. The EEOC never granted the request, and eventually notified
Graves that conciliation had been unsuccessful and filed suit against Defendant. UMB
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Bank raised the EEOC’s alleged failure to conciliate as an affirmative defense. The
EEOC moved for summary judgment as to this issue on the grounds that it had engaged
in sufficient efforts to conciliate Graves’ charge of discrimination as required by Title
VII. Defendant opposed the motion, arguing that in light of its repeated requests for a
face-to-face meeting, the EEOC’s refusal to conduct the meeting was evidence of the
EEOC’s unreasonableness and lack of good faith. The Court denied the EEOC’s motion,
holding that in this case it was unreasonable for the EEOC to refuse Defendant’s repeated
requests for a conciliation conference. The Court reasoned that the heart of the litigation
was Graves’ ability, or lack thereof, to perform the essential functions of the position for
which he applied. Although the EEOC sent a letter, held phone conferences, and
solicited monetary offers from Defendant, the EEOC nevertheless refused UMB Bank the
opportunity to evaluate the crucial issue of whether Graves was in fact capable of
performing the essential functions of the position for which he applied. For these
reasons, the Court stayed the case for sixty days to give the parties an opportunity for
further conciliation efforts. The Court made it clear that while the EEOC’s refusal to
hold a face-to-face conciliation meeting is not unreasonable as a matter of law, it is a
factor to be considered in determining whether the EEOC’s efforts are unreasonable.
(ix)
Ninth Circuit
EEOC v. GLC Restaurants, Inc. d/b/a McDonald’s Restaurant, 2006 U.S. Dist. LEXIS
78270 (D. Ariz. Oct. 26, 2006). In this case, the EEOC brought a pattern or practice
lawsuit on behalf of eight teenage female workers who allegedly experienced sexual
harassment working at a McDonald’s franchisee. The complaint alleged that all of the
female workers had been subject to a hostile work environment because of the behavior
of one of their managers who constantly grabbed them, touched their bodies, and made
sexual comments and jokes. The EEOC’s lawsuit named a class of women who allegedly
had been harassed at the McDonald’s between January 2001 and September 2002. The
four named victims had filed charges with the EEOC on March 17 and 20, 2003.
Defendant moved for summary judgment based on a statute of limitations defense. The
Court determined that under Title VII, the EEOC may bring hostile work environment
claims on behalf of the individual class members only if at least one of the actions
contributing to the hostile environment occurred within 300 days of the filing of the first
EEOC charge. In this case, two of the victims never filed charges with the EEOC and
only alleged harassment that occurred outside of the 300 day window. The Court held
that the claims of these two individuals were time barred and therefore the EEOC’s
claims on their behalf must be dismissed from the case. The EEOC argued that it had the
authority to bring class-wide allegations on behalf of any individual, no matter when they
were harassed, as long as the claims of at least one of the victims are timely. The Court
disagreed, noting that even though the EEOC does not have to adhere to the requirements
of Rule 23 when bringing a pattern or practice action, and that it has broader standing
than an individual to bring suit, its standing to assert claims is not unlimited.
EEOC v. Harris Farms, Inc., 2006 U.S. Dist. LEXIS 49011 (E.D. Cal. July 5, 2006).
In this EEOC pattern or practice case, a jury awarded $994,000 to a former employee
who the Commission claimed was sexually harassed, retaliated against, and
constructively discharged after her supervisor allegedly raped her. The Court
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subsequently entered an injunction prohibiting Defendant from retaliating against any
employee who complained against sexual harassment. The Court rejected Defendant’s
arguments to stay enforcement of the injunction, holding that although the employer had
appealed the case to the Ninth Circuit, the employer failed to show that it had a strong
probability of winning on appeal. Moreover, the Court held that in keeping the
injunction, any irreparable harm the employer would suffer would be very slight
especially since Defendant claimed that sexual harassment was no longer a problem for
its workforce after the lawsuit. Instead, the Court determined that there was strong
evidence of a continuing danger of retaliation against employees. The injunction also
required Defendant to provide education programs to employees regarding sexual
harassment, post a notice for employees about the litigation, and to keep records of those
who are disciplined regarding sexual harassment.
EEOC v. Lawry’s Restaurants, Inc., 2006 U.S. Dist. LEXIS 55859 (C.D. Cal. July 14,
2006). In this case, the EEOC alleged that Defendant engaged in a pattern or practice of
refusing to hire men as servers in its restaurants on a nationwide basis in violation of Title
VII. Defendant filed a motion to dismiss and argued that the EEOC did not conciliate in
good faith before filing the suit in violation of Title VII’s statutory requirements. The
Court held that although the Ninth Circuit has not considered this issue, other district
courts within the Ninth Circuit have adopted the majority approach which focuses on
whether the EEOC provided the employer with an opportunity to confront all the issues
in a pre-suit conciliation context. As a result, the Court considered whether the EEOC
provided Defendant with an opportunity to address and resolve the issues in the lawsuit
before the EEOC filed suit. The Court determined that because the EEOC and Defendant
spent several months attempting to resolve the issue raised in the lawsuit before the
EEOC filed suit, the EEOC had fulfilled its duty to engage in conciliation. The Court
further held that it was unnecessary to stay the proceedings pending further conciliation
because the parties had reached an impasse on a variety of issues. Therefore, the Court
denied Defendant’s motion to dismiss.
EEOC v. Lexus Of Serramonte Sonic Automotive Inc., 2006 U.S. Dist. LEXIS 66438
(N.D. Cal. Sept. 5, 2006). In this case, the EEOC brought a pattern or practice suit on
behalf of two former employees who allegedly were sexually harassed on the job. In
discovery, the EEOC sought the names of all former female employees of the dealership
for a two year time period; Defendant objected, arguing that the EEOC should not be
allowed to get the list of names for the purpose of adding class members to the suit. The
Court disagreed on the grounds that Title VII specifically allows the EEOC to seek out
possible class members in order to uphold their right to be free from workplace
discrimination. The Court reasoned that the EEOC may seek such class wide relief even
without complying with the certification requirements of Rule 23, because its mandate to
enforce Title VII gives it broader litigation rights than an individual plaintiff or class of
plaintiffs.
EEOC v. Peabody Coal Co., 2006 U.S. Dist. LEXIS 74478 (D. Ariz. Sept. 30, 2006).
In this case, the EEOC brought a pattern or practice case involving Peabody’s lease of a
mine from the Navajo Tribe, and a hiring preference for Navajos that the tribe negotiated
into the lease agreement. The EEOC originally brought suit alleging that the hiring
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preference for Navajo’s only violated Title VII’s provision against national origin
discrimination. The Court dismissed the case, finding that the Navajo Nation was a
necessary and indispensable party, and that it could not be joined to the case because the
EEOC could not bring a legal claim against the Navajo’s, which had sovereign immunity.
The Ninth Circuit subsequently held that the tribe could be joined in the case for the
purpose of providing complete relief, and remanded the lawsuit. On remand, the Court
again dismissed the case, finding that there was no jurisdiction against the tribe. The
Court reasoned that if the EEOC were to obtain the full relief it sought, which included
an injunction against the hiring preference, the tribe would be forbidden from requiring
and enforcing its Navajo’s only hiring provision. The Court determined that such a result
violated Title VII’s exemption of Indian tribes from being sued.
(x)
Tenth Circuit
EEOC v. Albertson’s Inc., 2006 U.S. Dist. LEXIS 727378 (D. Colo. Oct. 4, 2006). In
this case, the EEOC brought a pattern or practice lawsuit on behalf of African-American
and Hispanic workers at Albertson’s distribution centers due to alleged racial and
national origin discrimination. The EEOC subsequently sent a notice to the proposed
class, and then asserted an attorney-client privilege as to its communications with all
possible class members. Albertson’s disputed that a privilege existed and began
interviewing class members without giving notice to the EEOC or allowing it to be
present at the meetings. The EEOC moved for a protective order and also sought to
recover all of the information Albertson’s had already collected from the class members
and to require the company to provide a private meeting room at the workplace where the
EEOC could interview class members during their working time. The Court held that the
EEOC did not establish an attorney-client relationship with the class merely by filing suit
on their behalf. The employees remained free to bring their own lawsuits individually as
well. Further, the Court reasoned that even in a Rule 23 action, an employer is not barred
from communicating with putative class members before the class is certified,
particularly as the employer has an ongoing business relationship with them.
EEOC v. Body Firm Aerobics Inc. d/b/a Gold’s Gym, 2006 U.S. Dist. LEXIS 48128 (D.
Utah July 13, 2006). In this case, the EEOC brought a pattern or practice lawsuit against
Body Firm Aerobics, claiming that it subjected a class of female employees to a hostile
work environment. The case also included allegations of retaliation and constructive
discharge. Body Firm filed a motion for summary judgment regarding the retaliation and
constructive discharge claims of an intervenor plaintiff (Liender). The Court granted
summary judgment in favor of the company and determined that Liender’s retaliation
claim failed because she did not show an adverse employment action, despite the recent
U.S. Supreme Court decision in Burlington Northern Co. v. White, 126 S. Ct. 2405
(2006), which expanded the range of circumstance where employees can assert
retaliation. Liender, an aerobics teacher, complained internally that the company’s new
CEO harassed her and other female employees by referring to them as “little girls,”
making inappropriate comments, and standing unnecessarily close to them. Id. at *3.
Following Liender’s complaint, she alleged that other employees were instructed to shun
her, the CEO circulated a letter criticizing her job performance, and she had to perform
data entry duties and lost her authority to hire and fire employees. The Court stated that
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although Burlington establishes that an individual may suffer actionable retaliation even
in the absence of tangible changes to employment status, the facts alleged by Liender
were insufficient to establish actionable retaliation. The Court stated that “[a]lthough
unpleasant, the type of shunning alleged by Ms. Liender was not severe enough to
meaningfully interfere with her unfettered access to Title VII’s remedial mechanisms.”
Id. at *18. The Court held that the memorandum circulated about Liender amounted to
nothing more than an expression of frustration and dissatisfaction with her work. Thus,
“[e]ven if the memorandum could fairly be considered a threat that Body Firm would
take some future negative action against Ms. Liender, the memorandum itself cannot be
said to constitute an materially adverse action.” Id. at *19. The Court also determined
that the evidence showed that Liender’s job duties and authority did not change. Body
Firm likewise moved for summary judgment regarding the disparate impact and
constructive discharge claims of another employee (Allen) who was allegedly demoted
and forced to leave after the company learned that she was pregnant. Allen was a
salesperson who earned a base salary of $1,800 per month, plus commissions. After her
pregnancy became known, Allen was allegedly asked to do some data entry work to
update customer information. Allen agreed, thinking her pay would remain the same.
However, she received only $6.50 per hour for this work. Allen allegedly left a letter in
the CEO’s office complaining about her treatment. Allen argued that after writing the
letter, she began to receive complaints about her punctuality. When Allen went to a
friend’s funeral with her manger’s permission, but not the CEO’s permission, she learned
that the CEO planned to fire her upon her return, so she never went back to work. In
these circumstances, the Court denied summary judgment to Body Firm, determining that
there were genuine issues of material fact regarding whether Allen was demoted, whether
she voluntarily accepted the transfer, and whether she was constructively discharged.
The Court also concluded that summary judgment was not justified because Allen’s
compensation was significantly reduced and her job duties were completely changed.
EEOC v. Joslin Dry Goods, 2006 U.S. Dist. LEXIS 26770 (D. Colo. May 5, 2006). In
this case, the EEOC brought a pattern or practice lawsuit and alleged that an employee of
Defendant sexually harassed numerous female employees, and Defendant failed to take
adequate steps to prevent or stop the harassment. In discovery, the EEOC provided the
names of 23 potential class members, but refused to disclose their addresses and
telephone numbers despite the Court’s instructions to do so on two occasions. In these
circumstances, Defendant filed a motion to compel production of the information. The
EEOC argued that it should not be required to produce this information due to the
attorney-client privilege and Colorado Rule of Professional Conduct 4.2, which prohibits
contact with a party represented by counsel. The Court granted Defendant’s motion to
compel on the grounds that the employer had sought potentially relevant information.
The Court declined to render a formal opinion regarding whether Defendant could
contact the individuals once it received the information.
(xi)
Eleventh Circuit
EEOC v. R.F. Restaurants, Inc. d/b/a/ Denny’s, 2006 U.S. Dist. LEXIS 92139 (S.D.
Fla. Dec. 14, 2006) In this case, the EEOC brought a pattern or practice lawsuit based
upon the complaint of a former male employee (Crumity) who allegedly was subjected to
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a sexually hostile work environment due to the conduct of a female assistant manager
(Pieretti). The EEOC alleged that the sexual harassment allegedly suffered by the victim
included patting on his buttocks, brushing against his groin, kissing him on the lips, and
inquiring about his sexual practices. Defendant filed a motion for summary judgment,
claiming, among other things, that Pieretti was “universally rude, crude, and mean,” to all
employees, and that therefore, Crumity was not singled out for treatment based upon his
gender. Id. at *5. The Court denied Defendant’s motion for summary judgment and
stated that “[r]egardless that employees of both genders may have been exposed [to]
Pieretti’s meanness and rude behavior, ‘the critical issue… is whether members of one
sex are exposed to disadvantageous terms or conditions of employment to which
members of the other sex are not exposed.” Id. Therefore, the Court reasoned a jury
could find that Crumity was subject to offensive conduct because of his gender beyond
the conduct inflicted upon female employees.
McCall, et al. v. Lockheed Martin Corp., 2006 U.S. Dist. LEXIS 46772 (S.D. Miss.
July 10, 2006). In this multi-plaintiff race discrimination case, the employer attempted to
compel the production of testimony and documents from the EEOC to challenge the
credibility of EEOC determinations that there was reasonable cause to believe that
Plaintiffs were subject to discrimination. Plaintiffs intended to use these determinations
as evidence of the employer’s misconduct. The EEOC resisted discovery and filed a
motion to quash. The Court held that a balancing test should be employed before
requiring EEOC personnel to be deposed. The balancing test should take into
consideration whether the burden or expense of the proposed discovery outweighs its
likely benefit, taking into account the needs of the case, the amount in controversy, the
parties’ resources, the importance of the issues at stake in the litigation, and the
importance of the proposed discovery in resolving the issues. The Court balanced the
likely disruption to the operations of the EEOC by requiring deposition testimony against
the possibility that Defendant had already obtained all of the material to which it was
entitled; in balancing these factors, the Court granted the EEOC’s motion to quash. The
Court reasoned that at this juncture of the case, deposition testimony was not required
because all information to which the employer was entitled should be available in
documents produced by the EEOC pursuant to the employer’s Freedom of Information
Act requests. However, the Court also determined that if a review of the documents that
had been provided leads to the conclusion that other non-privileged information, likely to
lead to the discovery of admissible evidence, can only be obtained through a deposition
of EEOC personnel, Defendant could make an appropriate motion to pursue that
discovery.
(xii)
District Of Columbia Circuit
Venetian Casino Resort v. EEOC, 453 F. Supp. 2d 157 (D.D.C. 2006). After
undergoing a large hiring process, the Venetian hotel was hit with a number of lawsuits
alleging various types of discrimination in connection with the hiring. As a result, the
EEOC initiated an investigation and subpoenaed certain information from the Venetian,
including information about employees. The hotel objected to the request through the
EEOC’s administrative subpoena procedures, and when the EEOC rejected the
objections, the hotel filed a lawsuit, arguing that the EEOC’s requests violated Title VII,
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the Trade Secrets Act, the Freedom of Information Act, Executive Order No. 12, and the
Copyright Act. Further, it argued that the EEOC’s policy of providing information
received from employers to charging parties and of not notifying employers who have
submitted information before the agency provides that information to litigants allows a
“back door” by which charging parties can obtain documents without submitted a FOIA
request. The Court analyzed each of the applicable statutes and determined that the
EEOC’s document policy did not violate any of them. For example, the Court noted that
Title VII gives the EEOC the right to obtain information when it investigates a charge,
and although the agency is barred from public disclosures of the information, it has
always been allowed to give such information to the relevant charging parties. Because
the Court concluded that none of the statutes were violated by the EEOC’s potential
disclosure of collected information to the charging parties, the Court dismissed the
Venetian’s case seeking a declaratory judgment that it did not have to comply with the
subpoena.
C.
Other Federal Rulings Affecting The Defense Of Workplace Class Action Litigation
Throughout 2006, federal courts issued key rulings in class action lawsuits and on Rule
23 issues which significantly impact the defense of workplace class actions. Those
rulings included the legal standards for deciding class certification motions; legal issues
in class actions challenging employee testing; class action settlement issues; class actions
by retirees over cuts in benefits; class actions involving affirmative action plans and prior
consent decrees; the impact of piggy-backing EEOC charges by class members on
litigation issues under Rule 23; attorneys’ fee awards in class action settlements; multiparty litigation involving mass lay-offs under the Worker Adjustment and Retraining
Notification Act; arbitration of class actions; workplace RICO class actions; class action
litigation over worker privacy; class actions in Alien Tort Claims Act cases; class action
tolling principles; certification of issue classes under Rule 23; class certification issues
for nationwide Vioxx litigation; class actions under the Migrant and Seasonal
Agricultural Worker Protection Act; class action litigation by labor advocacy groups;
preemptive strikes on the class certification process; class certification issues involving
discrimination under other federal statutes; class action standing issues; legal issues in
terminating class action consent decrees; class certification defenses based on typicality;
proof issues for disparate impact theories in class actions; expert analyses in class actions
alleging disparate impact discrimination; challenges to adequacy of class counsel;
aggregate proof issues in class actions; fairness hearings for approval of class action
settlements; class actions under the Americans With Disabilities Act; disqualification of
counsel in class actions; and punitive damages in class actions.
These decisions add to the evolving case law of Rule 23. Perhaps none was more
significant or critical to employers than a bellwether securities law class action ruling
from the Second Circuit in December of 2006 entitled In Re Initial Public Offering
Securities Litigation. It is likely to influence employment discrimination class action
litigation – especially insofar as class certification motions are adjudicated – in a
profound manner in 2007.
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(i)
Legal Standards For Deciding Class Certification Motions
In Re Initial Public Offering Securities Litigation, 2006 U.S. App. LEXIS 29859 (2d
Cir. Dec. 5, 2006). In this case, the Second Circuit addressed significant legal questions
about the quantum of proof a party must present to certify a class action. The case
involved thousands of lawsuits filed in 2001 against issuers and underwriters of initial
public offerings alleging that a group of companies had manipulated hundreds of IPO’s.
The lawsuits were consolidated in the U.S. District Court for the Southern District of
New York; the district court then required Plaintiffs to consolidate their lawsuits against
the issuers of public offerings, which resulted in a set of “master allegations” laying out
the alleged fraudulent schemes that were common across the class of issuers. The district
court had the parties select six test cases for determining whether or not class certification
was appropriate. After full briefing, the district court certified nationwide class actions in
each test case. In granting class certification, the district court applied a standard that
Plaintiffs needed only to make “some showing” of each of the elements for certification
under Rule 23. In effect, the result was somewhat like a summary judgment decision, for
so long as Plaintiffs came forward with prima facie proof for each of the relevant Rule 23
elements, the district court could grant class certification in favor of Plaintiffs without
actually resolving any contested issues. The district court’s use of this “some showing”
standard was based chiefly on language from a Second Circuit decision entitled Caridad
v. Metro-North Commuter Railroad, 191 F.3d 238 (2d Cir. 1999). In that Title VII
action, the Second Circuit had held that “class certification is not an occasion for
examination of the merits of the case,” and seemed to indicate that, therefore, a plaintiff
needed only to make “some showing” on the issues relevant to class certification to
prevail on a certification motion. Id. at *6. In the Caridad case itself, the primary issue
was whether the employer’s supposedly discriminatory policies had a common effect on
the proposed class. Subsequently, the Caridad ruling has served as a launching pad for
Title VII plaintiffs to certify numerous employment discrimination class actions, for
Caridad is a very “plaintiff-friendly” precedent.
On appeal in the In Re IPO case, the Second Circuit reversed the district court’s order
granting class certification. In so doing, the Second Circuit “disavowed” the implications
of Caridad. It held instead that class certification requires “making determinations that
each of the Rule 23 requirements has been met,” and that a district court considering class
certification must “resolve factual disputes relevant to each Rule 23 requirement …” Id.
at *14. To reach this result, the Second Circuit distinguished well-known cautionary
language from the decision in Eisen v. Carlisle and Jacquelin, 417 U.S. 156 (1974),
where the U.S. Supreme Court cautioned against, in certain cases, examining the merits
of the underlying case when ruling on class certification. In Eisen, the Supreme Court
held:
“We find nothing in either the language or history of Rule 23 that
gives a court any authority to conduct a preliminary inquiry into the
merits of a suit in order to determine whether it may be maintained as
a class action. Indeed, such a procedure contravenes the Rule by
allowing a representative plaintiff to secure the benefits of a class
action without first satisfying the requirements for it. He is thereby
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allowed to obtain a determination on the merits of the claims advanced
on behalf of the class without any assurance that a class action may be
maintained.
417 U.S. at 177. The Second Circuit held that Eisen should properly be understood “to
preclude consideration of the merits only when a merits issue is unrelated to a Rule 23
requirement.” Id. at *8. This means “there is no reason to lessen a district court’s
obligation to make a determination that every Rule 23 requirement is met before
certifying a class just because of some or even full overlap of that requirement with a
merits issue.” Id. at *9. The Second Circuit placed particular importance on the seminal
decision in General Telephone Co. v. Falcon, 457 U.S. 147, 161 (1982), a Title VII class
action, where the Supreme Court held that such an action “may only be certified if the
trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have
been satisfied.” In the Second Circuit’s view, “the important point is that the
requirements of Rule 23 must be met, not just supported by some evidence.” 2006 U.S.
App. LEXIS at *15.
Applying these principles, the Second Circuit reached five key “conclusions” to guide
district courts in making decisions on class certification:
•
“[A] district judge may certify a class only after making determinations
that each of the Rule 23 requirements has been met;”
•
Such determinations can be made only if the judge resolves relevant
“factual disputes” and “finds whatever underlying facts are relevant to a
particular Rule 23 requirement have been established;”
•
This obligation “is not lessened by overlap between a Rule 23 requirement
and a merits issue, even a merits issue that is identical with a Rule 23
requirement;”
•
“[A] district judge should not assess any aspect of the merits unrelated to a
Rule 23 requirement;” and,
•
A judge has “ample discretion to circumscribe both the extent of discovery
concerning Rule 23 requirements and the extent of a hearing to determine
whether such requirements are met.”
Id. at *15-16. Thus, the Second Circuit held that “[i]t would seem to be beyond dispute
that a district court may not grant class certification without making a determination that
all of the Rule 23 requirements are met,” and that “the district judge must receive enough
evidence, by affidavits, documents, or testimony, to be satisfied that each Rule 23
requirement has been met.” Id. at *15. Using this new test for the In re IPO appeal, the
Second Circuit decided that, had the district court properly considered the evidence, it
would have concluded that individual questions of law or fact would clearly predominate
over common questions in the six focus cases. As a result, the Second Circuit concluded
that Plaintiffs had failed to satisfy the requirements of Rule 23.
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The Second Circuit’s decision in the In Re IPO case dramatically changes the landscape
of class action litigation in that circuit, and possibly in other circuits as well. Defendants
can now challenge – including by expert proof – plaintiffs’ assertions that the class
should be certified. The clear message of the ruling is that plaintiffs’ lawyers have a
higher standard in terms of the burden to show that their claims are class-worthy. Of
particular importance to employment discrimination litigation is that the author of In Re
IPO Securities Litigation is Circuit Judge Newman, the author of Caridad v. Metro-North
Commuter Railroad, 191 F.3d 283 (2d Cir. 1999), one of the most plaintiff-friendly
Rule 23 decisions in employment discrimination class actions. Caridad is clearly
undercut, and employers will no longer be burdened by its impact on the proof issue at
the heart of the Rule 23 certification process. The import of the In Re IPO ruling is an
unequivocal message that district courts may no longer ignore a defendant’s evidence in
opposition to class certification if such proof happens to touch on the merits.
(ii)
Class Actions Challenging Employee Testing
Adams, et al. v. City Of Chicago, 469 F.3d 609 (7th Cir. 2006). In this case, Chicago
police officers alleged that a 1994 examination for promotion to sergeant, and the ensuing
February 1997 promotions based on the examination, had a disparate impact based on
race. The district court granted summary judgment for the City of Chicago, determining
that the police officers could not demonstrate the availability of an alternative method of
promotion that was equally valid and less discriminatory than the examination used. On
appeal, the Seventh Circuit affirmed this ruling. The Seventh Circuit reasoned that
although the district court erred in excluding evidence that the City of Chicago in 1998
crafted a system where 30 percent of the promotions to sergeant were based on merit
evaluations, there was no evidence presented by Plaintiffs regarding an alternative
method for examining the merits of employees for promotion to sergeant or that the City
had refused to adopt this alternative earlier.
Bradley, et al. v. Lynn, 443 F. Supp. 2d 145 (D. Mass. 2006). Plaintiffs in this case
alleged that the civil service exams utilized to fill fire fighter vacancies in 110
Massachusetts municipalities had a disparate impact on African-Americans and
Hispanics. In ruling that the exams disparately impacted minorities, the Court held that
the exams were not properly validated or job-related. The Court determined that there
was no persuasive evidence that the use of the written cognitive examination as the sole
basis for rank ordering entry-level firefighter candidates was a valid selection procedure.
The Court agreed with Plaintiffs that valid alternatives to the exam existed, including
ranking candidates according to score bands instead of individual scores, or combining
the written test with physical, personality, and/or bio-data tests to rank the candidates.
The Court also concluded that proper validation had not been shown because the written
exam, as developed, assumed that the exam would comprise 40% of a candidate’s overall
score, while a physical exam would constitute 60%. However, in 1993, the State decided
to use the physical exam on a pass/fail basis only after a certified list of candidates had
been created based solely upon written exam scores.
Gulino, et al. v. New York State Education Department, 460 F.3d 361 (2d Cir. 2006).
Plaintiffs in this case, African-American and Latino teachers, filed a class action against
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the New York State Education Department (“SED”) and the New York City Board of
Education (“BOE”), alleging that a teacher test certification program violated Title VII.
The teachers alleged that the use of the Liberal Arts and Sciences Test (“LAST”) to
certify public school teachers had a disparate impact on minority educators in violation of
Title VII because minority teachers failed the test more frequently than Caucasian
teachers. The district court concluded that both Defendants were employers subject to
Title VII liability, but that Defendants were not liable because the LAST was sufficiently
job related. On appeal, the Second Circuit rejected the district court’s finding that
because the SED affirmatively interfered with or affected Plaintiffs’ employment
opportunities, the SED should be considered Plaintiffs’ employer. The Second Circuit
also held that the SED did not qualify as the employer under any theory of agency.
Instead, the Second Circuit relied upon its findings that the SED did not hire or
compensate Plaintiffs, nor did it exert any control over their day-to-day activities.
Consequently, the Second Circuit affirmed the dismissal of all claims against SED, and
ruled that the BOE was the employer and, therefore, subject to Title VII liability. With
respect to the test itself, the Second Circuit held that the district court’s conclusion that
the LAST was job-related was not based on the proper standard for determining the
validity of an employment test. The Second Circuit concluded that the district court
improperly held that the LAST was job-related. The Second Circuit determined that the
appropriate test for analyzing the content validity of an employment test considers the
following five factors: (1) the test-makers must have conducted a suitable job analysis;
(2) they must have used reasonable competence in constructing the test itself; (3) the
content of the test must be related to the content of the job; (4) the content of the test
must be representative of the content of the job; and (5) there must be a scoring system
that usefully selects those who can better perform the job. Because the district court did
not apply this standard, the Second Circuit remanded the case for further fact-finding in
light of the clarified legal standard.
International Brotherhood Of Electrical Workers v. Mississippi Power & Light Co.,
442 F.3d 313 (5th Cir. 2006). In this case, two unions and two of their AfricanAmerican members filed suit under Title VII claiming that Defendant’s method of setting
cut-off scores for an aptitude test was unlawful and had a disparate impact on AfricanAmericans. Following a reduction in force, more senior employees who were laid off
could “bump” junior employees, but were required to receive a certain score on a clerical
aptitude battery test in order to “bump” into a new position. Reversing the district court,
the Fifth Circuit found for the employer. It determined that the employer had shown that
the cut-off scores were consistent with business necessity in increasing the likelihood that
successful applicants would become proficient employees. The Fifth Circuit determined
that the company had presented sufficient evidence showing that the higher a score, the
more likely the applicant would be a proficient employee. It held that Plaintiffs had the
burden to establish an acceptable alternative business practice for making job placement
decisions once Defendant established a business necessity for using the disputed tests.
The Fifth Circuit concluded that Plaintiffs failed to meet this burden.
The opinion in Mississippi Power is important because it resolved a split in the Fifth
Circuit. The decision clarifies that once an employer makes a showing of business
necessity, the burden shifts to a plaintiff to establish an acceptable alternative practice.
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(iii)
Class Action Settlement Issues
Huber, et al. v. Taylor, et al., 469 F.3d 67 (3d Cir. 2006). Based on a complicated fact
pattern, Plaintiffs filed a class action against some of their prior counsel in an asbestos
class action for the breach of the attorneys’ fiduciary duty of undivided loyalty and
candor in the settlement of Plaintiffs’ claims. In broad terms, the class action complaint
alleged that prior counsel had negotiated settlements in which counsel received as
attorneys’ fees a smaller percentage of the payments made to punitive class members
than they received in fees from other clients in related actions, thus creating the incentive
for counsel to negotiate higher settlements in cases in which they would receive a larger
contingent fee. The district court’s opinion defined the “northerners” as Plaintiffs in
asbestos actions filed in Pennsylvania, Ohio, and Indiana, and as “southerners” those
Plaintiffs in asbestos actions filed in Mississippi and Texas. The complaint alleged that
northerners received payouts that were between 2.5 and 18 times lower than those
received by southerners. In cases involving northerners, class counsel had to share their
attorneys’ fee award with local counsel, but they did not have to utilize local counsel in
cases involving southerners. Plaintiffs sought class certification, which the district court
denied. The parties thereafter filed cross-motions for summary judgment; the district
court agreed with the defense that Plaintiffs had failed to demonstrate actual harm specifically, that the settlements received by Plaintiffs would have been more favorable
but for the alleged breaches of fiduciary duties - and, therefore, granted judgment for the
defense. On appeal, the Third Circuit reversed because the district court erred in its
choice of law determination. The district court had granted the defense motion for
summary judgment because it determined that Plaintiffs had failed to show “causation
and actual injury.” This determination was based on the district court’s choice of law
analysis, which the Third Circuit characterized as the “lynchpin” of the district court’s
decision to deny class certification and grant summary judgment. Id. at 74. The Third
Circuit rejected Defendant’s argument that Plaintiffs had waived the choice of law issues
and held that Texas law governed the class action complaint. The Third Circuit further
determined that Texas law does not require a client to prove actual damages in order to
obtain forfeiture of an attorneys’ fee for the attorney’s breach of fiduciary duty to the
client. Thus, the Third Circuit concluded that the foundation of the district court’s
decision was flawed and mandated reversal, and further directed the lower court to
“reconsider whether to certify the class in light of the application of Texas law.” Id. at
83.
Synfuel Technologies, Inc. v. DHL Express (USA), Inc., 463 F.3d 646 (7th Cir. 2006).
A group of customers sued a package shipping company, arguing that its practice of
setting a default mailing rate of 5 pounds for every package on which a customer failed to
indicate the actual rate violated federal common law. The case was certified as a class
action and eventually settled, with Defendant sending out notices to the class regarding
each member’s right to relief. The settlement entitled former customers to receive prepaid mailing envelopes depending on the number of default rates they had been charged,
with a cap of four envelopes given to customers who had been charged the default rate 12
or more times. Several Plaintiffs objected to the settlement, arguing that it was not fair to
the class members. The district court approved the settlement and the objectors appealed.
In addressing the objections, the Seventh Circuit determined that it had jurisdiction over
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the controversy because there was diversity between the parties, not because of any
unspecified federal common law. The Seventh Circuit examined the arguments against
the settlement, explaining that the most important factor was to measure the strength of
Plaintiffs’ case against the size of the settlement offer, and then quantify the net expected
value of continued litigation to the class. The Seventh Circuit concluded that the
settlement was not fair because it could not tell how the district court determined that the
particular payment schedule (i.e., free mailing envelopes up to a total of four) related to
Plaintiffs’ losses, the overall value of their case, or the overall value of the settlement
offer. Further, the Seventh Circuit disapproved of the use of pre-paid envelopes instead
of cash as compensation, as the envelopes acted as coupons that forced the class members
to continue using Defendant’s services, and as a percentage of such coupons will never
be used, the cost will never be incurred by Defendant. Based on these concerns, the
Seventh Circuit vacated approval of the settlement and remanded the case to the district
court.
(iv)
Class Actions By Retirees Over Cuts In Benefits
Raetsch, et al. v. Lucent Technologies, Inc., 2006 U.S. Dist. LEXIS 78422 (D.N.J.
Oct. 27, 2006). In 1996, AT&T decided to divest part of its manufacturing business and
spun off a new company, Lucent Technologies, Inc. (“Lucent”). In connection with the
business transaction, AT&T transferred, and Lucent assumed, the obligations to provide
pension and medical benefits to transferred employees as well as retirees. In 1999,
Lucent began to transfer excess pension plan assets to a new health care account to pay
for retiree medical benefits in the amount of $888 million over four years. In this case, a
group of retired management employees brought claims against Lucent alleging that the
company violated Internal Revenue Code (“IRC”) Section 420 because in less than five
years from the time the pension funds were transferred to the retiree medical plan, Lucent
made a series of severe cuts to retiree medical benefits either by reducing levels of
coverage or by increasing co-payments and deductibles. Lucent filed a motion to
dismiss, arguing that ERISA provides no cause of action under IRC § 420. Lucent also
argued that the retirees’ lawsuit should be dismissed because they failed to exhaust their
administrative remedies. The Court held that the retirees could pursue their claims under
§ 420 because the language of the tax code section was fully integrated into the terms of
the retiree medical benefits plan. However, the Court further held that the retirees were
required to exhaust their administrative remedies before filing their lawsuit, but did not
do so. The Court indicated that even if it would have been futile to file an administrative
appeal, the retirees should have filed the appeal so the Court could have an administrative
record. The Court dismissed the case with instructions for the plan fiduciaries to decide
the substantive matters presented by the retirees.
Stevenson, et al. v. Milwaukee Forge, 2006 U.S. Dist. LEXIS 76713 (E.D. Wis.
Aug. 17, 2006). In this case, former employees of Milwaukee Forge and several of the
employees’ spouses accepted an early retirement plan from Defendant, which included
certain alleged promises. These alleged promises were to pay health insurance premiums
until the employees became eligible for Medicare. Fourteen employees accepted the
early retirement plan. Two years later, Defendant modified its health plans to require
retirees and employees to pay their own premiums. Twelve of the fourteen employees
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filed a lawsuit under ERISA contending that the early retirement plan prohibited
Defendant from requiring them to pay their plan premiums. The Court held that
Defendant had violated the terms of the early retirement incentive plan, and that the early
retirement plan was a contract independent from the health plans and it supplanted any
reservation of rights contained in the health plans.
(v)
Class Actions Involving Affirmative Action Plans And Prior Consent
Decrees
Andrews, et al. v. Roadway Express, Inc., 2006 U.S. App. LEXIS 31284 (5th Cir.
Dec. 19, 2006). In this case, four employees who were formerly members of a class in a
lawsuit against Defendant that settled over twenty years ago brought a lawsuit over the
consent decree for that previous settlement. In 1971, a class of African-American and
Hispanic truck drivers filed an employment discrimination suit against the employer
under Title VII and 42 U.S.C. §1981, alleging that the employer maintained dual
seniority systems and made hiring and assignment decisions based on race and national
origin. The district court approved a consent degree settling that class action in 1985.
Several class members, including Plaintiffs, appealed the order to the U.S. Supreme
Court but lost. Seventeen years after the U.S. Supreme Court denied review of the order
in 1987, Plaintiffs filed this suit seeking enforcement of the consent decree and to recover
unpaid back pay and interest. The district court ruled that Plaintiffs were time-barred
under Texas law from enforcing the terms of the consent decree because a writ of
execution must be filed within ten years of the date of judgment. The district court
further held that the statute of limitations to revive dormant judgments had passed. On
appeal, the Fifth Circuit affirmed the district court’s ruling and held that Texas law
governed the execution of the consent decree. The Fifth Circuit also determined that the
order was dormant under Texas law because more than 10 years had expired since the
order became final. Moreover, the order had not been revived within two years as
required by Texas law. The Fifth Circuit concluded that Plaintiffs had no viable claim
because execution of a dormant judgment, including a federal consent decree, that is not
timely revived was barred forever.
Dean, et al. v. City Of Shreveport, 438 F.3d 448 (5th Cir. 2006). In this case, nine white
males brought suit challenging an affirmative action hiring policy used by the City of
Shreveport, Louisiana in hiring its firefighters. Shreveport’s affirmative action policy
was implemented as part of a consent decree that settled a 1977 class action lawsuit
brought by the U.S. Department of Justice challenging the hiring practices of the fire
department as discriminatory. Under the consent decree, the fire department set a long
term goal of achieving the same number of blacks and women in the fire department as
proportionate to the “appropriate work force.” Id. at 452. The consent decree also
required the department to adopt an interim goal of filling available job positions with
50% black applicants and 15% female applicants. Since the consent decree specified
only goals and not a hiring process, the fire department fashioned its own process, and
required all applicants to take a civil service exam. Those who scored 75 or higher were
separated into three lists based on whether they were white male, black male, or female;
each list was ranked from highest to lowest score and approximately twice as many
applicants as vacant spots were selected from the lists to proceed to step two of the hiring
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process. Plaintiffs were white males whose exam scores placed them too low on the
white male list to proceed to step two. They sued asserting claims for violations of Title
VII, 42 U.S.C. § 1983, and Louisiana state law. The Fifth Circuit reversed the district
court’s grant of summary judgment as to all claims except the state law discrimination
claim. The Fifth Circuit ruled that summary judgment on the equal protection claim was
improper because the City did not demonstrate that the affirmative action plan was still
necessary between 2000 and 2002 when the white males were not hired. Under the
precedent of City of Richmond v. J.A. Croson Co., 488 U.S. 493 (1989), the Fifth Circuit
determined that the relevant statistical comparison is between the number of blacks in the
City’s fire department and the number of blacks qualified to undertake the particular job.
Accordingly, the Fifth Circuit indicated that on remand the City must define “qualified
applicant” and provide reliable statistical data showing the percentage of blacks in its
workforce and in its qualified labor pool between 2000 and 2002. The Fifth Circuit also
reversed the district court’s grant of summary judgment on the Title VII claim. Plaintiffs
contended that the phase one selection method violated Title VII. The Fifth Circuit
agreed since separating applicants by race and sex and then selecting the same number of
blacks and whites to proceed to step two “has the practical effect of requiring different
cutoff scores, based solely on race and sex.” Id. at 463. Finally, the Fifth Circuit
affirmed the district court’s grant of summary judgment on plaintiffs’ claim under
Louisiana’s anti-discrimination employment statute because the law does not provide a
cause of action against an employer pursuant to any affirmative action plan.
Lomack, et al. v. City Of Newark, 463 F.3d 303 (3d Cir. 2006). This case arose as a
result of attempts by the mayor of Newark to diversify the City’s 108 firefighting
companies so that none of them consisted of a single race or ethnicity. A fire company is
made up of three or four firefighters in a particular fire station working under the
supervision of a fire captain. Although the State of New Jersey had been operating under
a consent decree regarding the hiring and promotion of minority firefighters for over 20
years, the consent decree did not contain a finding that discrimination had ever occurred;
it only required affirmative action to increase the proportion of African-American and
Hispanic personnel in fire departments. Twenty-two years later, the mayor of Newark
instituted his plan to diversify each individual fire company. Until that point, the fire
department had generally allowed firefighters to choose where they wanted to work,
which usually meant they worked in firehouses close to their homes. To implement the
mayor’s plan, 34 firefighters were involuntarily transferred to other fire companies or
else denied transfers they had requested. All transfers were based on race and designed
to achieve a better racial balance among the fire companies. The transferred firefighters
brought suit, alleging that the City’s plan violated Title VII, the Equal Protection Clause,
and the New Jersey Constitution. The Third Circuit determined that the City would have
to show that its policy was narrowly tailored to fulfill a compelling state interest (by the
so-called strict scrutiny test). The Third Circuit affirmed the district court’s finding that
the City was unable to do so. First, although there is a compelling interest in having a
governing body remedy its own past discrimination, there was no allegation or evidence
that the City ever participated in any form of discrimination, even passively. Although it
might be beneficial to try to eliminate unintentional segregation among the fire
companies, the Third Circuit ruled that there was no compelling state interest in doing so
that would support the racial classifications proposed by the mayor. The Third Circuit
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also rejected the City’s argument that integrating the fire companies would have an
educational benefit by encouraging individuals of different races to live and work
together. Among other things, the Third Circuit concluded that the plan focused only on
three racial classifications and ignored factors such as gender, age, or other ethnicities.
Finally, the Third Circuit reasoned that there was no evidence that the 25 year old consent
decree for the State of New Jersey required the transfer policy. It concerned hiring only,
and said nothing about the eventual racial makeup of individual fire companies.
Therefore, the Third Circuit overturned the transfer plan and remanded the case to the
district court.
United States v. New York City Board Of Education, 448 F. Supp. 2d 397 (E.D.N.Y.
2006). In this case, the United States brought a Title VII disparate impact lawsuit against
the Board, claiming that two hiring practices involving written exams and recruiting
methods resulted in school custodians being mostly white and male. The parties
subsequently settled. Four white male custodians filed a motion to intervene claiming
they were adversely affected by some of the settlement terms in violation of Title VII and
the Fourteenth Amendment. The challenged provisions involved grants of retroactive
seniority to the non-white, male custodian employees. The Court did not enter the
agreement as a consent judgment. However, the Court held that the agreement was valid
under Title VII except to the extent that it granted preferential seniority as to lay-offs to
non-victims of discrimination. The Court also granted relief using a preferential seniority
system for minorities in regard to a recruitment claim. The Court explained that the
adjudication of the multiple disparate impact claims and the effect of preferential
seniority on three seniority benefits (school transfers, temporary care assignments, and
layoffs) required application of one standard of review for the Title VII claims and two
standards of review applicable to race and gender based relief under a constitutional
analysis. The Court granted class action status under Rule 23 to those whose lay-off
protection rights were displaced by non-victims of discrimination.
(vi)
Impact Of Piggy-Backing EEOC Charges By Class Members
Lee, et al. v. Dell Products, L.P., 236 F.R.D. 358 (M.D. Tenn. 2006). Plaintiffs in this
case, which was not filed as a class action, were putative class members of an earlier
class action against their employer. Both the earlier case and this one made similar
allegations that Dell discriminated against African-American employees on the basis of
their race. After the initial case was filed as a class action on December 21, 2003, local
rules gave the named plaintiffs 60 days to either file a motion to certify the class or to
seek an extension. Plaintiffs sought a number of extensions and eventually the Court set
June 4, 2004, as the final date for submission of a motion to certify the class. Plaintiffs
never filed a motion and the case moved forward as an individual action. In the
subsequent litigation, Dell raised the issue as to whether the individual plaintiffs timely
filed their race discrimination claims. Normally, the statute of limitations would be four
years, and Plaintiffs would be untimely because they filed their lawsuits more than five
years after they were terminated from their jobs. However, the Court held that the statute
of limitations for an individual claim is tolled during the pendency of a class action on the
same issues. The Court determined that the statute of limitations was tolled from the time
the class action was filed until the time the named Plaintiffs failed to file a motion to
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certify the class, a period of 2 years and 166 days. At that point, the class action was over
and individual Plaintiffs were entitled to go forward with their own cases. By subtracting
the tolled period from the dates when Plaintiffs were fired allegedly due to
discrimination, the Court concluded that they had filed their lawsuits within the four year
limitations period.
Moore, et al. v. Chertoff, 437 F. Supp. 2d 156 (D.D.C. 2006). In this case, the Court
held that Plaintiffs could not plead their untimely filed claims dating back to 1974 under
a theory of equitable estoppel, but Plaintiffs could plead claims concerning the building
blocks of promotion because they had been vicariously exhausted by one Plaintiff’s nonpromotion class claim. Plaintiffs moved for reconsideration arguing that they alleged a
continuing violation in a pattern and practice suit and were entitled to litigate nonpromotion claims dating back to the inception of Defendant’s discriminatory policy.
Defendant moved for reconsideration arguing that Plaintiffs’ building block claims were
not vicariously exhausted. The Court noted that generally, a federal employee must
contact an agency equal employment opportunity (“EEO”) counselor within forty-five
days of an alleged act of employment discrimination in order for the claim to be timely.
However, in a pattern and practice suit where there is a continuing violation, Plaintiffs
may “litigate claims that fall outside of the time-filing requirements if [they] prove either
a series of related acts, one or more of which falls within the limitations period, or the
maintenance of a discriminatory system both before and during the statutory period.” Id.
at 160. The evidence showed that an employee timely contacted an EEO counselor at the
Secret Service in February 2000 after learning of his non-selection for a promotion. The
employee also filed an administrative class complaint alleging that the Secret Service
discriminated against African-American agents through its personnel policies, practices,
and procedures. Plaintiffs argued that because the employee timely filed an EEOC claim
for non-promotion and Plaintiffs alleged the existence of a discriminatory policy both
during and pre-dating the statutory period, they were entitled to litigate non-promotion
claims dating back to the inception of the discriminatory policy. Defendant countered
that Plaintiffs should not be able to plead claims dating back to the inception of the
statutory period on the theory of a continuing violation for several reasons. Defendant
argued that the doctrine of continuing violation requires that a Plaintiff be unaware of the
alleged violation in order for the doctrine to save untimely claims. Plaintiffs argued that
the doctrine of continuing violations could be invoked notwithstanding Plaintiffs’
knowledge of the nature of the challenged discriminatory policies. The Court held that
the doctrine of continuing violations would not apply where Plaintiffs are aware of the
discriminatory nature of the acts if the basis for the continuing violation is a series of
related acts. However, if Plaintiffs challenge a discriminatory policy or system, the
doctrine of continuing violations may apply without regard to Plaintiffs’ awareness or
knowledge of the discriminatory nature of that system. In this case, since Plaintiffs
challenged an alleged system of discrimination, Plaintiffs’ knowledge of the nature of the
discriminatory system was irrelevant. Accordingly, the Court rejected Defendant’s
argument that Plaintiffs were precluded from pleading a continuing violation because
they knew of the discriminatory nature of the policy.
With respect to Defendant’s arguments regarding the vicarious exhaustion of Plaintiffs’
building block claims, the Court held that a Plaintiff may invoke the doctrine of vicarious
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exhaustion only if one Plaintiff actually has exhausted his claims and if the exhausted
claims are so similar to the unexhausted claims that it can fairly be said that no
conciliatory purpose would be served by filing separate EEOC charges. Thus, a timely
non-promotion class claim will vicariously exhaust claims that involve discrimination in
the building blocks of promotion. Since a reasonable investigation of a class allegation
of non-promotion would necessarily involve the building blocks of promotion, the Court
reasoned that Defendant was on notice of the claim and would not be unfairly prejudiced
by its addition. Additionally, Defendant was put on notice of potential building block
claims by the class complaint.
Price, et al. v. Choctaw Glove And Safety Co., 459 F.3d 595 (5th Cir. 2006). In this
case, the Fifth Circuit held that employees who failed to exhaust their administrative
remedies under Title VII cannot piggy-back their sex discrimination lawsuits on a preexisting case brought by another employee who properly exhausted her administrative
remedies. In the first case, Rita Price filed an EEOC charge on behalf of herself and all
similarly situated females alleging sex discrimination in the payment of wages.
However, the district court later denied class certification under both Rule 23(b)(2) and
23(b)(3). The next day, Plaintiffs filed a lawsuit based on the same facts, which was
dismissed. On appeal, the Fifth Circuit rejected plaintiffs’ argument that Bettcher v.
Brown Schools, Inc., 202 F.3d 492 (5th Cir. 2001), allowed the extension of the single
filing rule to permit them to file an independent lawsuit on an otherwise unexhausted
Title VII claim. Bettcher held that the single filing rule is a limited exception that allows
parties to opt-in to a suit filed by a similarly situated Plaintiff under the conditions that
Plaintiff is similarly situated to the individual who actually filed the EEOC charge, the
charge provided some notice of the collective or class nature of the charge, and the
individual who filed the EEOC charge filed a lawsuit that the piggy-back Plaintiff may
join. In these circumstances, the Fifth Circuit concluded that Plaintiffs failed to meet the
third condition because they did not opt-in to the earlier lawsuit. Although Price did file
a suit in which Plaintiffs could have attempted to join, they decided not to. Instead,
Plaintiffs filed their own separate suit and attempted to piggy-back on Price’s EEOC
charge.
(vii)
Attorney’s Fee Awards In Class Action Settlements
Burr & Forman, et. al. v. Blair, et. al., 2006 U.S. App. LEXIS 29133 (11th Cir.
Nov. 27, 2006). In this case, Plaintiffs appealed the entitlement of attorneys’ fees
awarded in connection with the settlement of mass tort litigation. On September 21,
1994, Plaintiffs entered into a letter agreement with Defendant, obligating their thenrespective law firms to share any attorneys’ fees they might be awarded for two class
actions brought in state court. Plaintiffs contended that this letter agreement covered an
additional case, the Tolbert litigation, and that they were entitled to fees which were paid
to Defendant. As a result, Plaintiffs sued alleging breach of contract. Defendant
removed the case to federal court by consolidating the case with the Tolbert litigation.
The district court determined that the letter agreement did not cover the Tolbert litigation,
and denied the claim. Plaintiffs appealed claiming that the district court did not have
subject matter jurisdiction over the claim. The Eleventh Circuit agreed with Plaintiffs
and reversed the district court’s decision. The Eleventh Circuit held that enjoining the
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sate court suit was not required for the district court to exercise its jurisdiction in the class
action under the Anti-Injunction Act’s “necessary in aid of its jurisdiction” exception. Id.
at *21-23. The district court had twice remanded the state court action due to lack of
subject matter jurisdiction and for lack of diversity. After the first remand, the Eleventh
Circuit held that any jurisdiction the district court may have had over the case ceased.
The Eleventh Circuit concluded that after the district court remanded the case for lack of
subject matter jurisdiction, the district court was precluded from reconsidering that
decision or reaching the merits even if it had erred in finding a lack of subject matter
jurisdiction.
In Re AT&T Corp. Securities Litigation, 455 F.3d 160 (3d Cir. 2006). In this case,
several Plaintiffs filed federal securities fraud actions, alleging that AT&T Corp. and its
executives violated the Securities Exchange Act of 1934. Specifically, Plaintiffs alleged
that AT&T knowingly made false statements between October 25, 1999 and May 1,
2000, about AT&T’s anticipated performance for the year 2000 to artificially inflate the
company’s stock price. The parties eventually settled, and AT&T agreed to pay the class
$100 million in return for a complete release of the class’s claims. The agreement
provided that as soon as the funds were deposited into escrow, attorneys’ fees and
expenses would be paid to class counsel in an amount equal to 21.25% of the settlement
fund, in addition to costs and expenses of over $5 million. The district court granted
preliminary approval of the settlement agreement, and notices were mailed to more than
one million potential class members. Eight potential class members filed objections
related to the attorneys’ fee provisions, the form of notice, and certain ERISA claims.
There were no objections to the settlement amount. The district court held a fairness
hearing and granted final approval of the settlement agreement, including the attorneys’
fees provisions. The eight potential class members appealed the district court’s decision
to the Third Circuit, contending that the award of attorneys’ fees was excessive, unfair,
and unreasonable; they requested that the fee be reduced to 15% of the settlement fund, in
addition to cost and expenses. The Third Circuit affirmed the decision of the district
court to award 21.25% of the common fund as attorneys’ fees. The Eleventh Circuit
reasoned that a multiplier of 1.28 was well within a reasonable range, particularly given
the district court’s emphasis on the significant time and effort devoted to the case by class
counsel. In addition, the Third Circuit held that the district court considered the relevant
circumstances of the particular case, and concluded that the fee was not excessive and the
single payment of attorneys’ fees and expenses was appropriate.
In Re Boston Chicken, Inc. Securities Litigation, 2006 U.S. Dist. LEXIS 56267 (D.
Colo. Aug. 10, 2006). The parties settled this class action. Final judgment was entered
on July 31, 2006, and the Court had to resolve a motion to permit distribution of
settlement funds to the class. Plaintiffs’ counsel sought an attorneys’ fee award of 29%
of the settlement fund of $23,586,408 ($6,840,058) together with costs in the amount of
$626,068 for a total recovery of $7,466,126. Plaintiffs’ lodestar calculation of their hours
and rates totaled $5,623,376. The Court held that Plaintiffs’ counsel was entitled to 29%
of the settlement fund as an award of attorneys’ fee. However, the Court determined that
the number of hours billed (14,614) and the blended hourly rate ($385 per hour) should
be reduced by 10%, as well as an additional 25% reduction in the hourly rate for non-lead
counsel, to make the rates closer to applicable market rates.
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Meyenburg, et al. v. Exxon Mobil Corp., 2006 U.S. Dist. LEXIS 52962 (S.D. Ill.
July 31, 2006). In this case, Plaintiffs sought a judgment enjoining Defendant from
continuing to engage in allegedly false, deceptive, unfair, and unlawful business acts and
practices in connection with the marketing, advertising, and sale of its lubricant products,
and for an award of money damages on behalf of past and indirect purchasers of such
products. Subsequently, the parties settled the class action. The Court granted Plaintiffs’
motion for conditional class certification and Plaintiffs’ motion for final approval of a
class action settlement. Plaintiffs’ counsel filed a motion for award of attorneys’ fess,
expenses, and incentive awards. Plaintiffs’ counsel sought an attorneys’ fee award of
approximately 4.7% of the total benefits (approximately $85 million) of the common
fund settlement, which the Court found to be reasonable. Therefore, Plaintiffs’ counsel
was awarded $4 million in attorneys’ fees and $49,127.98 in expenses.
(viii)
Mootness Doctrines In Class Actions
Briggs, et al. v. Arthur T. Mott Real Estate LLC, 2006 U.S. Dist. LEXIS 82891
(E.D.N.Y. Nov. 14, 2006). In this case, the Court dealt with the issue of whether a Rule
68 offer of judgment could moot an FLSA collective action when no persons other than
Plaintiff had yet elected to opt into the action. The case was brought by a former
assistant mechanic of Defendant who claimed he was not paid overtime during his thirty
seven weeks of employment. Plaintiff brought an FLSA claim as a collective action on
behalf of himself and other current and former employees similarly situated. Defendant
served Plaintiff with a Rule 68 offer of Judgment of $3,000; the most Plaintiff could
recover for unpaid overtime was $1,027.50, representing 205.5 hours of unpaid worked
overtime times $5 (half of his regular rate of pay). Adding liquidated damages of an
equal amount, the most Plaintiff could recover in the entire action was $2,055. Plaintiff
refused Defendant’s offer of $3,000. Defendant moved to dismiss arguing that by
offering full relief to Plaintiff, the FLSA claim was moot and the Court was divested of
subject matter jurisdiction. Plaintiff argued that Defendant could not use an offer of
judgment to pick off a named Plaintiff thereby avoiding its legal obligations to other
collective action members. The Court rejected Plaintiff’s argument, finding that an
employer could defeat an FLSA collective class action by an offer of judgment,
particularly because in the instant case there was no pending motion to certify the class
and no similarly situated individuals other than Plaintiff had chosen to opt into the action
despite being able to do so.
Richards, et al. v. Delta Airlines, Inc., 453 F.3d 525 (D.C. Cir. 2006). A former airline
passenger filed a class action suit on behalf of herself and of people who, between
December 17, 1997 and March 3, 1999, received from Delta less than the fair-market
value of their lost or damaged luggage. Delta defended the case on the ground that the
Warsaw Convention limited Delta’s liability. The parties stipulated that the purported
class consisted of about 3,000 people. Consistent with the Warsaw Convention, the
airline only reimbursed passengers up to $20 per kilogram for lost or damaged luggage
on international flights. Relying on Cruz v. American Airlines, Inc., 193 F.3d 526 (D.C.
Cir. 1999), Plaintiffs argued that since Delta did not record the weight of the luggage on
passenger tickets as a matter of practice, the defense could not rely on the Warsaw
Convention. The Plaintiff sought to certify the class under Rule 23(b)(2) and
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alternatively under Rule 23(b)(3). The District Court held that the requirements for
Rule 23(a) were met, but not the requirements for Rule 23(b)(2) or 23(b)(3). The Court
denied certification because the suit was predominately or exclusively for money
damages and common questions of law or fact did not predominate among the purported
class. The parties then settled, but Plaintiff appealed the district court’s denial of class
certification. The D.C. Circuit then reviewed the decision for abuse of discretion and
ultimately affirmed the holding of the district court. The D.C. Circuit examined whether
Plaintiff’s settlement of her individual claim rendered the denial of class certification
moot. Id. at 528. The D.C. Circuit analyzed applicable U.S. Supreme Court precedent in
U.S. Parole Commission v. Geraghty, 445 U.S. 326 (1980), and the limits on certification
of a class action after a named Plaintiff’s individual claims are involuntarily extinguished
and whether in such circumstances the class representative retains a sufficient personal
stake in the appeal of the denial of class certification sufficient to prevent the litigation
from being moot. The D.C. Circuit held that the rule in Geraghty involving mootness
principles also applied when a class representative voluntarily settles his or her individual
claim. Id. at 529. Because Plaintiff had entered into a settlement instrument which
preserved “any parties’ claim, defense, or right that either party or any putative class
member might have in respect of this litigation, including Plaintiff’s class claim,” the
D.C. Circuit concluded that the rule in Geraghty applied and Plaintiff had a sufficient
personal stake in the appeal of the denial of class certification to obviate Defendant’s
argument that the litigation was moot.
The rulings in Briggs and Richards demonstrate the differences in the approach to the
mootness principle in class action and collective action litigation. Due to the U.S.
Supreme Court’s decision in U.S. Parole Commission v. Geraghty, employers face
significant impediments to fracturing a class action under Rule 23 based on mootness
defenses. In contrast, courts are more receptive to mootness defenses in the context of
collective actions under 29 U.S.C. § 216(b).
(ix)
Multi-Party Litigation Involving The Worker Adjustment And Retraining
Notification Act
Allen, et al. v. Sybase, Inc., 468 F.3d 642 (10th Cir. 2006). Twenty-six former
employees of a software company specializing in retail banking and capital markets
software filed suit against their former employer and its parent company for violations
under the Worker Adjustment and Retraining Notification (“WARN”) Act. The district
court held for the former employees and ordered payment of damages, interest, and
attorneys’ fees to former employees in accordance with the WARN Act. The Tenth
Circuit held that the employer conducted a “mass layoff” under the WARN Act definition
when the employer dismissed fifty-six employees within a fifty-eight day period.
Further, the Tenth Circuit determined that release forms signed by the former employees
did not waive their WARN Act claims because the claims did not accrue until the date the
employer had terminated more than 50 of the employees in aggregate, after the date of
execution of some of the releases. Moreover, the employer failed to establish that the
September 11 terrorist attacks were an unforeseeable business circumstance prompting
the employer to fire 41 employees. Therefore, the Court affirmed the district court’s
denial of summary judgment to Defendants, reversed in part the district court’s award of
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summary judgment to Plaintiffs, and remanded for further proceedings to determine
whether Plaintiffs were aggrieved employees under the WARN Act.
Deveraturda, et al. v. Globe Aviation Security Services, Inc., 454 F.3d 1043 (9th Cir.
2006). Several former employees who worked for a private employer as security
screeners at the San Jose International Airport in California brought a class action under
the Worker Adjustment and Retraining Notification (“WARN”) Act after they were laid
off from their positions. As a result of the Aviation and Transportation Security Act
(“ATSA”) of 2001, all of the employer’s operations at the airport were transferred to the
Transportation Security Administration (“TSA”), which is operated by the U.S.
Government. The Ninth Circuit held that in these circumstances, the lay-offs were not
effectively ordered by the employer, but by the government. Therefore, the Ninth Circuit
held that the WARN Act did not apply, and affirmed the district court’s judgment on the
pleadings in favor of the employer.
(x)
Arbitration Of Class Actions
Kristian, et al. v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006). A group of customers
brought state and federal court actions against a cable television provider for antitrust
violations resulting from swapping agreements by which the cable provider traded
customers with competitors. Defendant moved to dismiss the claims on the grounds that
the subscriber agreement was amended to include an arbitration clause. Alternatively,
Defendant moved to compel arbitration. The district court denied the motion. On appeal,
the First Circuit held that the arbitration agreements applied retroactively to claims
arising before the existence of the agreements. Plaintiffs pointed to many discrepancies
between the arbitration agreement and their rights under antitrust laws, but the First
Circuit determined that the conflicts were not enough to vitiate the terms of the
arbitration agreement. For example, the arbitration agreement improperly prohibited
treble damages, attorneys’ fees and costs, and class actions. However, to the extent that
Plaintiffs could not contractually waive their claims, the savings clause in the arbitration
agreement allowed those claims to be severed from arbitration. Accordingly, the First
Circuit held that the arbitration agreement applied, and reversed the decision of the
district court.
(xi)
Workplace RICO Class Actions
Trollinger v. Tyson Foods, Inc., 2006 U.S. Dist. LEXIS 74114 (E.D. Tenn. Oct. 10,
2006). In this case, eight former employees sued Tyson Foods for allegedly engaging in
a pattern of racketeering activity in violation of the Racketeer Influenced and Corrupt
Organizations Act (“RICO”) in order to hire illegal workers and depress the wages of
legal workers. The Court certified the class. The certified class covers workers who
worked for the company since April 1998 at eight Tyson plants throughout the U.S. The
Court found that the proposed class met the numerosity, commonality, and typicality
requirements for class certification under Rule 23. The Court determined that the
numerosity threshold had been met given the large yet ascertainable number of workers
who were employed in an eight year period. The Court concluded that Plaintiffs
established commonality because all claims involved whether Tyson engaged in an
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illegal hiring scheme to depress wages in violation of RICO. The Court reasoned that
Plaintiffs had shown typicality because depressed wages were the typical result of the
alleged conduct. The Court also found that the class method of adjudication was
preferable, superior, and fair because separate proceedings would produce duplicative
efforts.
Williams, et al. v. Mohawk Industries Inc., 465 F.3d 1277 (11th Cir. 2006). In this
case, the Eleventh Circuit ruled that current and former legal employees of Mohawk
Industries may proceed with their suit alleging that the company violated the Racketeer
Influenced and Corrupt Organizations Act (“RICO”) and the Georgia RICO statute by
conspiring with labor recruiters to hire illegal workers with a purpose of depressing
wages for legal workers. On remand from the U. S. Supreme Court, the Eleventh Circuit
for the second time upheld the denial of the company’s motion to dismiss the RICO
claims. The Eleventh Circuit reasoned that the workers made sufficient allegations in
their complaint that Mohawk conducted an enterprise through a pattern of racketeering
activity and that the legal workers were injured by the illegal activity. In their complaint,
Plaintiffs alleged that Mohawk knowingly or recklessly accepted fraudulent
documentation from illegal workers and concealed its actions by destroying documents
and helping illegal workers evade detection by government authorities. Federal RICO
law makes it illegal “[f]or any person employed by or associated with any enterprise
engaged in, or the activities of which affect, interstate commerce or foreign commerce, to
conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs
through a pattern of racketeering activity.” Id. at 1282. The Eleventh Circuit reasoned
that Mohawk’s legal workers properly alleged a pattern of racketeering activity by
alleging that the company had committed “hundreds, even thousands, of violations of
federal immigration laws.” Id. at 1283. The Eleventh Circuit further concluded that
whatever difficulties Plaintiffs may have in proving their allegation that the company
exercised some direction over the recruiters, they sufficiently alleged that the company
had engaged in the operation or management of the enterprise.
The Second, Sixth, and Ninth Circuits have each found in similar cases that plaintiffs
alleged sufficient damages to pursue RICO claims at the motion to dismiss stage. In a
contrary ruling, the Seventh Circuit has decided that an employer that hired illegal
workers did not share a common purpose with recruiters and a community organization
that provided assistance to the workers because the entities had different goals. The
Williams case represents the latest in a growing tide of RICO-based employment class
actions premised on the hiring of illegal workers.
Zavala, et al. v. Wal-Mart Stores, Inc., 447 F. Supp. 2d 379 (D.N.J. 2006). A group of
janitorial workers brought a class action against Wal-Mart alleging RICO violations.
Defendant filed a motion to dismiss. The Court found that Plaintiffs failed to allege facts
that supported their RICO allegations, and dismissed those parts of their complaint with
prejudice. Specifically, the Court found that Plaintiffs’ RICO claims did not adhere to
the distinctness requirement of the statute in that they did not differentiate between the
“person” and the “enterprise” that engaged in the racketeering. Id. at 382-83. Instead,
Wal-Mart and its various contractors were referred to as both persons and the enterprise.
The Court determined that in a proper RICO action, the person engages in predicate acts
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that serve to conduct the enterprise through a series of racketeering activity. The Court
concluded that in addition to the distinctness flaw, the complaint also failed to claim that
the RICO violations were the proximate cause of Plaintiffs’ alleged injuries. Although
Plaintiffs argued that Wal-Mart violated immigration law in various ways – such as by
transporting, harboring, and encouraging aliens to work for the store in order to obtain
cheap labor – their immediate injuries stemmed from the alleged underpayment of wages
by the company. The Court found that there was no clear link between Wal-Mart’s
alleged violations of immigration law and its alleged underpayment of wages to
Plaintiffs. The Court determined that it would have to examine numerous other possible
reasons for the low payment of wages, and other potential causes of Plaintiffs’
immigration difficulties, to determine whether proximate cause existed at all. The Court
dismissed the RICO causes of action, finding that Plaintiffs could not amend the
complaint to correct these deficiencies.
(xii)
Procedures For Distribution Of Settlement Funds In A Class Action
Settlement
In Re Cendant Corp. Securities Litigation, 454 F.3d 235 (3d Cir. 2006). In this case,
the Third Circuit rejected Plaintiffs’ claims for compensation under a plan of allocation
for a class action settlement. The Third Circuit upheld the plan administrator’s finding
that Plaintiffs did not merit compensation under the plan pursuant to the Plan’s netting
provision because the profits they made by selling stock at artificially high prices
cancelled out the losses they suffered on stock held after certain irregularities were
disclosed. In order to reach the merits of the case, however, the Third Circuit initially
had to determine whether the district court’s order ruling was a separate document
pursuant to Rule 58. The Third Circuit noted that Rule 58 was precisely designed to
avoid doubt as to when a notice of appeal was timely filed. In this respect, the Third
Circuit ruled that although Rule 58 does not necessarily require the issuance of two
distinct written documents, a lengthy recitation of facts and procedural history in an order
precludes it from complying with the separate-document requirement. Because the order
filed in the case did contain such an excessive statement of facts and procedural history, it
was not a separate document such that the typical 30-day appeal period had not been
triggered. Accordingly, the Third Circuit concluded that appeal was timely if filed within
150 days from the entry of the Order pursuant to Rule 58 (a)(1).
(xiii)
Class Action Litigation Over Worker Privacy
Bell, et al. v. Acxiom Corp., 2006 U.S. Dist. LEXIS 72477 (E.D. Ark. Oct. 3, 2006). In
this case, the Court ruled that the threat of potential harm from identity theft is not a
concrete damage sufficient to establish standing to sue an information company in a class
action over its compromise of personal data. The Court reasoned that assertions of
potential future injury do not satisfy the injury in fact test that is strictly required in order
to state a claim upon which relief can be granted. Plaintiff had filed a two-count
complaint against one of the world’s largest computer database management companies
alleging negligence and invasion of privacy related to a large-scale hacking incident that
resulted in the unauthorized release of some 1.6 billion files representing approximately
8.2 gigabytes of personal information. Plaintiff’s lawsuit sought to establish a nationwide
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class of all individuals whose information was breached in the hacker incidents, and
argued that an increased risk of receiving junk mail as well as the threat of identity theft
were concrete damages. In rejecting Plaintiff’s argument, the Court determined that
Plaintiff did not know whether her personal information was included in the data stolen
from Acxiom and that more than three years after the theft she had not faced any identity
theft incidents. The Court concluded that a continuing fear of identity theft was merely a
speculative injury insufficient to satisfy the case-or-controversy requirement for class
action standing.
Pichler, et al. v. UNITE, 2006 U.S. Dist. LEXIS 75314 (E.D. Pa. Oct. 17, 2006). In
this case, the Court ruled that the union, UNITE HERE, violated the federal Driver’s
Privacy Protection Act of 1994 (“DPPA”), by accessing motor vehicle records and using
license plate numbers to obtain home addresses of employees in preparation for an
organizing campaign. Granting summary judgment to six Cintas employees and three of
their relatives and friends, the Court rejected the Union’s arguments that its actions were
permitted under the DPPA’s exceptions for use in connection with litigation and use on
behalf of a government agency. The Court reasoned that the Union was “finding” claims,
not investigating them within the meaning of the statute and found that the Union
accessed the personal information of 1,758 to 2,005 class members, which resulted in
only 31 persons either becoming involved in litigation against Cintas or taking steps
towards such actions. Although the Union filed charges against Cintas with various
federal and state agencies, the Court found no evidence that the union’s tagging activities
were undertaken on behalf of a government agency and that there was no connection
between the charges and information obtained from home visits with Cintas employees.
The Court awarded $2,500 in liquidated damages to each of the seven named Plaintiffs
plus the same amount to be shared by two more named Plaintiffs. In a later ruling, the
Court denied punitive damages to the individual Plaintiffs, reasoning that the Union
would be amply punished by the estimated $4 million to $5 million in damages the Union
will owe plaintiffs and the class if they prevail on appeal (the Court had certified its
earlier summary judgment ruling for immediate appeal to the Third Circuit). The Court
further observed that while the DPPA authorizes punitive damages, such awards are
discretionary. The Court found that prior to finding that the Union had violated the
DPPA, the Union’s legal department had given clear instructions that staff members
should not use plate numbers to obtain motor vehicle information. Based on that finding,
the Court reasoned that the Union’s lawyers’ “clear instruction,” plus the certainty that
further license plate retrievals will result in costly damages awards would effectively
deter the Union from further violations of DPPA. Id. at *20. Finally, the Court enjoined
the Union from engaging in further violations of the DPPA and from using the personal
information it had already obtained in violation of the DPPA.
(xiv)
ATCA Class Actions
In Re Sinaltrainal Litigation, Case No. 01-CV-3208 (S.D. Fla. Sept. 29, 2006). In this
case, Plaintiffs sued two foreign-based Coca-Cola bottling companies in a class action
under the Alien Tort Claims Act (“ATCA”). The lawsuit alleged that Panamco and
Bediadas, two independent Colombian companies that perform bottling work for Coke,
assisted Colombian right wing paramilitaries in killing several union members at their
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bottling plant in Colombia. Plaintiffs sought $500 million in punitive damages. The
Court ruled that even though the complaint described how Panamco plant managers
allowed paramilitary groups into the plant and did not stop them from leaving threatening
pamphlets, there was no evidence of a direct conspiracy between the paramilitary groups
and plant managers. The Court dismissed the ATCA claims. The Court also specifically
asked the Eleventh Circuit to provide guidance to the district courts in handling cases
brought under ATCA, which originally was passed in 1789 to deal with piracy on the
high seas. In framing the issue to be decided on the motion to dismiss, the Court stated
that “[t]his Court faces the difficult task in determining whether the instant complaints’
harrowing allegations of violence and abuse, coupled with murky allegations regarding
relationships between the violent actors, state entities, and corporate entities, sufficiently
plead the violation of the law of nations to afford this Court subject matter jurisdiction.
Indeed, if the complaints merely alleged torts and crimes of a local nature as opposed to
torts in violation of the law of nations, then this Court lacks subject matter jurisdiction.”
Id. at *3. The Court observed that under existing precedent there are very few instances
in which private conduct can constitute a violation of the law of nations. After reviewing
a patchwork quilt of ATCA precedent, the Court concluded that it is appropriate to
require a heightened pleading standard when determining whether the complaint
sufficiently plead facts showing that Defendants violated the law of nations. The Court
concluded that Plaintiffs failed to adequately plead facts that could give rise to either war
crimes, genocide, or crimes against humanity under the necessarily heightened pleadings
standards required under the ATCA. Thus, the Court ruled that it lacked subject matter
jurisdiction on the basis of war crimes or crimes against humanity. Finally, the Court
ruled that Plaintiffs’ allegations failed to establish anything more than a colorable
relationship between Defendants and the paramilitaries (which the Court assumed for
purpose of argument to be state actors) and, that therefore, there was no federal subject
matter jurisdiction under the ATCA since the complaint failed to plead a violation of the
law of nations (or treaty of the United States). The Court also dismissed Plaintiffs’
claims under the Torture Victim Protection Act (“TVPA”), which creates a private cause
of action for torture perpetrated by individuals acting under the color of law of any
foreign nation. Since such claims for torture may be entertained only if they fall within
the jurisdiction conferred by the ATCA (which claims the Court had already dismissed),
the Court similarly dismissed Plaintiffs’ TVPA claims.
Villeda-Aldana, et al. v. Del Monte Fresh Produce N.A., Inc., 452 F.3d 1284 (11th Cir.
2006). In this case, Plaintiffs sued under the Alien Tort Claims Act (“ATCA”) and
alleged that Del Monte Fresh Produce and its Guatemalan subsidiary hired an armed
security force to threaten them with death and force them to leave the country. The
district court dismissed the claim for failure to allege a viable ATCA claim. On appeal,
the Eleventh Circuit allowed the union leaders to proceed with claims for torture related
to intentionally inflected mental pain and suffering, but dismissed their claims for
inhuman and degrading treatment which fell short of torture. The Eleventh Circuit
denied plaintiffs’ petition for review en banc, but Circuit Judge Rosemary Barkett issued
a strong dissent to the denial of rehearing en banc. She stated that that panel’s decision
failed to follow the precedent established by Sosa v. Alvarez-Machain, 542 U.S. 692
(2004). She reasoned that international and U.S. laws prohibit cruel and unusual
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punishment such that cruel, inhuman, and degrading treatment should be actionable under
the ATCA.
(xv)
Class Action Tolling Principles
Irrer, et al. v. Milacron Inc., 2006 U.S. Dist. LEXIS 66473 (E.D. Mich. Sept. 18,
2006). In this case, the Court dismissed claims by two former workers alleging exposure
to metal working fluids at a General Motors plant, which caused them permanent
respiratory injuries. The Court ruled that Plaintiffs were aware of the possible connection
between their injury and workplace exposure to the fluids more than three years before
filing the lawsuit. In finding Plaintiffs’ negligence, strict liability, and intentional tort
claims time-barred, the Court rejected the workers’ arguments that the three year statute
of limitations should be tolled or estopped because class certification issues were pending
in a separate state court action contending that the company allegedly concealed the
existence of Plaintiffs’ claims and misrepresented the safety of its products through
Plaintiffs’ employer General Motors. The Court found that each Plaintiff had a
documented lung-related condition no later than 1995 or 1996, and each believed that
exposure to metal working fluids or mists was a possible cause of the condition well
before filing suit in 2004. The Court rejected Plaintiffs’ class action tolling argument,
concluding that the statute of limitations had expired before the class action lawsuit was
even filed. Moreover, the Court rejected Plaintiffs’ fraudulent concealment tolling
argument, reasoning that Plaintiffs’ recitation of twelve alleged concealments by the
company were not enough to support application of the tolling rule. In rejecting
Plaintiff’s argument that the company should be equitably estopped from raising the
statute of limitations defense because it allegedly misrepresented safety risks, the Court
observed that Michigan case precedents are reluctant to apply the estoppel rule in the
absence of conduct designed to induce a litigant to refrain from filing suit, such as
offering in bad faith to compromise or lying about the limitations. Finding no such
evidence, the Court rejected the estoppel argument and dismissed Plaintiffs’ suit.
(xvi)
Certification Of Issue Classes
In Re Nassau County Strip Search Cases, 461 F.3d 219 (2d Cir. 2006). A group of
individuals who had been subject to Nassau County Correctional Center’s blanket policy
of strip searching all misdemeanor detainees (regardless of whether probable cause
existed for the search) brought a class action lawsuit alleging violations of their
constitutional rights after a federal court held that the strip search policy was
unconstitutional (the Shain decision). When deciding Plaintiffs’ motion for class
certification, the district court first found that the class satisfied the 23(a) requirements of
numerosity, commonality, typicality, and adequacy of representation. However, it denied
certification, finding that Plaintiffs’ claims did not satisfy the predominance requirement
of Rule 23(b)(2) because certain individual defendants might defeat liability if they
showed a reasonable suspicion to justify particular searches. Plaintiffs dismissed the
individual Defendants and moved for class certification again on the issue of liability
only, pursuant to Rule 23(c)(4)(A). In defending against the class certification issue,
Defendants conceded that the Shain decision bound them to cease applying the blanket
policy and thus they argued that only individual issues of liability remained (namely,
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whether particular Plaintiffs were searched without reasonable suspicion). The district
court rejected this argument. On appeal, the Second Circuit disagreed, and found that
Rule 23(c) allowed for class certification of a single issue, and that Defendants’
concession on the common liability issue did not eliminate this issue from a
predominance analysis; the Second Circuit held that it merely acted as strong evidence of
the issue common to the class, eliminating the need for the class to present additional
proof. The predominance question requires Plaintiffs to show that issues requiring
generalized proof predominate over issues requiring individual proof, and in this case,
Defendants’ concession made such a showing easy. The predominate issue was whether
Defendants had a blanket strip search policy and whether they were liable for
implementing it. The Second Circuit also found that a class action would be the most fair
and efficient way of resolving the case and thus, it certified the class action on the single
issue of application of the blanket policy.
The ruling of In Re Nassau County Strip Search Cases demonstrates the flexible nature of
Rule 23 certification mechanisms. So long as at least one factual or legal issue is
common to the class, plaintiffs’ counsel will have strong grounds for certification.
(xvii)
Class Certification For Nationwide Vioxx Litigation
In Re Vioxx Products Liability Litigation, 2006 U.S. Dist. LEXIS 85376 (E.D. La.
Nov. 21, 2006). In this case, the Court denied Plaintiffs’ motion to certify a nationwide
class of plaintiffs in their personal injury and wrongful death claims. Before analyzing
whether a class action was proper under Rule 23, the Court first determined what state
law would apply to Plaintiffs’ claims. The case was originally filed in New Jersey. The
case arrived in the Eastern District of Louisiana when the Judicial Panel on Multidistrict
Litigation transferred it, and all other Vioxx lawsuits, to that jurisdiction. Thus, the Court
determined that New Jersey’s choice of law rules would apply. New Jersey applies a
“governmental interests” choice of law test. Under that test, the Court determined that
the substantive law of each Plaintiff’s home jurisdiction would have to be applied. The
Court then analyzed whether the proposed nationwide class was appropriate. The Court
held that the numerosity and commonality requirements were easily satisfied, as a class
of approximately 20 million Vioxx users brought claims that created common questions
of fact regarding the development, manufacturing, and testing of Vioxx. The Court
found, however, that the claims of the class representatives were not typical of the class
claims. Because the Court determined that the substantive law of each Plaintiff’s home
state must be applied, the named Plaintiffs’ claims were only typical of their own home
state. Furthermore, there were individual issues regarding injury, causation, the learned
intermediary doctrine, and comparative fault, and the named Plaintiffs’ claims were only
typical class members from the same state (New Jersey). Members from fifty other
jurisdictions were not adequately represented. This also led the Court to conclude that
the named Plaintiffs were not adequate class representatives of the class because “in the
absence of typical claims, the class representative has no incentive to pursue the claims of
the other class members.” Id. at *8. Thus, the Court held that the Rule 23(a)
requirements were not satisfied. Finally, the Court held that the requirements of
Rule 23(b)(3) also were not satisfied. The Court reasoned that there were no common
questions of law that predominated over individual inquiries in this case. The extent of
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Plaintiff’s injuries from using Vioxx varied widely. The Court determined that the
“number, uniqueness, singularity, and complexity of the factual scenarios surrounding
each case swamp any predominating issues.” Id. at *11. Furthermore, the Court held
that the class action device was not superior to other means of adjudication because the
difficulties in class management would “overwhelm any efficiencies that could be
secured.” Id. Thus, the Court held that certification was not proper under Rule 23(b)(3),
and denied Plaintiffs’ motion for class certification.
In Re Vioxx Products Liability Litigation, 448 F. Supp. 2d 741 (E.D. La. Aug. 30,
2006). In this decision, the Court granted the defendant’s forum non conveniens motion
to dismiss foreign class actions that had been filed on behalf of French and Italian
citizens. The Court first noted that alternative forums were available for the class actions
as defendant Merck & Co. was amenable to service of process in both France and Italy,
and it agreed to submit to the jurisdiction of those countries. The Court also found that
these alternative forums were adequate. The Court determined although these forums do
not have sophisticated class action devices in place, they do have collective action
mechanisms that are “far from inadequate.” Id. at *10. Furthermore, Plaintiffs would not
be deprived of their remedies, even if there was no class action device available, because
individual actions would be allowed. The Court further held that the existence of feeshifting and the prohibition on contingency fee arrangements in France and Italy did not
render the alternative forums inadequate. Thus, the Court held that France and Italy were
available, adequate alternative forums. The Court then held that the public and private
interests favored dismissal of the claims. First, an abundance of individualized issues
could only be resolved by examining facts that were available in France and Italy.
Second, France and Italy had strong interests in deciding this case since French and
Italian citizens were injured and treated in their home countries. Furthermore, the
countries had an interest in deciding the litigation since the French and Italian
governments had approved and regulated the sale of Vioxx inside their borders. Finally,
under a most significant relationship choice-of-law analysis, the Court found that France
and Italy were the favored fora for this case, since Plaintiffs were injured abroad, the
injury-causing conduct occurred abroad, Plaintiffs are foreign citizens, and the
relationship of the parties was centered in Italy and France. Thus, the Court held that the
public and private factors favored dismissal of the claims, and granted the motion to
dismiss.
(xviii)
Class Actions Under The Migrant and Seasonal Agricultural Worker
Protection Act
De Leon-Granados, et al. v. Eller And Sons Trees, Inc., 452 F. Supp. 2d 1282 (N.D.
Ga. Sept. 28, 2006). Plaintiffs filed a claim for wages under the Migrant and Seasonal
Agricultural Worker Protection Act. The Act does not specify a statute of limitations.
Thus, the Court had to determine which Georgia state statute of limitations would be
“borrowed” in adjudicating the lawsuit. Plaintiffs sought to borrow the six year statute of
limitations that applies to claims on written contracts, while Defendants wanted to
borrow the two year statue of limitations that governs wage claim disputes. The Court
found that most of Plaintiff’s claims arose from an alleged breach of their working
arrangements. By statute, the working arrangements must be put into writing. Thus, the
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Court held that under Georgia law, the six year statute of limitations governing written
contract disputes was controlling.
Iglesias-Mendoza, et al. v. La Belle Farm, Inc., 2006 WL 3634567 (S.D.N.Y. Dec. 7,
2006). In this case, the Court denied Plaintiff’s motion for class certification under the
Migrant and Seasonal Agricultural Worker Protection Act (“AWPA”). Defendants
alleged that the AWPA did not apply to the putative class representatives. Defendant
further asserted that if the class representatives were not able to seek relief under the
AWPA, they would not be able to adequately represent a class of migrant workers who
were eligible for relief. The Court reasoned that under the new precedent in the Second
Circuit in In Re Initial Public Offering Securities Litigation, 2006 U.S. App. LEXIS
29859 (2d Cir. Dec. 5, 2006), the Court must resolve any factual disputes that bear on
Rule 23 class certification, even if the disputed facts overlap with any aspect of the merits
of the case. Thus, before a class could be certified in this case, the Court determined that
it had to decide whether the class representatives had valid claims under the AWPA.
Accordingly, the Court denied the motion for class certification, and directed the parties
to complete all discovery on any issues related to the class representative’s claims and to
brief a motion for summary judgment so the Court could decide whether Plaintiffs were
covered by the AWPA.
The rulings in Iglesias-Mendoza – decided just two days after In Re Initial Public
Offering Securities Litigation – illustrates the dramatic shift which the Second Circuit’s
opinion is apt to have in employment-related class action certification battles. If the
defense can show that a named plaintiff lacks a viable claims, In Re Initial Public
Offering Securities Litigation and Iglesias-Mendoza are powerful case law precedents to
support the denial of class certification.
Recinos-Recinos, et al. v. Express Forestry, Inc., 233 F.R.D. 472 (E.D. La. 2006).
Plaintiffs in this case filed claims under the Migrant and Seasonal Agricultural Worker
Protection Act (“AWPA”) and the Fair Labor Standards Act (“FLSA”). The Court
certified Plaintiffs’ proposed class under the AWPA. The Court found that the
numerosity requirement was satisfied because the proposed class would contain about
300 migrant workers, many of whom reside in Guatemala and Mexico. The Court also
found that the commonality requirement was satisfied, as all members of the class shared
a common factual circumstance of working for Defendants as H-2B temporary workers,
and all members of the class raised the same legal allegations under the AWPA. The
Court held that the named Plaintiffs’ claims were typical of the claims of the class as a
whole, an assertion that was undisputed by Defendants. Finally, the Court held that the
named Plaintiffs could adequately represent the class. Defendants argued the named
representatives could not adequately represent the class because they were indigent,
lacked education, and could not speak English. The Court found that these arguments
were insufficient to lead to a finding that the representatives would be subordinate to their
counsel or that they were otherwise inadequate to represent the class. Therefore, the
Court held that all four requirements of Rule 23(a) were satisfied. The Court next
analyzed whether a class could properly be certified under Rule 23(b)(3). Defendants
argued that Plaintiffs could not fulfill the predominance requirement because their FLSA
claims predominated over their AWPA class claims. The Court reasoned, however, that
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the predominance factor only requires that common questions predominate over
individual interests. As the FLSA claims are not individual issues, the Court concluded
that the predominance requirement was met. The superiority requirement was also met,
since individual claims would be highly impractical, if not impossible, because potential
Plaintiffs resided in Mexico and Guatemala and spoke little English; there were no
known individual actions brought by class members; it was desirable to bring the actions
in one forum; and there were no exceptional difficulties caused by litigating the claims as
a class. The Court therefore held that the requirements of Rule 23(b)(3) were satisfied,
and certified the class.
Perez-Farias, et al. v. Global Horizons, Inc., 2006 WL 2129295 (E.D. Wash. July 28,
2006). In this case, the Court certified a class of U.S. resident workers who sought
employment with Defendant or who may, in the future, seek employment. The class
claims arose under the Migrant and Seasonal Agricultural Work Protection Act and the
Farm Labor Contractor’s Act. Defendant did not challenge Plaintiff’s arguments that the
numerosity, commonality, or typicality requirements were satisfied. Instead, Defendant
raised factual disputes that showed that the named Plaintiffs may not, themselves, be
entitled to relief and that they were therefore inadequate class representatives. The Court
determined that in ruling on a motion for class certification, the Court “must accept the
substantive allegations of the complaint as true.” Id. at *8. Thus, the factual disputes
raised by Defendant did not create a conflict between the named Plaintiffs and the absent
class members. In these circumstances, the Court held that all four requirements of Rule
23(a) were satisfied. The Court further held that certification under Rule 23(b)(2) was
proper. Defendant argued that the equitable relief Plaintiffs sought – an injunction
barring the employer from future discrimination – was rendered moot when Defendant
lost its license to operate a business in Washington state. The Court noted, however, that
Defendant was appealing the loss of its license, and that even if the appeal failed,
Defendant could reapply for a license in the future. Thus, the Court ruled that equitable
relief was proper because it was not absolutely clear that the alleged illegal activities will
never recur in the future. The Court also noted that although Plaintiffs sought monetary
damages for ex-employees, they did not seek any monetary damages for future workers.
Thus, the Court held that the claims for injunctive relief predominated over the class
claims for monetary relief, and that certification under Rule 23(b)(2) was proper.
(xix)
Class Action Litigation Prosecuted Labor Advocacy Groups
Doe, et al. v. Village Of Mamaroneck, et al., 2006 U.S. Dist. LEXIS 86249 (S.D.N.Y.
Nov. 20, 2006). Plaintiffs were day laborers of Mexican, Guatemalan, and Salvadorian
origin, who together with a day laborers advocacy group, brought suit against a village,
its mayor, and its police chief claiming violations of their equal protection rights pursuant
to 42 U.S.C. § 1983 for allegedly maintaining an intimidation campaign against the day
laborers. In a beach hearing, the Court concluded that the evidence showed that for 50
years, immigrant day laborers who were predominately white congregated in a village
park in order to solicit work from various contractors. Since the 1990’s, however, nearly
all of the day laborers have been Latino. In 2004, the village changed the day laborers’
gathering place to a village parking lot, increased police presence, and routinely ticketed
and searched commercial vehicles. The evidence at the hearing showed that the
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aggressive ticketing and searching of vehicles was instituted in order to reduce the
amount of day laborers by deterring contractors from picking them up. Eventually,
claiming that crime had increased in the area and that many of the immigrants came from
different municipalities, the village passed a resolution closing the village parking lot site
in order to control quality of life issues. After dismissing the advocacy group from the
suit for lack of standing, the Court determined that Defendants applied neutral laws in an
intentionally discriminatory manner against the day laborers. Specifically, the Court
found that the reasons given by the village for its practice of aggressively ticketing
contractor vehicles and repeatedly harassing the day laborers in the village parking lot
was pretextual and not related to controlling any quality of life issues. The Court further
found that when the day laborers had been predominantly white, the village was highly
tolerant of the laborers. The Court thus determined that Defendants’ actions constituted
intentional race discrimination in violation of 42 U.S.C. § 1983.
(xx)
Preemptive Dismissal Of A Class Action Prior To Discovery
Chicago Lawyers Committee For Civil Rights Under The Law, Inc., v. Craigslist, Inc.,
2006 U.S. Dist. LEXIS 82973 (N.D. Ill. Nov. 14, 2006). Plaintiff, a non-profit
organization, brought suit against a website operator alleging that Defendant’s
advertisements for the sale or rental of housing intentionally stated a preference for,
limited, or discriminated on the basis of race, color, religion, sex, familial status or
national origin in violation of the Fair Housing Act (“FHA”), 42 U.S.C. § 3604(c).
Plaintiffs sought monetary, declaratory, and injunctive relief against Defendant. The
website, which is a vehicle through which third party users can post and read
advertisements, allowed third parties to create their own advertisements for available
housing. Plaintiff argued that some of these advertisements contained objectionable
statements that violated the FHA, such as, “African Americans and Arabians tend to
clash with me, so that won’t work out,” or “No Minorities.” Id. at *3. Defendant,
however, argued that Plaintiffs failed state a claim, maintaining that Section 230(c)(1) of
the Communications Decency Act (“CDA”) provides immunity to interactive computer
services (“ICS”) from cases seeking to find these services liable for third-party content.
Plaintiff responded to this argument by claiming that Section 203(c)(1) is merely a
definitional clause that determines whether ICS’s fall within the purview of the Act,
rather than a clause that provides immunity to ICS’s. In finding for Defendant, the Court
held that Defendant was a “provider of interactive computer service” for purposes of the
CDA because it operates a website that allows multiple users to create notices and
advertisements for housing. Id. at *5. In addition, the Court determined that although
Section 230(c)(1) of the CDA does not bar any cause of action against an interactive
computer service, it does prohibit treating an ICS as a publisher of third-party content.
Accordingly, because Section 230(c)(1) precluded Plaintiff from characterizing
Defendant as a “publisher,” the Court granted Defendant’s motion for judgment on the
pleadings. As a result, Defendant preempted Plaintiffs’ class action on its pleadings and
without discovery.
Hulteen, et al. v. AT&T Corporation, 441 F.3d 653 (9th Cir. 2006). In this case, female
AT&T employees who had taken pregnancy leave prior to the enactment of the
Pregnancy Discrimination Act (“PDA”) in 1979 sued their employer. They alleged that
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defendant violated Title VII by not giving them credit for their pregnancy leave time in
calculating their current retirement benefits. Prior to 1979, AT&T treated pregnancy
leave as personal leave and did not award full service credit for the entire period of
absence. On the effective date of the PDA, however, the company changed its policy to
comply with the new law, providing service credit to employees who took pregnancy
leave on the same basis as leaves taken for other temporary disabilities. The district court
granted plaintiffs’ motion for summary judgment. On appeal, the Ninth Circuit reversed.
It reasoned that there were two problems with Plaintiffs’ case. First, the PDA is not
retroactive and therefore Defendant’s denial of the credit at the time the pregnancy leave
was taken was not illegal. Plaintiffs’ argument that it was not the initial credit calculation
but the present denial of retirement benefits that is illegal also failed. Following the
Supreme Court’s decision in United Airlines v. Evans, 431 U.S. 553 (1977), the Ninth
Circuit reasoned that the emphasis “should not be placed on mere continuity” and that the
“critical question is whether any present violation exists.” Id. at 658. Without applying
the PDA retroactively, Plaintiffs’ arguments failed. Additionally, the Ninth Circuit
rejected Plaintiffs’ assertion that the benefits calculation system was “facially
discriminatory.” Id. at 660. Second, the Ninth Circuit held that Plaintiffs’ claims were
barred by the statute of limitations. Since the current violation theory was not viable, any
possible violation occurred prior to 1979 and since the suit was filed in 1994, it was
clearly time-barred.
The Ninth Circuit subsequently vacated its ruling ordered a rehearing en banc in Hulteen
v. AT&T Corp., 455 F.3d 973 (9th Cir. 2006). The Ninth Circuit has yet to render a new
ruling en banc.
Key, et al. v. DSW Inc., 454 F. Supp. 2d 684 (S.D. Ohio Sept. 27, 2006). In this case,
Plaintiff filed a complaint in state court, charging shoe retailer DSW Inc. with violating
the Ohio Consumer Protection Statute as well as alleging negligence, breach of contract,
and other state tort claims over the company’s alleged failure to protect customer
financial data. DSW removed the case to federal court. Plaintiff’s lawsuit sought to
establish a nationwide class of all individuals whose information was accessed in a 2005
hacker incident involving more than 1.4 million individuals. The Court dismissed the
complaint for lack of standing. The Court reasoned that while plaintiff alleged an
increased risk of identity theft related to the DSW breach incident, her complaint
contained no allegation that she personally experienced identity theft or any other
concrete harm. The Court concluded that an increased risk of future identity theft alone
is insufficient to show damages necessary to maintain a current case or controversy
necessary for standing to sue.
Shaw, et al. v. Hyatt International Corp., 461 F. 3d 899 (7th Cir. 2006). In this case,
the Seventh Circuit upheld the dismissal of class claims of consumer fraud action and
unjust enrichment brought by an American living in London. Plaintiff claimed that he
made a hotel reservation for his stay in Moscow through the Hyatt website which quoted
a rate of $502 per night and asserted that the price to be paid at checkout would be in the
currency initially quoted and displayed. Upon checkout, the hotel charged him in rubles
and upon conversion, the result was that Plaintiff paid approximately 14% more for his
room than what was advertised on the website. Plaintiff brought suit on behalf of himself
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and all other similarly situated customers alleging unjust enrichment and violation of the
Illinois Consumer Fraud and Deceptive Business Practices Act. The district court
granted Hyatt’s motion to dismiss both claims because Plaintiff was a non-resident, and
he could only bring suit under the Act if a fraudulent transaction occurred primarily and
substantially within Illinois. With respect to the unjust enrichment claim, the district
court held that because the claim arose out of an express contract between Plaintiff and
Hyatt governed by the terms of the website, the concept of unjust enrichment was
inapplicable. On appeal, the Seventh Circuit determined that there could be a nexus
whereby Plaintiff’s transaction on the Hyatt website for the rate of the room and the
currency in which it would be charged occurred primarily and substantially in Illinois
(given that Hyatt’s website operated out of Chicago and because the website stated that
any claims or action would be governed by Illinois law). However, the Seventh Circuit
upheld the dismissal of both claims on the grounds that there was an express contract
between Plaintiff and Hyatt. The Seventh Circuit determined that Plaintiff’s claim was
based entirely on contractual promises made by the Hyatt website which he accepted
upon booking the room and that the deception he claimed was nothing more than a failure
to fulfill the contractual promise as to the rate of the room. Thus, the Seventh Circuit
concluded that his claim was based entirely on breach of contract, thus foreclosing a
consumer fraud or an unjust enrichment action.
Spires, et al. v. Hospital Corporation Of America, 2006 U.S. Dist. LEXIS 52913 (D.
Kan. July 27, 2006). In this case, the Court dismissed a proposed class action brought
by individuals who were admitted or treated by HCA hospitals and who were allegedly
injured by “dangerous” nurse staffing policies. Plaintiff alleged that the nurse staffing
policies of HCA gave rise to unreasonably dangerous conditions, violated the Kansas
Consumer Protection Act, or resulted in an unjust enrichment of the corporation. The
Court reasoned that claims that the hospital employed a level of medical staff insufficient
to meet the required medical standard of care were inherently claims involving questions
of medical judgment and thus, were more properly medical malpractice claims. As such,
they had to be asserted against the treating hospital, not the corporate parent. The Court
determined that lending credence to the argument espoused by Plaintiff would have the
effect of “transmogrifying any and all malpractice claims (so long as someone involved
was seeking a profit) into a consumer protection claim” and that “no authority exists for
such a drastic reworking of the law.” Id. at *12.
(xxi)
Class Certification Issues Involving Discrimination Under Other Federal
Statutes
Amos, et al v. GEICO Corp., 2006 U.S. Dist. LEXIS 89594 (D. Minn. Nov. 20, 2006).
Plaintiffs were a group of African-Americans who were issued automobile insurance
polices by Defendant, and who alleged that Defendant’s use of an insured’s occupation or
level of education in order to determine rates for insurance polices constituted racial
discrimination in violation of 42 U.S.C. § 1981. Specifically, Plaintiffs claimed that
Defendant used an insured’s occupation or level of education to determine his or her risk
of coverage and then referred high risk individuals to companies with higher premiums
and referred lower risk individuals to companies with lower premiums. Plaintiffs’
complaint averred that African-Americans were less likely to have advanced jobs or to
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have reached higher levels of education than Caucasians and thus, Defendant knowingly
and purposely relied on occupation and education as proxies for race. In denying
Defendant’s motion to dismiss, the Court affirmed a magistrate judge’s determination
that Plaintiffs sufficiently pled their allegations of intentional discrimination for purposes
of surviving a Rule 12(b)(6) motion. First, the magistrate judge noted that in the context
of a Section 1981 claim, “there is no requirement that the plaintiff plead facts establishing
a prima facie case of discrimination.” Id. at *10-11. The magistrate judge also
determined that the issue when deciding a Rule 12(b)(6) motion is not whether Plaintiffs
would prevail, but whether Plaintiffs were entitled to offer proof in support of their
claims. Thus, according to the magistrate judge, if proven true, Plaintiffs’ allegations that
Defendant intentionally discriminated against them by charging them higher insurance
rates than similarly situated Caucasians could entitle them to relief under § 1981.
Accordingly, Court denied Defendant’s motion to dismiss.
Garcia, et al. v. U.S. Department Of Agriculture, et al., 444 F.3d 625 (D.C. Cir. 2006).
Plaintiffs were Hispanic farmers who filed suit against the U.S. Department of
Agriculture (“USDA”), alleging that the USDA’s money lending programs for farmers
were racially discriminatory and violated the Equal Credit Opportunity Act (“ECOA”).
Plaintiffs also sought class certification and a declaratory judgment that by systematically
failing to investigate their discrimination claims, the USDA violated their rights under the
ECOA and the Administrative Procedures Act (“APA”). The district court denied the
motion for class certification and granted Defendant’s motion to dismiss. On appeal,
Plaintiffs argued that they represented a class of similarly situated Hispanic farmers
throughout the nation and that the USDA discriminated against them by refusing to
provide them with loans and other benefits. In affirming the district court’s decision, the
D.C. Circuit held that Plaintiffs did not establish “commonality” for the purposes of class
certification because Plaintiffs “failed to identify any centralized, uniform policy or
practice of discrimination by the USDA that formed the basis of discrimination against
Hispanic loan applicants.” Id. at 632. Furthermore, according the D.C. Circuit,
Plaintiffs’ claims did not arise from one single actor, but rather, the claims arose from
“multiple individual decisions made by multiple individual committees.” Id. The D.C.
Circuit reasoned that it is difficult to identify a centralized and uniform practice of
discrimination and thus, commonality when, as in this case, “multiple decision makers
with significant local autonomy exist.” Id. at 633-34. The D.C. Circuit also rejected
Plaintiffs’ argument that the district court erred when it refused to certify a class “on
whose members the Department’s facially neutral action has had a discriminatory
disparate impact,” holding that Plaintiffs failed to identify a common facially neutral
USDA loan policy. Id. at 634-35. Finally, the D.C. Circuit affirmed the district court’s
dismissal of the failure to investigate claim, finding that the failure to investigate a
discrimination complaint is not a credit transaction within the meaning of the ECOA.
The D.C. Circuit therefore declined to exercise jurisdiction over Plaintiffs’ failure to
investigate claim, and remanded that issue to the district court.
Love, et al. v. Johanns, et al., 439 F.3d 723 (D.C. Cir. 2006). Plaintiffs, female farmers,
appealed a district court’s decision denying their motion for class certification and
dismissing their discrimination and failure to investigate claims against the U.S.
Department of Agriculture (“USDA”). Plaintiffs brought these claims pursuant to the
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Equal Credit Opportunity Act (“ECOA”) and the Administrative Procedures Act
(“APA”). Plaintiffs alleged that the USDA used “subjective loan-making criteria” which
allowed loan decision makers to discriminate on the basis of gender and that it
“systematically dismantl[ed] its complaint-processing systems and fail[ed] to investigate
discrimination claims filed by women farmers.” Id. at 726. In their amended complaint,
Plaintiffs sought certification of two subclasses; Subclass 1 consisted of women farmers
who asked for but did not receive loan applications and Subclass 2 consisted of women
farmers who submitted their loan applications, but did not receive a loan. In affirming
the district court’s decision, the D.C. Circuit held that Plaintiffs failed to establish
commonality for Subclass 1 because they failed to show that each member of the class
suffered from a common policy of discrimination. Specifically, the D.C. Circuit found
that there were too many diverse issues and too many potential Plaintiffs to infer a
common policy of discrimination. The D.C. Circuit also noted that Plaintiffs failed to
provide any statistical evidence that female farmers’ loan requests were treated
differently than male farmers’ requests and rejected Plaintiffs’ argument that “622
aggrieved women’s declarations warranted the certification of the class.” Id. at 730. The
D.C. Circuit affirmed the district court’s refusal to certify Subclass 2, rejecting Plaintiffs’
argument that “a common policy [of discrimination] exists when significantly subjective
decision-making operates on a national basis with discriminatory results.” Id. Finally,
the D.C. Circuit affirmed the district court’s dismissal of the failure to investigate claim,
finding that the failure to investigate a discrimination complaint is not a credit transaction
within the meaning of the ECOA. The D.C. Circuit declined to exercise jurisdiction over
Plaintiffs’ failure to investigate claim, and remanded that issue to the district court.
Maldonado, et al. v. City Of Altus, 433 F.3d 1294 (10th Cir. 2006). In this case, the
district court ruled that an Oklahoma city’s policy that its public employees speak only
English while on the job conducting city business violated their rights under Title VII of
the 1964 Civil Rights Act and other federal anti-discrimination laws. On appeal, the
Tenth Circuit affirmed that ruling, sending the claims back to the district court for a jury
to decide. The City implemented the policy in 2002, requiring that all workers use
English for work-related and business communications, with limited exceptions. A group
of bilingual City employees brought suit, alleging disparate impact and treatment under
Title VII as well as violations of 42 U.S.C. § 1981 and § 1983. Although the Englishonly policy was written to only require that all workers use English for all work-related
conversations, Plaintiffs alleged that they were told by various supervisors not to speak
Spanish any time a non-Spanish speaker was present, even on breaks, during lunch, or in
other private, personal conversations. They alleged that the policy created a hostile
environment for Hispanic employees, and subjecting them to racial and ethnic taunting.
The Tenth circuit upheld Plaintiffs’ claims, finding that Defendant’s explanations for the
policy were not plausible. For example, there was no evidence of prior communication
problems or safety issues linked to the speaking of Spanish, although there had been
complaints about Spanish being spoken over the City radios. Further, the Tenth Circuit
held that Plaintiffs had shown that the policy had a disparate impact on them, in that it
created a hostile work environment based on race and ethnicity. The Tenth Circuit
reasoned that the allegations of racial taunting might not be enough to support a hostile
environment claim, but coupled with the policy, which was allegedly enforced beyond its
written terms, there was sufficient evidence of disparate impact. Indeed, the fact that the
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City prevented Plaintiffs from using their preferred language at all could be seen as antiHispanic, if there was no reasonable justification for the policy. Given the lack of
previous problems linked to the speaking of Spanish in the workplace, the Tenth Circuit
concluded that the City’s claim of a business necessity for the policy fell flat.
Menges, et al. v. Blagojevich, et al., 451 F. Supp. 2d 992 (C.D. Ill. 2006). In this case, a
group of Walgreen pharmacists brought suit against the State of Illinois and its Governor,
seeking to invalidate a law that requires pharmacies that sell contraceptives to accept and
fill prescriptions without delay. Plaintiffs alleged that the requirement that they fill
prescriptions for contraception violated their right under Title VII to be free from
religious discrimination and their First Amendment right to freedom of religion. The
Court allowed Walgreen to intervene in the case, as the company’s interest in overturning
the law would not be fully served by the pharmacists’ own case. Walgreen had
previously implemented an accommodation program that allowed objecting pharmacists
to have a different pharmacist (at the same or a nearby pharmacy) fill contraceptive
prescriptions in their stead. The new state law requires all pharmacists to fill such
prescriptions themselves. When faced with a motion to dismiss, the Court found that the
allegations of the complaint were specific enough to raise claims under Title VII and the
First Amendment. Although the State argued that the law was neutrally written and did
not need to survive strict scrutiny to be upheld, Plaintiffs alleged that statements from the
Governor and others indicated that the real purpose of the law was to prevent pharmacists
with religious objections from being able to avoid dispensing contraceptives. At the
motion to dismiss stage, the Court determined that this allegation was enough to survive
dismissal of the case. Similarly, Plaintiffs’ argument that the law was preempted by
Title VII because it required employers to infringe upon their pharmacist-employees’
religious beliefs also survived, although the Court noted that there was a strong
presumption against finding federal preemption of state health and safety statutes.
Thorn, et al. v. Jefferson-Pilot Life Insurance Co., 445 F.3d 311 (4th Cir. 2006). In
this class action case, Plaintiffs alleged that between 1911 and 1973, Defendant’s
corporate predecessor discriminated against generations of African-Americans in
violation of 42 U.S.C. §§ 1981 and 1982 by charging African-Americans higher
insurance premiums than whites for similar insurance coverage. The complaint sought an
injunction prohibiting Defendant from collecting any future premiums on policies sold
under this dual-pricing system, restitution for the difference in premium payments made
by African-American and white policyholders, punitive damages, and attorneys’ fees.
Defendant challenged class certification on two grounds. First, Defendant claimed that
individual class members could have acquired either actual or constructive knowledge of
the dual-pricing system outside of the statute of limitations period. Second, Defendant
argued that Plaintiffs sought primarily monetary relief, rather than declaratory or
injunctive relief, and such relief made class certification impossible due to individualized
damages issues. The district court denied class certification, finding that because it could
not resolve Defendant’s statute of limitations defense on a class-wide basis, common
issues did not predominate over individual ones. The district court also agreed that
Plaintiffs were seeking primarily monetary relief, and such requests made class
certification impossible due to individualized damages issues. On appeal, the Fourth
Circuit affirmed, holding that Plaintiffs bore the burden of proving the class was
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appropriate for certification under Rule 23 and that the district court did not err in finding
that Defendant’s statute of limitations defense did not present common issues that could
be resolved on a class-wide basis. The Fourth Circuit also held that, although Plaintiffs
sought an injunction, they primarily sought monetary relief thereby dooming their
arguments for certification under Rule 23(b).
Trevizo, et al. v. Adams, et al., 455 F.3d 1155 (10th Cir. 2006). In this class action case,
owners, employees, and customers of a Latino-owned restaurant/bakery sued Salt Lake
City and individual law enforcement officials under 42 U.S.C. § 1983. Plaintiffs alleged
that Defendants engaged in gross improprieties in the execution of a search warrant at the
business as part of an investigation of illegal drug use on the premises. However, upon
execution of the warrant, no evidence of illegal activity was found. The district court
denied class certification on numerosity and commonality grounds. Plaintiffs argued on
appeal that the district court erred because it should have followed cases from other
jurisdictions which hold that numerosity may be presumed at a certain number. The
Tenth Circuit rejected this argument, stating that it had never adopted such a presumption
and, in fact, had specifically stated that “no set formula to determine if the class is so
numerous that it should be so certified.” Id. at 1162. The Tenth Circuit also rejected
Plaintiffs’ argument that joinder would be impractical because the remaining potential
class members may be deterred from joining the action because they do not speak English
and they fear the legal system. The Tenth Circuit found this argument unpersuasive
because the majority of the named Plaintiffs did not speak English and there was no
evidence to demonstrate a fear of the legal system. Finally, the Tenth Circuit held that
the district court thoroughly examined the issue of commonality and determined that
Plaintiffs “presented divergent fact patterns which made this case inappropriate for class
action status.” Id. at 1163. The jury’s determination of reasonableness would rely on
numerous factors, including how long each Plaintiff was detained by the police and the
degree of force used on each of them. In the present case, Plaintiffs’ responses to each of
these questions varied widely, thereby undermining certification under Rule 23(b).
(xxii)
Class Action Standing Issues
In Re African-American Slave Descendants Litigation, 2006 U.S. App. LEXIS 30525
(7th Cir. Dec. 13, 2006). The descendants of slaves filed nine separate class action
lawsuits seeking monetary relief under both federal and state law for harms stemming
from the enslavement of African-Americans in the United States. Pursuant to 28 U.S.C.
§ 1407, the Judicial Panel on Multi-District Litigation consolidated all nine class actions
in the U.S. District Court for the Northern District of Illinois for pre-trial proceedings.
Once consolidated, all but one group of Plaintiffs agreed to file a consolidated complaint.
The district court dismissed the original complaint, but gave Plaintiffs leave to amend and
re-file the lawsuits. Plaintiffs’ original complaint emphasized the human rights
dimension of the injuries for which they were suing, and relied upon the Alien Tort
Claims Act to sue for damages for human rights violations such a genocide, torture, and
forced labor. In their amended complaint, Plaintiffs dropped all references to violations
of human rights, and based their claims for compensation on conventional legal theories
involving damage to property and personal injury. Plaintiffs alleged that Defendants
acted in ways that dispossessed property from two sets of victims, including the slaves
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themselves (who were denied the property rights they had in the value of their own
labor), and the descendants of those slaves who allegedly had been denied property that
they would have inherited (were it not the for theft of property from their forbearers). In
addition, Plaintiffs alleged that consumers have been defrauded because Defendants have
consciously chosen not to reveal their connections to slavery, and that consumers would
have boycotted the companies due to their connections to slavery and failure to pay
reparations (instead of being lulled into continuing to purchase products and services
from Defendants). Plaintiffs’ amended complaint also relied upon various state consumer
fraud laws, including the laws of California, Illinois, New Jersey, New York, and Texas.
The district court granted Defendant’s motion to dismiss on the merits with prejudice,
finding that Plaintiffs lacked standing and as their claims raised political questions that
were not justiciable by federal courts. Plaintiffs appealed the decision, contending that
the district court could not decide the case on the merits because Plaintiffs never agreed
to let the district court decide the merits. The Seventh Circuit affirmed the district court’s
ruling in part, and reversed in part. The Seventh Circuit concluded that the district court
had authority to dismiss the case on the merits because the district court had a duty to
conduct pre-trial proceedings, which includes ruling on a number of pre-trial motions that
will shape the litigation. The Seventh Circuit also determined that while the U.S.
Supreme Court has ruled that a transfer under 28 U.S.C. § 1407 does not give a district
court the authority to retain the case for trial, there is no reason to exclude motions to
dismiss from a district court’s authority to conduct pretrial proceedings under § 1407.
The Seventh Circuit modified the dismissal to be without prejudice because it determined
that the district court should not have dismissed the class action with prejudice when it
did not have federal jurisdiction over the state law consumer fraud claims. The Seventh
Circuit reasoned that Plaintiffs should be allowed to present their consumer fraud theory
for adjudication, but commented on the severe proof problems which Plaintiffs were apt
to encounter in attempting to prove such a novel theory.
(xxiii)
Termination Of Class Action Consent Decrees
Frazar, et al. v. Ladd, et al., 457 F.3d 432 (5th Cir. 2006). In this case, Plaintiffs filed a
lawsuit against Texas state officials to improve the state’s administration of the Medicaid
program. The parties settled, and the district court entered a consent decree. Defendants
subsequently filed a motion to terminate the consent decree under Rule 60(b)(5) because
the goal of the consent decree – compliance with federal Medicaid law – had been met.
The district court denied Defendants’ motion, and the state officials appealed. According
to the Fifth Circuit, Defendants had the burden of establishing that a change in factual
circumstances or the law warranted revision of the consent decree because compliance
was onerous or unworkable and the changes occurred despite Defendants’ efforts to
comply with the decree. In addition, Defendants argued that principles of federalism
required the district court to terminate the consent decree once state officials showed that
they were complying with federal law. In particular, Defendants argued that state
officials should be given wide latitude and substantial discretion in administering federal
programs. The Fifth Circuit found that terminating a consent decree as soon as
Defendants show that they are complying with federal law would allow them to ignore
their consent decree obligations without a showing that a change in circumstances made
the compliance with the consent decree more onerous or unworkable. Moreover, the
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Fifth Circuit found that compliance was not the sole purpose of the consent decree. The
consent decree was also aimed at preventing further litigation of Plaintiffs’ claim. As
such, the Fifth Circuit found that the district court did not abuse its discretion when it
denied Defendants’ motion.
(xxiv)
Class Certification Defenses Based On Typicality
Beck, et al. v. Maximus, Inc., 457 F.3d 291 (3d Cir. 2006). In this case, Plaintiffs sued
Defendant, a debt collection agency, alleging that it had violated the Fair Debt Collection
Practices Act (“Act”) when it sent debt collection letters to Plaintiffs’ employers. The
Act provides a defense to a debt collector when a violation of the Act results from a bona
fide error. Defendant sent a debt collection letter to the named Plaintiff by accident, as
she was not, in fact, a debtor. Defendant challenged class certification, arguing that it
had a bona fide error defense against the named Plaintiff’s claim, and, therefore, the
named Plaintiff’s claim was not typical of the class, and she was not an adequate class
representative. The district court rejected this argument and granted class certification.
On appeal, the Third Circuit vacated the certification order and remanded for further
review. In particular, the Third Circuit determined that, on remand, the district court
must evaluate whether Defendant had a bona fide error defense against the named
Plaintiff before determining that class certification was appropriate. If Defendant had
such a defense, class certification would not be appropriate if it is likely that the unique
defense would play a significant role at the trial.
(xxv)
Proof Issues For Disparate Impact Theories In Class Actions
Williams, et al. v. The Boeing Co., 2006 U.S. Dist. LEXIS 3417 (W.D. Wash. Jan. 17,
2006). In this case, plaintiff sued on behalf of a class of 4,200 current and former
African-American employees of Boeing on the basis of disparate treatment and disparate
impact discrimination in alleged violation of Title VII. On December 21, 2005, a jury
entered a verdict in favor of Defendant on the disparate treatment claims. The disparate
impact claims – which were based on neutral promotion practices that were alleged to
disparately impact African-American employees – were tried to the Court. The Court
found that Plaintiffs did not prove their disparate impact claim by a preponderance of the
evidence. The Court entered judgment in favor of Defendant because Plaintiffs did not
establish a prima facie case of disparate impact. Plaintiffs relied on statistical evidence
and analyses by an expert witness. However, the Court found the analyses unpersuasive
because the expert relied on data kept by Defendant of when an individual had received a
promotion. That data was not reliable since Defendants had instituted procedures to track
individual promotions after the period of time in question and did not provide an accurate
or consistent measure of when a promotion had actually occurred. The Court instead
credited the testimony and analysis of Defendant’s expert. That expert relied on
individuals’ career progress as measured by salary growth, which the Court concluded
was a more accurate indication of promotion. In addition, the Court held that Plaintiffs
did not demonstrate a causal connection between any specific employment practices and
any alleged disparate impact. Thus, Plaintiffs could not point to any specific employment
practice which would account for the disparate impact they claimed.
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(xxvi)
Expert Analyses In Class Actions Alleging Disparate Impact
Discrimination
Carpenter, et al. v. Boeing Co., 456 F.3d 1183 (10th Cir. 2006). In this case, the Tenth
Circuit upheld the district court’s grant of summary judgment in favor of Defendant and
held that female employees presenting statistical analysis showing large discrepancies in
the assignment of overtime between men and women failed to prove disparate impact
discrimination. The underlying claims were based on allegations that the discretion given
to supervisors in assigning overtime resulted in women receiving consistently fewer
overtime assignments than their male counterparts. Plaintiffs also alleged that Boeing’s
failure to act upon knowledge of the denial of those assignments constituted intentional
discrimination against its female employees. Plaintiffs’ expert provided evidence that
female hourly employees who were similarly situated to males with respect to job, grade,
shift, department, and budget code were consistently and statistically less likely to work
overtime. The Court rejected the expert’s argument based on its conclusion that his
analysis did not properly define employees qualified for overtime. The Court reasoned
that to prove disparate impact, it is not enough for employees to show only that more
overtime goes to men than women. Instead, Plaintiffs must compare qualified men to
qualified women and show that among those eligible for overtime, a disproportionate
share of overtime goes to men. For this reason, the Court concluded that a statistical
analysis cannot establish Plaintiffs’ prima facie case unless it is based on data restricted
to qualified employees, or reliable data with respect to the group is unavailable, and
Plaintiffs establish that the statistical analysis uses a reliable proxy for qualification. In
this case, the employees eligible for overtime were those who satisfied the collective
bargaining agreement’s requirements. The analysis of Plaintiffs’ expert, however, did not
incorporate or account for all of the requirements in the agreement. The Court concluded
that Plaintiffs did not meet their burden because even though Boeing indicated that it did
not maintain electronic data on the omitted variables, it may have been available in other
forms and through other means of discovery. The Court held that even if the data were
unavailable, Plaintiffs failed to demonstrate that their expert’s variables produced reliable
surrogates for the overtime qualifications.
(xxvii)
Challenges To The Adequacy Of Class Counsel
Bruce, et al. v. KeyBank National Association, 2006 U.S. Dist. LEXIS 60207 (N.D.
Ind. Aug. 7, 2006). In this case, Plaintiff sought to certify a class in a lawsuit against
Defendant for alleged violation of the Fair Credit Reporting Act (“FCRA”). Plaintiff
alleged that Defendant accessed his credit report, and the credit reports of others, for the
improper purpose of mailing a letter that was merely a general solicitation for business.
Plaintiff alleged this was not a firm offer of credit under the FCRA. Defendant argued
that class certification was inappropriate because, among other things, Plaintiff’s counsel
had engaged in past unethical behavior. Defendant cited to two cases in support of its
argument based on previous issues of possible inappropriate behavior in other litigation.
In one case, another court questioned whether the law firm representing Plaintiff had
acted appropriately where it had suggested an untenable settlement. In the other case,
Plaintiff’s counsel was sanctioned for sending an inappropriate pre-litigation demand.
The Court rejected Defendant’s challenge to adequacy of counsel and stated that
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Plaintiff’s counsel was experienced and well-qualified to handle the case. The Court
reasoned that absent of a finding of an ethical breach, case law did not support rejection
of class certification under Rule 23(a)(4) based on the mere questioning of the adequacy
of Plaintiff’s counsel on ethical grounds.
Nowak, et al. v. Ford Motor Company, et al., 2006 U.S. Dist. LEXIS 92780 (E.D.
Mich. Dec. 22, 2006). This case involved consolidated ERISA class actions filed by
salaried hourly employees against Ford and various officers, directors, and other
fiduciaries of Ford’s 401(k) retirement savings plans. Plaintiffs alleged that Defendants
breached their fiduciary duties to 401(k) participants in numerous ways. Counsel for
separate Plaintiff groups filed motions seeking to be named lead counsel under Rule
23(g). One of the law firms representing Plaintiffs was Milberg, Weiss, Bershad &
Shulman. The Court indicated that several factors were pertinent when the parties to a
class action cannot agree on lead counsel, including experience, prior success record, the
number, size, and extent of involvement of represented litigants, the advanced stage of
proceedings, and the nature of the causes of actions alleged. Id. at *12. Furthermore,
Rule 23(a) requires that the Court choose lead counsel who will fairly and adequately
represent the interests of the class. Id. Based on these factors, the Court determined that
serious questions existed as to whether the Milberg, Weiss, Bershad & Shulman law firm
could act as lead counsel. Among other considerations, the Court held that it was highly
relevant that the Milberg Weiss law firm was indicted in May of 2006 for alleged bribery,
perjury, and fraud for alleged kickbacks paid to named class action representative in
United States v. Milberg, Weiss, Bershad & Schulman, Case No. 05-CR-587 (C.D. Cal.).
The Court acknowledged the “presumption of innocence” and “vigorous denials of
wrongdoing” by Milberg Weiss, but determined that “this cannot erase the obvious – that
this indictment of a major law firm for alleged bribery, perjury and fraud by its named
partners, could significantly harm the commitment of long term, unaltered legal
personnel resources from the Milberg Weiss firm.” Id. at *23. In addition, the Court
rejected the argument of Milberg Weiss that the motions of the other law firms who
sought appointment as lead counsel should be denied because Milberg Weiss filed the
first complaint against Ford and purportedly performed all of the original legal work in
connection with the class actions. The Court indicated that it had the responsibility to
select who among the competing firms “are best able to represent the interests of the
class.” Id. at *27. For this reason, the Court construed Rule 23(g) to require a qualitative
assessment of the work performed by counsel and the knowledge, skill, and experience of
counsel in the area of law at issue, as well as the available resources counsel has to
vigorously pursue the class action. Accordingly, the Court reasoned that the fact that a
law firm was “first to file” by itself has little to do with who is best qualified to lead the
case, and is irrelevant under Rule 23(g). The Court determined that to hold otherwise
“would further encourage a rush to the courthouse in ERISA class action cases.” Id.
(xxviii) Aggregate Proof Issues In Class Actions
Schwab, et al. v. Philip Morris USA Inc., 449 F. Supp. 2d 992 ( E.D.N.Y. Sept. 25,
2006). In this case, the Court certified a nationwide class of smokers alleging that the
tobacco industry made false representations about light cigarettes. In so ruling, the Court
declined to certify the case for an immediate appeal to the Second Circuit, or to stay
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proceedings while Defendants sought an appeal under Rule 23(f). In a 540 page opinion,
the Court rejected most of the parties’ motions for summary judgment, addressed
objections to experts, and made other pretrial rulings. Plaintiffs alleged that Defendants
engaged in a campaign to convince them smoking light cigarettes was healthier than
smoking other cigarettes, “[w]hen in fact they were at least as dangerous and defendants
knew of their dangers.” Id. at 1018. Plaintiffs’ sought treble damages under the federal
Racketeer Influenced and Corrupt Organizations Act (“RICO”). The Court observed
that, by using RICO and similar claims, and alleging that Plaintiffs’ “suffered financial
damage because they did not get what they thought they were getting - a more valuable,
safer cigarette,” Plaintiffs avoid one of the serious difficulties with national class actions:
the tort law in the 50 states is not uniform. Id. at 1019. The Court had no problem
finding the case met the Rule 23 numerosity test, noting estimates that the class numbers
in the tens of millions. Further, the Court ruled that the common issues were substantial
since plaintiffs alleged both the common course of conduct - the deliberate misleading of
the public concerning relative health risks of light cigarettes through significant and
widespread advertising campaigns, and a conspiracy - the collusion between the various
defendant companies and perpetrating the alleged fraud through many predicate acts
committed by all of them. The Court concluded that the same facts and evidence would
establish claims for each Plaintiff. Similarly, the Court found the named Plaintiffs met
the typicality requirement, noting that they “share the common traits that define the class:
arguably, they purchased light cigarettes under the reasonable belief in defendants’
knowingly false representations that they were a safer alternative to regular cigarettes
which would deliver less tar and nicotine.” Id. at 1105. Finally, the Court held that the
named Plaintiffs and class counsel met the adequacy of representation test. The Court
declined to certify the class under Rule 23(b)(2), noting that it had dismissed claims for
injunctive relief and finding the monetary damages clearly predominated. The Court
further concluded that Plaintiffs’ experts could extrapolate to the class as a whole from
individual class members’ experience as determined in individual discovery, surveys, and
statistical proof. In rejecting defense arguments based on individualized issues of
reliance, injury to business or property, calculation of damages, and statute of limitations
issues, the Court reasoned that those arguments were based on the “superficially true”
argument that “each smoker differs from every other smoker.” Id. at 1247. The Court
concluded that in such class actions, attention should focus on defendants’ alleged
misconduct rather than minor differences in plaintiffs’ reaction to it. With regard to
defendants’ due process claims, the Court ruled that the aggregate proof offered by
Plaintiffs did not violate constitutional requirements. The Court rejected Defendants’
claim that only individual jury trials could afford proper due process, concluding that,
“[i]f such an individualized process were undertaken, it would have to continue to beyond
all lives in being” and that, assuming Defendants were willing to expend the resources
and monies necessary both in discovery and at trial to mount such an undertaking,
“litigation costs in doing so would far exceed any monies saved by avoiding erroneous
payments.” Id. at 387. The Court also upheld Plaintiffs’ fluid recovery proposal, which
provides for a cy pres distribution of any damages not paid out to class members based on
their purchases during the appropriate class period.
This class certification ruling is of gigantic proportions. The decision stretches Rule 23
mechanisms to craft a class certification order in a way which few federal courts have
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done before. Defendants’ petition for interlocutory appeal to the Second Circuit was
accepted, and it remains to be seen whether the underlying certification order will
survive.
(xxix)
Class Action Fairness Hearings For Approval Of Settlements
UAW v. General Motors Corp., 235 F.R.D. 383 (E.D. Mich. 2006). The United Auto
Workers union and General Motors agreed to settle a class action over the modification
and termination of retiree health benefits. A group of class members raised objections to
evidentiary materials submitted in support of the proposed settlement at the fairness
hearing. The objectors argued that certain evidence offered to show the settlement’s
alleged fairness could not be considered by the Court because it consisted of hearsay
testimony (in the form of declarations) from class representatives, experts, and officers
and employees of the UAW and General Motors who did not attend the fairness hearing.
The UAW and General Motors had relied entirely on declarations and affidavits, and
presented no live testimony at the fairness hearing. The Court denied the objections on
the grounds that the purpose of a fairness hearing is “singular and narrow,” to determine
whether a proposed settlement is fair, reasonable, and adequate. Id. at 387. The Court
reasoned that it had broad discretion to require and accept any evidence and testimony
which would assist in making this determination. Such evidence typically includes
affidavits, declarations, and other material in the Record; the Court rejected the notion
that such evidence must be based on live testimony.
(xxx)
Class Actions Under The Americans With Disabilities Act
Bates, et al. v. United Parcel Service, Inc., 465 F.3d 1069 (9th Cir. 2006). In this case,
Plaintiff alleged that United Parcel Service, Inc. (“UPS”) violated the ADA, the
California Fair Employment and Housing Act (“FEHA”), and the California Unruh Civil
Rights Act. Specifically, Plaintiffs alleged that UPS refused to consider deaf workers for
jobs driving the company’s smaller vehicles, which are not covered by the U.S.
Department of Transportation’s (“DOT”) hearing standard. The district court found in
favor of the Plaintiffs. UPS appealed, and the Ninth Circuit affirmed the lower court’s
decision and rejected UPS’s argument that the workers had the burden to show that they
can perform the job safely. The Ninth Circuit held that the employees merely had to
show that they met all the requirements for the job other than the challenged criteria. The
Ninth Circuit further held that UPS failed to carry its burden of showing that its voluntary
use of the DOT hearing standard for jobs driving smaller vehicles is job-related and
consistent with business necessity. The Court found that UPS failed to present evidence
showing either that substantially all deaf drivers presented a higher risk of accidents than
non-deaf drivers or that there are no practical criteria for determining which deaf drivers
present a heightened risk.
(xxxi)
Disqualification Of Counsel In Class Actions
In Re Employment Discrimination Litigation Against State Of Alabama, 2006 U.S.
Dist. LEXIS 72161 (M.D. Ala. Oct. 2, 2006). In this case, Plaintiffs alleged that the
State of Alabama and many of its officials and subdivisions discriminated against
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African-American employees. Defendants claimed that Plaintiffs’ counsel violated the
Alabama Rules of Professional Conduct and the American Bar Association Model Rules
of Professional Conduct when he made ex parte contact with a management employee of
the State of Alabama. Defendants also alleged that when Plaintiffs’ counsel represented
the management employee in a separate retaliation suit against the State of Alabama he
further violated the Rules of Professional Conduct because of the alleged conflict of
interest. The Court denied Defendant’s motion. Specifically, the Court held that the
contact with the management employee was regarding a matter outside the state’s
asserted representation of the employee in the current lawsuit. The Court further held
that although it relied on previous case decisions regarding former employees, the
management employee’s employment status made no difference in its decision.
Furthermore, the Court held that because the management employee’s interests were
adverse to her employer’s legal interest (she was also filing a lawsuit against them), the
employee could not have been represented by the employer in the current matter.
(xxxii)
Punitive Damages In Class Actions
In Re The Exxon Valdez, 2006 WL 3755109 (9th Cir. Dec. 22, 2006). On
September 16, 1994, a jury found Exxon liable for an oil spill in Alaska’s Prince William
Sound, and awarded $287 million in compensatory damages and $5 billion in punitive
damages in a class action brought by various groups of Plaintiffs. The Ninth Circuit
vacated a portion of the punitive damages verdict in 2001, after which the district court
reduced the award to $4 billion in 2002. After a second appeal and remand, the district
court entered an award of $4.5 billion in punitive damages. In this appeal, Exxon
appealed the district court’s ruling. The Ninth Circuit examined the punitive damages
award based on the intervening precedent of State Farm v. Campbell, 538 U.S. 408
(2003). The Ninth Circuit determined that under Campbell, the district court had failed to
assess the reprehensibility of Exxon’s conduct and the effect of various mitigating
factors. As a result, the Ninth Circuit vacated the district court’s order, and remanded
with instructions to reduce the punitive damages award to the amount of $2.5 billion.
The Ninth Circuit determined that this figure struck the correct balance between the
various factors outlined by the U.S. Supreme Court in Campbell.
IV.
SIGNIFICANT COLLECTIVE ACTION RULINGS UNDER THE AGE
DISCRIMINATION IN EMPLOYMENT ACT
Multiple-plaintiff age discrimination claims under the Age Discrimination in
Employment Act (“ADEA”) are not governed by Rule 23. Instead, these claims are known as
“collective actions,” and are governed by the litigation procedures in the Portal-to-Portal Act at
29 U.S.C. § 216 (b). Courts and litigants commonly refer to these lawsuits as “§ 216 (b)
actions.”
Collective actions brought under the ADEA raise “opt-in” issues quite similar to those
arising under the Fair Labor Standards Act (“FLSA”). The plaintiffs’ bar typically utilizes the
FLSA’s two-step procedure under § 216 (b) to obtain conditional certification of ADEA
collective action claims. This approach, based upon the Tenth Circuit’s seminal decision in
Thiessen, et al. v. General Electric Capital Corp., 267 F.3d 1095 (10th Cir. 2001), involves
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substituting “pattern or practice” claims for evidence of commonality and typicality. The pattern
or practice vehicle by definition requires a higher threshold of proof, but plaintiffs have taken
advantage of the more lenient step one process in the ADEA’s two-step procedure for certifying
collective actions. In the “notice” or “conditional” certification stage, there is a lower threshold
of proof than in cases brought under Rule 23 where the Supreme Court requires a “rigorous
analysis” of a plaintiffs’ claims and evidence. Conditional certification under the ADEA
authorizes plaintiffs to send class notices based on minimal evidentiary showings and enables
them to gain leverage over employers who must then endure extensive discovery as plaintiffs
seek to gather proof of such claims.
A.
Cases Certifying Or Refusing To Certify ADEA Class Actions
(i)
First Circuit
No reported cases.
(ii)
Second Circuit
No reported cases.
(iii)
Third Circuit
Duffy, et al. v. Sodexho, 2006 U.S. Dist. LEXIS 76769 (E.D. Pa. Oct. 20, 2006). In this
case, a group of former employees asserted age discrimination claims against Sodexho.
Plaintiffs contended that Sodexho promoted younger, less qualified employees over older
workers through a pattern or practice of age discrimination. Plaintiffs sued under the
ADEA and Pennsylvania state law. Plaintiffs sought class certification of all their claims
under Rule 23 and 29 U.S.C. § 216(b). Defendant argued that class certification was not
appropriate under Rule 23 because it is inapplicable to ADEA lawsuits; in addition,
Defendant argued that collective certification was inappropriate under 29 U.S.C. § 216(b)
because the scope of the lawsuit should be limited to the scope of Plaintiffs’ EEOC
charges, and Plaintiffs failed to allege any class claims in those charges. The Court
denied collective action certification because Plaintiffs had failed to include any class
allegations in the charges they filed with the EEOC. Plaintiffs argued that as Sodexho
knew about issues of class-based discrimination arising during the administrative process,
Plaintiffs should not be precluded from prosecuting a class action merely because the
EEOC failed to include the class allegations in the charge or to investigate the class
claims fully. The Court rejected these arguments, reasoning it was Plaintiffs’ failure to
include class allegations in the charges that resulted in their omission from the EEOC
investigation. Further, the Court found that although certain aspects of the administrative
process – such as letters between the EEOC and Plaintiffs – arguably alluded to class-like
allegations, there was no evidence that this information ever got to Sodexho, and nothing
in the individual EEOC charges mentioned anything other than individual claims. For
these reasons, the Court refused to grant collective certification under § 216(b). Finally,
although not necessary to the disposition of the case, the Court also found that plaintiffs
were not similarly situated to other potential class members, who were spread out all over
the country and were subject to hiring decisions made by numerous managers.
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(iv)
Fourth Circuit
No reported cases.
(v)
Fifth Circuit
No reported cases.
(vi)
Sixth Circuit
No reported cases.
(vii)
Seventh Circuit
Anthony, et al. v. AMR Corp., 2006 U.S. Dist. LEXIS 73804 (N.D. Ill. Sept. 27, 2006).
In this case, the Seventh Circuit ruled that a group of former TWA flight attendants who
were hired by American Airlines could not go forward with their collective action
because they lacked standing. When American Airlines hired a number of former TWA
attendants in 2001, it renegotiated a new seniority agreements for them with its union, the
Association of Professional Flight Attendants (“APFA”). While employed by TWA, the
flight attendants had been represented by a different union. Plaintiffs contended that the
new seniority system violated the Age Discrimination in Employment Act because it
erased all of the seniority the flight attendants accrued at TWA and started it anew on
their first day of hire by American. Most of the TWA attendants were over the age of 40
and many had accumulated years of service for TWA. When American began
downsizing its workforce after the September 11 attacks, the former TWA attendants
were the first to be let go. Although the Seventh Circuit agreed that Plaintiffs had been
injured by the implementation of the seniority agreement, it found that their proposed
solution – to renegotiate the agreement – could leave them in a worse position, and at
best, was not guaranteed to redress their injuries. The Seventh Circuit concluded that
Plaintiffs were in effect asking to set aside the collective bargaining agreement between
American and APFA and to overlook the flight attendants’ previous waiver of their
bargaining rights. There was no assurance that a renegotiation would result in a better
seniority system for Plaintiffs, and they could end up with a worse outcome.
(viii)
Eighth Circuit
No reported cases.
(ix)
Ninth Circuit
No reported cases.
(x)
Tenth Circuit
No reported cases.
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(xi)
Eleventh Circuit
No reported cases.
(xii)
District Of Columbia Circuit
Alliota, et al. v. Gruenberg, 237 F.R.D. 4 (D.D.C July 25, 2006). After the Federal
Deposit Insurance Corporation (“FDIC”) implemented a reduction-in-force (“RIF”),
current and former employees age 50 and older sued and contended that the RIF violated
the Age Discrimination in Employment Act (“ADEA”). For reasons not explained in the
Court’s ruling, Plaintiffs moved to certify pursuant to Rule 23 as opposed to 29 U.S.C.
§ 216(b); Defendant did not raise the issue that Rule 23 is inapplicable to the ADEA.
The Court likewise failed to note this issue. Although the affected employees were
subject to three different termination scenarios, the Court certified the claims as a class
action under Rule 23, finding that they shared common questions of law and fact and met
the other statutory criteria for certification. Specifically, all the affected employees were
first offered a buy-out offer that included severance payments. Most of those who did not
accept the offer were dismissed outright. Others obtained different jobs with their
employer at a reduced pay-grade. Of the 150 total employees affected by the RIF, about
100 were over age 50. The Court found that this number satisfied the numerosity
requirement for a class action. The Court determined that regardless of whether each
employee accepted a buyout or a reduction-in-grade, or else was dismissed, the same
question predominated, i.e., whether the RIF was implemented in a discriminatory way.
The Court did not find any conflict between the named Plaintiffs, who had been
terminated, and those class members who accepted new jobs. While the Court certified
the Plaintiffs’ claims, the Court mixed and matched Rule 23 class action concepts with
§ 216(b) certification issues for an ADEA collective action.
B.
Other Federal Rulings Affecting The Defense Of ADEA Collective Action Claims
(i)
First Circuit
No reported cases.
(ii)
Second Circuit
Meacham, et al. v. Knolls Atomic Power Lab. a/k/a KAPL Inc., 461 F.3d 134 (2d Cir.
2006). On remand from the U.S. Supreme Court, the Second Circuit reversed its earlier
finding that a power company’s reduction-in-force (“RIF”) discriminated against a class
of workers because of their age. The Second Circuit considered in the remand the recent
Supreme Court decision in Smith v. City of Jackson, 544 U.S. 228 (2005), which
approved use of a disparate impact theory in ADEA cases but explained that an employer
defending such a claim under the ADEA need not prove the “business necessity” required
of an employer defending an adverse impact case under Title VII. Rather, an ADEA
defendant need only show that it was relying on “reasonable factors other than age”
(“RFOA”), and the burden of proof as to reasonableness is on the plaintiff, not the
defendant. In the case before the Second Circuit, Defendant’s decision-making process
included certain subjective components that required managers to rate employees on the
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basis of performance, flexibility, and critical nature of their skills. The Second Circuit
interpreted Smith to mean an employer need not show there is a better way to achieve a
particular business goal that would have less of an impact on the protected ADEA group;
rather, the method chosen need only be reasonable. The Second Circuit concluded that
the power company’s decision-making process, although it had a subjective component,
was a reasonable means for an employer to reduce its workforce while retaining
employees with the skills most critical to continued functions and growth. Therefore, the
Second Circuit concluded that Defendant had demonstrated that its practice was
reasonable, and as Plaintiffs had failed to present evidence to disprove that evidence,
Defendant was entitled to summary judgment.
(iii)
Third Circuit
No reported cases.
(iv)
Fourth Circuit
Adkins, et al. v. M&G Polymers, 2006 U.S. Dist. LEXIS 14679 (S.D.W.Va. Mar. 13,
2006). In this case, over 50 employees who were laid off from a West Virginia plastics
plant brought an action against their former employer alleging discrimination on the basis
of age in violation of the West Virginia Human Rights Act (“WVHRA”). Plaintiffs
alleged that Defendant replaced its former lay-off procedure, which was based upon
seniority, in favor of a new evaluation procedure consisting of multiple factors, which it
used as a mechanism to dismiss older workers. Defendants removed the case to federal
court, contending that because Plaintiffs were subject to a collective bargaining
agreement (“CBA”) that would have to be interpreted in order to resolve their claims,
Plaintiffs’ state law claims were preempted by § 301 of the Labor Management Relations
Act. Plaintiffs countered by filing a motion to remand, arguing that because their claims
under the WVHRA involved determinations relative to Defendant’s motivations, as
opposed to interpreting or applying the CBA, their state law claims were not preempted,
and therefore the federal court lacked subject matter jurisdiction. According to the Court,
determining whether Plaintiffs’ state law claims were preempted under § 301 required
analysis of the elements Plaintiffs must prove to establish a prima facie case of
discrimination, and if resolution of those claims required interpretation of the CBA, or if
resolution is inextricably intertwined with the terms if the CBA, then the claim is
preempted by § 301. Based on that analysis, the Court found that neither Plaintiffs’
disparate treatment or disparate impact claims fell into either category. As a result, the
Court held that “[a]lthough the evaluation process in the CBA will surely be consulted in
this case, the [claims involve] the effect of that process on a protected class of persons
under the WVHRA, and not an interpretation of the contract provisions to determine
whether Defendants properly implemented the process.” Id. at *8. Therefore, the Court
found that Plaintiffs’ state law discrimination claims were not preempted by § 301, and
granted their motion to remand the litigation to state court.
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(v)
Fifth Circuit
Cheatham, et al. v. Allstate Insurance Co., 465 F.3d 578 (5th Cir. 2006). Plaintiffs
sued their employer for age discrimination, wage & hour violations, and state tort claims.
The district court granted Defendant’s motion for summary judgment. On appeal, the
Fifth Circuit affirmed the district court’s grant of summary judgment on all three claims.
The Fifth Circuit held that Plaintiffs’ age discrimination claims failed because they did
not show that Defendant’s proffered reason for their discharge was pretextual, and the
statistical evidence offered by Plaintiffs to show that many younger employees worked at
the company was based on too insignificant of a sample to be probative of discriminatory
intent.
(vi)
Sixth Circuit
EEOC v. Jefferson County Sheriff’s Dept., 467 F.3d 571 (6th Cir. 2006). Reversing its
earlier position, the Sixth Circuit held in an en banc ruling that the State of Kentucky’s
disability retirement plan discriminated against employees on the basis of their age. The
retirement plans in this case covered state and county employees in Kentucky. They
provided for “normal” retirement for employees in non-hazardous jobs at age 65 or 20
years of service and for employees in hazardous jobs at age 55 or 20 years of service.
Benefits were equal to 2.5% of the employee’s final salary multiplied times his or her
years of service. Disability benefits were available to employees who had at least five
years of service, but were not available to any employee who qualified for regular
retirement at the time he or she became disabled. Employees who qualified for disability
benefits were credited with additional years of service for the purpose of calculating the
amount of disability benefit. The calculation added additional years of service to bring
the disabled employee up to normal retirement age. This rule had several effects. First,
an employee over the age of 55 (or 65 for non-hazardous jobs) who became disabled was
not entitled to any disability payment at all, but a younger employee with the same years
of service who became disabled could receive such a payment, because the younger
employee was entitled to the service credit. For two identical employees who became
disabled after the same number of years of service, the younger employee nearly always
qualified for greater disability benefits, because more years of service credit were added
to his or her calculation. The Sixth Circuit found that the plan violated the ADEA in two
ways. First, it barred all still-working employees in hazardous jobs from ever receiving
disability benefits after they turned 55 solely because of their age. Second, any employee
who became disabled at a time when he or she was still eligible for disability benefits is
discriminated against compared to a younger employee who becomes similarly disabled
and is similar in all aspects other than age.
Slenczka, et al. v. Central States, Southeast & Southwest Areas Pension Fund, 2006
U.S. Dist. LEXIS 49527 (E.D. Mich. July 20, 2006). An employer suspected of
violating a pension fund’s “adverse selection rule” properly had its collective bargaining
agreement declined by the pension fund because the fund had a legitimate interest in
ensuring that it remained adequately funded for all participants. The “adverse selection
rule,” which is common among many pension funds, prevents an employer from
manipulating its workforce in such a way that the majority of participants are those who
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are most likely to obtain a vested pension benefit and receive the highest pension
benefits. The employer in this case was suspected of violating the rule when it undertook
the practice of converting its owner-operators, who participated in the fund, to nonemployee owner-operators, who did not. The result of this practice was that the
employer’s number of participants in the fund dropped, and those remaining were
generally older “veteran” employees who were likely to need pension benefits in the near
future. In contrast, younger, newer employees, who generally would be making the
highest contributions to the fund but not making withdrawals, were omitted from
participation. The employer had been suspected of such a practice once in the past, but
negotiated with the fund to implement several practices that ensured adequate fund
participation. Its most recent collective bargaining agreement deleted those practices and
its participating workforce once again consisted of a disproportionately high percentage
of older workers. The fund subsequently decided to decline the collective bargaining
agreement and a group of employees filed suit, arguing that the fund had violated the Age
Discrimination in Employment Act and ERISA by rejecting the bargaining agreement,
which denied them their pension benefits. The Court held that the fund’s action was
legal. The fund had proven that the employer had engaged in adverse selection by
instituting a hiring practice that decreased the number of workers making contributions.
Further, the Court determined that the fund’s action did not discriminate against the
workers on the basis of their age; indeed, the purpose of the rule was to protect the money
in the fund so that there would be enough to distribute to vested participants.
(vii)
Seventh Circuit
EEOC v. Sidley Austin LLP, 437 F.3d 695 (7th Cir. 2006). In this case, the
Commission filed an ADEA suit against a law firm for allegedly demoting 32 of its
equity partners to “of counsel” or “senior counsel” positions based on their age. The
Seventh Circuit agreed to entertain this interlocutory appeal after the district court denied
the law firm’s motion for partial summary judgment. In its motion, the law firm argued
that the EEOC could not obtain monetary relief for individual ex-partners who failed to
timely file administrative charges with the Commission, therefore barring them from
bringing their own suits. The district court held that the Commission could obtain
monetary relief on behalf of the ex-partners despite the fact that they could not bring
individual suits under the ADEA. Recognizing that the Seventh Circuit’s decision in
EEOC v. North Gibson School Corp., 266 F.3d 607 (7th Cir. 2001) – holding that EEOC
claims for individual damages must be based on timely charges filed by the Commission
– was overruled by EEOC v. Waffle House, Inc., 534 U.S. 279 (2002) (holding that the
Commission’s enforcement authority is not derivative of the legal rights of individual
plaintiffs), the law firm attempted to distinguish Waffle House from this case based on
language in the majority opinion suggesting that an alleged discrimination victim’s
conduct may limit the relief that the Commission may obtain in court. However, the
Seventh Circuit held that the reference to conduct in Waffle House contemplated
something quite different from procedural forfeiture. The Seventh Circuit reasoned that
if the ex-partners received settlements from the law firm, or failed to mitigate their
damages, then the Commission could obtain no monetary relief on their behalf.
However, the law firm’s motion for partial summary judgment was based on the expartners’ failure to file their own charges with the Commission. According to the
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Seventh Circuit, that failure did not prevent the Commission from seeking monetary
relief on their behalf.
EEOC v. Sidley Austin Brown & Wood LLP, Case No. 05-CV-208 (N.D. Ill. July 13,
2006). In this case, the EEOC sued Sidley Austin on behalf of 34 former partners who
were either demoted or terminated during a restructuring of the firm. The EEOC sought
production of a witness to testify at a Rule 30(b)(6) deposition to obtain information
about the law firm’s reasons for its personnel decisions made during the restructuring. In
response to the law firm’s motion for a protective order, the Court ordered the law firm to
provide a list summarizing all of its reasons for making the demotion and termination
decisions. The Court allowed the law firm eight weeks to produce a report summarizing
its reasons, including the relative importance of each reason, and noted that after that
point, the law firm would be barred from producing additional reasons (in summary
judgment papers or at trial), unless the interests of justice required it to supplement their
response. The Court noted that it might be difficult for the law firm to provide detailed
explanations about each partner because the law firm used a committee-based decision
making structure, but it upheld the right of the EEOC to procure information about the
relative weight the law firm placed on each factor when deciding about the ex-partners’
change in status.
(viii)
Eighth Circuit
Ayala, et al. v. Graves Hospitality Corp., 2006 U.S. Dist. LEXIS 26543 (D. Minn.
May 4, 2006). Plaintiffs sued Defendant for violation of the Age Discrimination in
Employment Act and the Minnesota Human Rights Act for terminating their employment
because of their age. Defendants moved for summary judgment, arguing budgetary
reasons and performance issues were the reason for terminations. The Court granted
Defendant’s motion. It accepted the employer’s reasons for its personnel decisions. The
Court determined that judges are ill-equipped to second guess the business judgment of a
company in making budgetary and personnel decisions. As Defendant showed the
legitimate and non-discriminatory reasons for Plaintiffs’ terminations, the Court
concluded that the case should be dismissed on summary judgment.
EEOC v. Allstate Insurance Co., 2006 U.S. Dist. LEXIS 76096 (E.D. Mo. Oct. 19,
2006). The EEOC sued Defendant asserting that its re-hiring plan had a disparate impact
on older workers in violation of the Age Discrimination in Employment Act. Defendant
instituted a reorganization plan that terminated the employment contracts of over 6,000
employee-agents who sold Allstate’s property and casualty insurance. The plan provided
various options to employee-agents in connection with their terminations. Defendant
subsequently instituted a re-hire policy that provided former employee-agents would be
ineligible for re-hire for a period of one year after their termination or after all payments
of any severance benefits had been received. The Court denied Defendant’s motion for
summary judgment because the EEOC was able to sufficiently question the
reasonableness of some of the reasons provided by Defendant regarding the
implementation of the re-hire policy.
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EEOC v. Independent School District No. 834, 430 F. Supp. 2d 901 (D. Minn. 2006).
After ten charges of discrimination were filed by teachers who were retiring from fulltime positions with the school district, the Commission filed a lawsuit alleging that its
practice of reducing the value of early retirement benefits because of the teachers’ age at
retirement violated the ADEA. The school district moved to dismiss the claim on three
grounds. First, the school district argued that the charges of discrimination that were
filed with the Commission did not provide sufficient notice of a potential pattern or
practice action. The Court held that the Commission’s “ability to bring [a] potential class
action is not affected by notice requirements placed on individual plaintiffs when
bringing actions under the ADEA,” and therefore it did not matter whether the individual
teachers who filed charges asserted class-wide allegations. Id. at 905. Second, the school
district argued that because the teachers were time barred from bringing their own claims,
and because the Commission was in privity with them, the EEOC should be barred from
bringing its claim. The Court rejected this argument as well, holding that the
Commission’s ability to bring an action against the district “is not contingent upon the
timing of filings … by individual teachers.” Id. Finally, the school district argued that
the lawsuit was brought outside of the relevant statute of limitations. The Court also
rejected this argument. Recognizing that the two-year or three-year statute of limitations
that once applied was eliminated by the 1991 amendments to the ADEA, the Court held
that the Commission’s claim was not time barred.
Scheer v. Best Buy Enterprise Services, Inc., 2006 U.S. Dist. LEXIS 65447 (D. Minn.
Sept. 13, 2006). Plaintiff’s suit alleged unlawful termination based on age in violation of
the Age Discrimination in Employment Act and the Minnesota Human Rights Act.
Defendant moved for summary judgment on the ground that it terminated Plaintiff during
a reduction-in-force (“RIF”) because it determined that his position was expendable, and
that age was not a factor in that determination. To establish a prima facie case in lawsuits
involving a RIF, the Court held that Plaintiff must bring forward some additional
showing that age was a factor in the termination. The Court determined that Plaintiff
established her prima facie case with statistical evidence, in the form of a probability
analysis, giving rise to an inference that Plaintiff’s termination was based on of her age.
However, the Court ruled in favor of Defendant because Plaintiff’s statistical evidence
was not enough to establish that the RIF was pretext for age discrimination.
Wittenberg v. American Express, 464 F.3d 831 (8th Cir. 2006). In this case, plaintiff
sued for discrimination following her inclusion in a reduction-in-force (“RIF”), including
age discrimination under the Age Discrimination in Employment Act, gender
discrimination under Title VII of the Civil Rights Act of 1964, and gender and age
discrimination under the Minnesota Human Rights Act (“MHRA”). Plaintiff argued that
the district court erroneously granted summary judgment to Defendant because it had
conducted a RIF in 2003 based on financial and business reasons and terminated her
during the RIF because of her low 2002 performance rating. The Eighth Circuit
determined there was nothing inherently discriminatory in an employer choosing to rely
on recent performance data more heavily than past performance in deciding which
employees to terminate in a reduction in force, as this was a business judgment properly
left to the employer’s discretion.
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(ix)
Ninth Circuit
Syverson, et al. v. IBM Corp., 461 F.3d 1147 (9th Cir. 2006). In this case, IBM was
found to have violated the Older Workers Benefit Protection Act (“OWBPA”) in a
reduction-in-force (“RIF”) by having its employees waive their rights under the ADEA in
a manner that was not knowing and voluntary. The case arose after IBM instituted a RIF
in which it asked affected employees to sign certain release documents in exchange for
severance benefits. Several employees who signed releases nonetheless sued IBM for
age discrimination, arguing that the release was ineffective as it was not knowing and
voluntary. The Ninth Circuit held that the release failed to satisfy the OWBPA
requirement that releases be written in a manner calculated to be understood by the
applicable workforce. Specifically, one part of the release agreement stated that it
released IBM from all claims including those brought under the ADEA, but another part
contained a covenant not to sue IBM, which excluded cases brought under the ADEA and
preserved the right to file age discrimination charges with the EEOC. Although the
agreement’s language was technically correct, the Ninth Circuit determined that it was
written in a confusing manner that would leave an ordinary employee confused about
whether he or she could sign the agreement and still sue IBM for age discrimination.
The ruling in Syverson is noteworthy in manifesting a growing trend by federal courts to
scrutinize and then declare illegal the releases used by employers in a reduction-in-force
context. Syverson creates a low bar for plaintiffs’ lawyers to successfully challenge such
releases.
(x)
Tenth Circuit
Bolton, et al. v. Sprint/United Management Company, 2006 U.S. Dist. LEXIS 44581
(D. Kan. June 29, 2006). In this case, fourteen former Sprint employees contended that
the company’s methods of instituting a reduction-in-force (“RIF”) had a disparate impact
on the basis of their age. Defendant moved to dismiss the complaints of several of the
Plaintiffs, arguing that they had not exhausted their administrative remedies. After
examining each case, the Court allowed two of the Plaintiffs to “piggy-back” on the
claims of some of the other Plaintiffs, pursuant to the so-called “single filing rule.”
Although it is a general requirement that every Plaintiff must first exhaust his or her
administrative remedies by filing a charge with the EEOC prior to bringing suit, the
single filing rule provides that in a multiple-plaintiff, non-class action suit, a Plaintiff
who fails to file with the EEOC may piggy-back on the timely filing of a co-plaintiff if
the claims of the two Plaintiffs arise out of similar discriminatory treatment in a similar
time frame. Additionally, a Plaintiff may piggy-back on a charge only if he or she could
have filed a timely charge of discrimination at the same time. The Court determined in
this case that one Plaintiff at issue (Johnson) could piggy-back on the charge of the one
Plaintiff who filed her charge after Johnson was terminated; obviously, Johnson did not
have a claim for discrimination when the other Plaintiffs filed their charges because he
had not yet been let go. In allowing the piggy-back claim to go forward, the Court relied
on allegations in the charge that supported an inference that the discrimination at Sprint
was class-wide. Although the charge did not specifically make class allegations, it did
mention two other employees who had been terminated during the same time period, and
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implied that the reason for the terminations was age. The remainder of the Court’s
decision concerned another Plaintiff, whose claims were pending at the same time as a
separate class action against Sprint. Although that Plaintiff (Davis) failed to file a
consent to join that class action within the time limit set by the Court, it allowed him to
piggy-back on one of the other claims in this case pursuant to the rules explained above.
The relevant question in this case was whether Davis had filed his lawsuit within 90 days
of the receipt of a right-to-sue letter by the one Plaintiff on whose charge he was piggybacking. Because he did file his complaint in such a time limit, the Court allowed his
claim to go forward.
Kruchowski, et al. v. Weyerhaeuser Co., 446 F.3d 1090 (10th Cir. 2006). In this case,
31 employees who were terminated as part of a reduction in force (“RIF”) filed an action
under the ADEA against their former employer. However after Plaintiffs were
terminated, each signed a release in which they agreed to waive their rights to assert an
ADEA claim against Defendant in exchange for a severance package. The district court
granted Defendant’s motion for summary judgment, holding that the release was valid
and enforceable. On appeal, Plaintiffs argued that the release was void as a matter of law
because it did not comply with the required group informational disclosure of the
“decisional unit,” which is required by § 626(f)(1)(H)(i) of the Older Worker Benefit
Protection Act (“OWBPA”). The group termination notice that Plaintiffs received
indicated that the decisional unit was all of the salaried employees at the mill where
Plaintiffs worked; however, in responding to interrogatories, Defendant later indicated
that the decisional unit actually consisted of only salaried employees who reported to the
mill manager, which removed fifteen employees from the unit. Recognizing that the
decisional unit of which Plaintiffs were notified and the actual decisional unit that
Defendant used were two separate groups, the Tenth Circuit found that the information
that Plaintiffs received was inaccurate. As a result, the Tenth Circuit reversed the district
court’s order granting Defendant summary judgment, holding that “[b]ecause the
information defendant provided did not meet the strict and unqualified requirements of
the OWBPA, the release is ineffective as a matter of law.” Id. at 1095.
Mendelson, et al. v. Sprint/United Management Co., 466 F.3d 1223 (10th Cir. Nov. 1,
2006). Plaintiff lost her suit against Defendant for unlawful discrimination in violation of
the Age Discrimination in Employment Act, in which she alleged termination based on
age during a reduction-in-force (“RIF”). Plaintiff appealed, asserting that the district
court committed reversible error by requiring her to show that she and the other
employees, who were prepared to testify that they were subjected to similar treatment,
shared a supervisor as a precondition for admissibility of their testimony. Plaintiff
asserted that the proffered testimony was relevant and admissible as reflecting
Defendant’s discriminatory intent in selecting Plaintiff for the RIF. The Tenth Circuit
reversed and remanded, agreeing that the evidence Plaintiff sought to introduce was
relevant to Defendant’s discriminatory animus toward older workers, and the exclusion of
such evidence unfairly inhibited Plaintiff from presenting her case to the jury. The Tenth
Circuit reasoned that proffered testimony of the other employees was logically, or
reasonably, tied to the decision to terminate Plaintiff and Defendant’s motive.
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Pippin, et al. v. Burlington Resources Oil And Gas Co., 440 F.3d 1186 (10th Cir.
2006). A 51-year-old plaintiff sued Defendant, alleging termination based on
discrimination in violation of the Age Discrimination in Employment Act. Defendant
contended that it fired Plaintiff pursuant to a reduction-in-force (“RIF”) and because of
Plaintiff’s consistently poor performance. The district court granted Defendant’s motion
for summary judgment. On appeal, the Tenth Circuit affirmed on the grounds that
Plaintiff failed to present sufficient evidence to support an inference of pretext in the RIF
itself, in his prior work performance evaluations, or Defendant’s alleged history or
pattern of age discrimination. The Tenth Circuit also concluded that Defendant also was
entitled to summary judgment based on the reasonable factors other than age defense, as
corporate restructuring, performance-based evaluations, retention decisions based on
needed skills, and recruiting concerns were all reasonable business considerations.
(xi)
Eleventh Circuit
Burlison, et al. v. McDonald’s Corp., 455 F.3d 1242 (11th Cir. 2006). Under the Older
Worker Benefit Protection Act (“OWBPA”), an employer who wishes to secure agerelated waivers as part of a reduction-in-force (“RIF”) must provide all employees subject
to the RIF with statistical information about other affected employees, including the ages
and job titles of workers who are discharged and those who are retained. Such
information may be an important decision-making tool for employees deciding whether
to sign a waiver. In this case, the Eleventh Circuit determined that when McDonald’s
underwent a nationwide RIF several years ago, it correctly provided employees with
statistical information about their own decisional unit, as opposed to information about
all employees nationwide who were affected by the RIF. When McDonald’s restructured
its corporate operations, it created an Atlanta region out of several other regions. In that
region, McDonald’s identified 208 possible candidates for termination and eventually
selected 66 of them. Nationally, McDonald’s reduced its workforce by 500 employees.
The workers in the Atlanta region were given information about the ages of Atlanta
region employees only, both those selected for separation and those not selected. A
group of five terminated employees who signed waivers later sued the company, arguing
that their waivers did not comply with the OWBPA because McDonald’s did not include
nationwide information about the RIF. The Eleventh Circuit disagreed with Plaintiffs’
arguments, explaining that the purpose of the OWBPA is to provide terminated
employees with usable data when deciding whether to waive their ADEA rights. Such
relevant information is commonly found in a particular decisional unit, where local
corporate managers are likely to oversee operations and terminations. The Eleventh
Circuit concluded that nationwide data would confuse the issues, and possibly make it
more difficult for employees to find patterns or trends about the ages or job titles of those
selected for termination.
Wells v. XPEDX, 2006 U.S. Dist. LEXIS 79789 (M.D. Fla. Oct. 31, 2006). In this case,
the Court determined that an employee who signed a waiver giving up the right to sue his
former company could continue with his age discrimination claim because there was a
question about whether his termination satisfied the requirements of both the Age
Discrimination in Employment Act and the Older Worker’s Benefit Protection Act
(“OWBPA”). The employee was terminated after his position was eliminated by the
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company. In exchange for signing a waiver to sue, he received a severance payment of
over $100,000. The waiver agreement gave the employee 45 days to consider it and then
seven days to revoke approval of it. Despite the waiver, the employee later sued his
employer for age discrimination. The key question in the case was whether the
termination was an independent elimination of Plaintiff’s job or part of a broader
reduction-in-force (“RIF”) that the company was undergoing at the time. If Plaintiff’s
termination was part of the RIF, the OWBPA required the company to give him specific
notices related to the termination of all individuals in his business unit, including the
selection criteria for termination and ages of those terminated. In this case, although
some of the paperwork given to Plaintiff referenced the OWBPA and provided him with
some of the notices required under a RIF, the company argued that it gave him such
paperwork in error and that his termination – from a unique job not held by any other
employee – was independent of the RIF. The Court determined that there was a dispute
about the exact nature of Plaintiff’s business unit, and therefore the Court was unable to
determine on summary judgment whether the termination was legally sufficient.
(xii)
District Of Columbia Circuit
No reported cases.
V.
SIGNIFICANT COLLECTIVE ACTION RULINGS UNDER THE FAIR LABOR
STANDARDS ACT
Fair Labor Standards Act (“FLSA”) collective action litigation accelerated at a rapid pace
in 2006. FLSA collective actions were filed more frequently than all other types of workplace
class actions.
Whereas in Title VII cases the courts undertake a “rigorous analysis” required by U.S.
Supreme Court decisional law for determining class-worthiness under Rule 23, courts have
continued the trend of utilizing a two-step process for determining certification in FLSA
collective action cases. Under the first step of this approach, known as “notice” or “conditional”
certification, courts generally impose a much lighter burden on plaintiffs to obtain conditional
certification and to support a notice being sent to all putative class members. It is only at a
second proceeding – usually in the context of a motion to decertify after discovery has been
taken – that courts apply a more rigorous analysis of the evidence offered by plaintiffs.
A prominent issue which saw significant litigation in 2006 is whether a case alleging
violations of state wage & hour laws may simultaneously proceed in federal court as a Rule 23
class action alongside an FLSA collective action. Dubbed “hybrid” class actions, courts often
are concerned about the confusion that may result from class members receiving successive optin (collective action) and opt-out (class action) notices in such “hybrid” cases; whether or not a
class action is a superior method for adjudicating state law wage & hour claims when such cases
also include an FLSA claim covering the same conduct; and what effect a class member’s failure
to opt-in to an FLSA collective action should have on his or her state law claim and the class as a
whole. A clear trend developed in 2006 in which federal courts – especially in the Second and
Third Circuits – refused to certify state law claims in hybrid cases under Rule 23.
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A.
Cases Certifying Or Refusing To Certify FLSA Collective Actions
(i)
First Circuit
O’Donnell, et al. v. Robert Half International, Inc., 429 F. Supp. 2d 246 (D. Mass.
2006). Plaintiffs were two former staffing managers of defendant’s Accountemps
division. Plaintiffs alleged that they had been mischaracterized as exempt employees
under the FLSA. Though titled managers, Plaintiffs contended that they were merely
tightly-controlled telephone operators. Plaintiffs initially filed their action in state court,
which RHI removed to federal court. Plaintiff filed a motion to certify a conditional class
(and issue notice) consisting of all current and former staffing managers, account
executives, or account managers employed by RHI in any state but California. RHI
opposed the motion on several grounds. The Court denied Plaintiffs’ motion because the
proposed class was not similarly situated to the named Plaintiffs, and as there was no
credible evidence that putative class members were interested in joining the class. The
Court determined that Plaintiffs failed to provide evidence that they were similarly
situated to account executives and account managers, employees located in divisions
other than Accountemps, and employees working in offices located throughout the
country. The Court held that one could not assume that all RHI employees, regardless of
the division or office to which they are assigned, were “subject to the same ‘policy’ of an
allegedly improper exemption.” Id. at 250. The Court also held that Plaintiffs failed to
demonstrate that there were other putative class members interested in joining the suit.
Plaintiffs’ evidence on this point consisted of affidavits containing their personal beliefs
only. The Court determined that this evidence was insufficient as a matter of law.
Trezvant, et al. v. Fidelity Employer Servs. Corp., 434 F. Supp. 2d 40 (D. Mass. 2006).
Plaintiffs were four former analysts of Fidelity who claimed that they were unlawfully
classified as exempt employees and denied overtime compensation. Plaintiffs filed suit
under the FLSA and New Hampshire’s wage & hours laws, and sought collective
certification of their FLSA claims under 29 U.S.C. § 216(b) and class certification of
their state law claims under Rule 23. The Court conditionally granted a § 216(b)
collective action under the FLSA, but refused to certify a class action pursuant to Rule 23
as to Plaintiffs’ state law claims. The Court determined that the First Circuit has not yet
ruled on the proper standard of review for determining the issue of what Plaintiffs must
show in terms of being similarly situated to other alleged class members in order to
certify a § 216(b) “opt-in” collective action. As a result, the Court applied the standard
utilized by a majority of the district courts in the First Circuit. That approach, referred to
as the “two-tier approach,” calls for an initial determination with respect to whether
potential class members should receive notice of a pending action and then later, after
discovery is completed, to make a final determination as to whether the putative class
members are similarly situated. The Court also noted that there is no consensus as to
what factual showing is required to satisfy the first tier of this approach. The Court
determined that Plaintiffs are required to “put forth some evidence that the legal claims
and factual characteristics of the class . . . are similar.” Id. at 44. The Court rejected
Fidelity’s argument that Plaintiffs should be required to submit affidavits from one or
more employees besides the named Plaintiffs in order to show that the putative class
members are similarly situated. At this stage in the proceedings (i.e., the first tier of the
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certification process), the Court concluded that additional affidavits were not necessary to
satisfy Plaintiffs’ burden of proof. Plaintiffs originally sought certification of a companywide class consisting of five analyst positions. However, the Court certified a class
consisting of only three of the five analyst positions at issue because Plaintiffs failed to
rebut the evidence submitted by Fidelity that the two excluded analyst positions required
specialized technical knowledge that the other positions did not. The excluded analyst
positions also had a salary grading structure that differed from the other three positions.
Plaintiffs’ evidence was limited to a one sentence description about the job duties of the
excluded analyst positions. The Court concluded that Plaintiffs, at this juncture, had
made a sufficient showing that the remaining three analyst positions were similarly
situated by arguing that the primary duties of each position entailed data collection and
entry. The Court determined that Fidelity had failed to show that Plaintiffs could not
establish that analysts in different divisions of the company were not similarly situated; at
the same time, the Court accepted Fidelity’s argument that the class should be limited to
employees working in the company’s Merrimack, New Hampshire office, the location
where all the named Plaintiffs had worked. The Court so ruled because Plaintiffs failed
indicate in their affidavits that they were familiar with the employment policies of the
other branches of the company. Finally, the Court rejected Plaintiffs’ request for
certification of their state law claims under Rule 23 on the grounds that an action for
federally mandated overtime cannot be pursued concurrently under the New Hampshire
wage & hour law; in addition, the Court held that even assuming that Plaintiffs could
bring such a claim under state law, a Rule 23 class action is not the appropriate vehicle in
which to recover federally mandated overtime compensation (rather, the Court held that a
§ 216(b) collective action is the appropriate procedure for doing so).
(ii)
Second Circuit
Flores, et al. v. Osaka Health Spa, Inc., 2006 U.S. Dist. LEXIS 11378 (S.D.N.Y.
Mar. 16, 2006). Plaintiff, a masseuse, alleged FLSA overtime violations by Defendants
and sought to certify a class of masseuses employed by Defendants. In support of her
motion for certification, Plaintiff contended that she worked 12-hour shifts and served 7
to 8 customers per shift; she also affirmed that she believed other massage therapists
worked the same shifts as she did. Plaintiff further contended that customers gave her
$20 to $50 cash in tips, but that Defendants confiscated these tips. At different times,
Plaintiff varied her description of the class she wished to have certified. Based on
Plaintiff’s inability to describe in a consistent manner the purported class, the Court
concluded it could not possibly determine the merits of collective action certification
under 29 U.S.C. § 216(b). Moreover, the Court determined that Plaintiff’s belief as to
other employees’ work schedules and her conclusory allegation regarding Defendants’
confiscation of employees’ tips fell short of establishing “that a factual nexus exist[ed]
between the way the defendants allegedly compensated [Plaintiff] and the way they may
have compensated other employees during the relevant time period.” Id. at *8.
Therefore, the Court denied Plaintiff’s motion for conditional certification. Despite
denying conditional certification, the Court noted that certification of a collective action
may later become appropriate and, thus, directed Defendants to disclose to Plaintiff the
names of all the masseuses at their facilities during the three years preceding the date
Plaintiff filed her complaint.
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Glewwe, et. al. v. Eastman Kodak Co., 2006 U.S. Dist. LEXIS 333449 (W.D.N.Y.
May 25, 2006). Plaintiffs brought a nationwide class action lawsuit against Kodak,
alleging that it violated the FLSA, a number of state labor and wage laws, and breached
several employment contracts. Plaintiffs sought declaratory relief and monetary
damages. Kodak moved to dismiss portions of the claims, arguing that Plaintiffs lacked
standing to bring such claims, and that the proposed class for the state law claims was
inappropriate under Rule 23. The Court determined that Plaintiffs’ state law claims under
Rule 23 warranted dismissal because they did not meet the commonality requirements of
Rule 23(a)(2); Plaintiffs’ claims were based upon 36 separate state wage laws, each with
its own set of requirements and defenses. The Court also held that pursuant to Rule
23(b)(1), Plaintiffs did not establish that a failure to certify a class action would result in
inconsistent adjudications and create incompatible standards of conduct for the party
opposing the class. Additionally, the Court found that the few issues common to the
purported class members were subordinate to the issues unique to each class member. As
such, the class failed to meet Rule 23(b)(3)’s requirement that that common issues of law
or fact predominate over the individual issues applicable to the purported class. Finally,
the Court declined to exercise supplemental jurisdiction over the individual state law
claims because those claims involved complex and diverse issues of state law that would
predominate over the FLSA claims.
Letouzel, et al. v. Eastman Kodak Company, 2006 U.S. Dist. LEXIS 33453 (W.D.N.Y.
May 25, 2006). Plaintiffs brought an action for declaratory relief and monetary damages
on behalf of themselves and all other employees similarly situated, alleging that Kodak
violated their rights under the FLSA, the labor and wage laws of multiple states, and
breached several employment contracts. Defendant moved to dismiss the state labor and
wage law claims on grounds that Plaintiffs lacked standing to bring such claims, and that
the proposed class was invalid under Rule 23 of the Federal Rules of Civil Procedure.
The Court found that Plaintiffs’ state claims failed to satisfy the requirements of a class
action for three reasons. First, under Rule 23(a)(2) there must be common questions of
law or fact among the members of a class action. In this case, the Court held that the
state wage and contract claims lacked commonality because the claims were brought
under 36 separate wage laws, each with its own peculiar requirements and defenses.
Additionally, the contract claims were being brought under the laws of 51 different
jurisdictions. Second, under Rule 23(b)(3), Plaintiffs must establish that the common
issues of law or fact predominate over the individual issues applicable to the purported
class members. The Court determined that the few issues common to the purported class
members were actually subordinate to the issues unique to each individual class member.
Finally, under Rule 23(b)(1), Plaintiffs must establish that a failure to certify a class
action would result in inconsistent adjudications that would create incompatible standards
of conduct for the party opposing the class. With reference to this factor, the Court
concluded that Plaintiffs were unable to make this showing. After declining to certify a
class action, the Court also declined to exercise supplemental jurisdiction over the
individual state law claims because they presented complex issues of state law that would
predominate over the FLSA claim. The Court also rejected Plaintiffs’ individual federal
claim for injunctive relief because the FLSA does not give private litigants the right to
injunctive relief, but only gives this right to the Secretary of Labor. Unlike the FLSA,
New York labor law is unsettled on the availability of injunctive relief. Therefore, while
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the Court did not dismiss the New York claim, it declined to exercise supplemental
jurisdiction over the claim.
Luciano, et. al. v. Eastman Kodak Co., 2006 U.S. Dist LEXIS 33452. (W.D.N.Y.
May 25, 2006). Plaintiffs alleged that Kodak failed to properly pay them in violation of
the FLSA, breached several employment contracts, and violated numerous state wage &
hour laws, including the laws of New York where the action was brought. Plaintiffs
sought declaratory relief and monetary damages. Kodak moved to dismiss the New York
labor law claims, arguing that Plaintiffs could not maintain a class action under New
York law. Kodak also argued for dismissal of Plaintiffs’ other claims on grounds that
Plaintiffs lacked standing to bring such claims and because the Court should decline to
exercise supplemental jurisdiction over those claims. The Court dismissed the state law
wage and contract claims because Plaintiffs failed to satisfy the requirements of a class
action under Rule 23; they did not have the requisite commonality as their claims were
brought under 34 separate state wage laws. Moreover, the Court concluded that under
Rule 23(b)(3), common issues of law or fact did not predominate over the individual
issues applicable to the purported class members. Finally, because of the complex and
diverse issues of state law that would predominate over the FLSA claim, the Court
declined to exercise supplemental jurisdiction over the individual state law claims.
Morales, et al. v. Plantworks, Inc., 2006 U.S. Dist LEXIS 4267 (S.D.N.Y. Feb. 2,
2006). Five former landscapers brought claims under the FLSA and New York wage &
hour law against their ex-employer. Plaintiffs sought to conditionally certify a collective
action under the FLSA and compel the production of the names of certain former
employees. In support of their motion for certification, Plaintiffs submitted eight payroll
stubs for three Plaintiffs. The Court declined to conditionally certify the case because
Plaintiffs’ showing was insufficient to support a finding that “they and potential plaintiffs
together were victims of a common policy or plan that violated the law.” Id. at *4. The
Court determined that Plaintiffs’ affidavits and exhibits were devoid of any references to
other employees who were allegedly owed overtime or allegations that Defendant had a
common policy or plan to deny overtime pay to employees. In addition, the Court held
that Plaintiffs’ conclusory allegation that similarly-situated employees existed and were
denied overtime, in and of itself, was insufficient to merit class certification. Id. at *6.
Notwithstanding Plaintiffs’ failed motion, the Court granted Plaintiffs’ request for
production of the names and address of former employees, and held that Plaintiffs’ could
renew their motion for certification if discovery uncovered information to support the
motion.
(iii)
Third Circuit
Armstrong, et al. v. Wichert Realtors, 2006 U.S. Dist. LEXIS 31352 (D.N.J. May 19,
2006) and 2006 U.S. Dist. LEXIS 54230 (D.N.J. Aug. 4, 2006). Plaintiff, a loan officer,
was classified as an exempt employee by his employer. He alleged that Defendant had a
policy of requiring loan officers to work overtime and, having misclassified loan officers
as exempt, failed to pay him and other loan officers overtime compensation. Before any
discovery had been taken, Plaintiff moved for conditional class certification under
29 U.S.C. § 216(b). The Court denied his motion because he failed to present sufficient
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evidence that there were other similarly situated employees. Applying the two-stage test
employed by other district courts in the Third Circuit, the Court determined that
Plaintiff’s one-page declaration was insufficient to constitute a “modest factual showing”
of the existence of other similarly situated employees. Id. at *2. Plaintiff failed to
identify any other loan officers (other than himself) that were required to perform unpaid
overtime work, or provide a factual basis to support the inference that defendant had a
company policy of requiring loan officers to work unpaid overtime.
Several months later, Plaintiff sought reconsideration of the court’s ruling denying
conditional class certification. The Court denied the motion for reconsideration in its
entirety. In refusing to reconsider its denial of a collective action, the Court faulted
Plaintiff for moving for conditional class certification without having conducted any
discovery. While Plaintiff’s motion for class certification was pending, Plaintiff had
agreed with Defendant to stay discovery pending a ruling on his motion. In his motion
for reconsideration, Plaintiff stated that he needed to conduct discovery in order to prove
that there were similarly situated employees. The Court concluded that Plaintiff failed to
meet the two applicable grounds for reconsideration – that new evidence not previously
available had emerged, or to prevent a manifest injustice. The only “new” evidence that
Plaintiff presented was that two additional employees submitted opt-in forms. The Court
concluded that this new information did not meet “the standards set forth because it sheds
no new light on the underlying questions regarding a collective action under [the] FLSA.”
Id. at *5. Rather, it merely showed that there may have been two other potential
Plaintiffs. The Court also concluded that Plaintiff failed to show that he would suffer a
manifest injustice since he was still permitted to bring an individual claim under the
FLSA.
Aquilino, et al. v. Home Depot Inc., 2006 U.S. Dist. LEXIS 48554 (D.N.J. July 17,
2006). Two Plaintiffs who were merchandising assistant sales managers (“MASM’s”)
alleged that Home Depot misclassified them as “exempt” employees and unlawfully
denied them overtime compensation. Plaintiffs contended that they performed the duties
of an hourly-paid clerk (stocking shelves and other floor duties). They alleged violations
under both the FLSA and state wage & hour laws in 24 states, plus the District of
Columbia. Earlier in the proceedings, the Court granted Plaintiffs’ motion for a
collective action pursuant to the FLSA’s § 216(b) opt-in procedures. Plaintiffs
subsequently sought class certification pursuant to Rule 23(b)(3), seeking to establish 25
separate state overtime sub-classes. Each sub-class represented a state in which Home
Depot employed MASM’s. The Court denied Plaintiffs’ motion for class certification
under Rule 23. The Court refused to assume supplemental jurisdiction over Plaintiffs’
numerous state law claims because it viewed Plaintiffs’ request for Rule 23 class
certification as an attempt to circumvent the FLSA’s opt-in collective action procedures.
Unlike the FLSA’s opt-in procedures, a class member must affirmatively opt out of the
class once a class is designated under Rule 23. The Court also held that two reasons of
the four reasons for declining supplemental jurisdiction were present in the case,
including (1) Plaintiffs’ request for establishment of 25 sub-classes indicated a lack of
commonality of facts, and (2) state law claims predominated over the federal claims.
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Aquilino, et al. v. Home Depot Inc., 2006 U.S. Dist LEXIS 66084 (D.N.J. Sept. 6,
2006). In subsequent proceedings, the Court affirmed the magistrate’s order granting
conditional certification as to Plaintiffs’ FLSA claims pursuant to 29 U.S.C. § 216(b). In
the same order, the Court granted Plaintiffs permission to send out notifications to
potential class members. The Court affirmed the magistrate’s order over Home Depot’s
objection, which challenged the finding that Plaintiffs had provided sufficient evidence to
show that the MASM’s were similarly situated for purposes of granting a conditional
collective action. The Court determined that Plaintiffs met the relatively lenient notice
standard by producing evidence on behalf of 11 individuals of a practice of
misclassifying MASM’s as exempt, requiring them to work in excess of 55 ours per
week, and having them perform routine non-managerial tasks.
Chemi, et al. v. Champion Mortgage, No. 05-CV-1238 (D.N.J. June 21, 2006).
Plaintiff, a loan officer, moved to certify a collective action under the FLSA. At that
juncture of the litigation, the parties had only engaged in limited discovery. As such, the
Court found that only minimal evidence was required to establish that the class members
were similarly situated. The Court noted that at the notice stage, many courts only
require Plaintiffs to establish that the class members are victims of a single decision,
policy, or plan infected by discrimination. On the other hand, some courts require
litigants at the notice stage to make a modest factual showing that the class members are
similarly situated with respect to job requirements and pay provisions. By holding that
Plaintiff could meet neither of these two tests, the Court avoided deciding which was the
appropriate test to apply. Under the first test, the Court held that Plaintiff’s bare
allegation that Defendant improperly exempted loan officers was insufficient evidence to
establish that the class members were subject to a common scheme or plan. Under the
second test, the Court found that the class members were not similarly situated with
respect to job requirements and pay provisions. In support of the request for conditional
certification, Plaintiff submitted three unsworn declarations and several listings of job
postings allegedly made by Defendant. The Court held that the declarations not only
failed to allege personal knowledge of specific loan officers being required to work
unpaid overtime, but also failed to indicate when, where, by whom, or why such overtime
work was required. Likewise, Plaintiff provided no evidence that his job requirements
and salary compared to those job requirements and salaries in the alleged job listings.
Because none of the job listings were authenticated, the Court found that their probative
value was limited. In these circumstances, the Court concluded that “job postings do not
as a matter of law establish the existence of similarly situated plaintiffs.” Id. at *11.
Plaintiff further argued that the recently filed consent to opt-in forms bolstered the
contention that class members were similarly situated. The Court rejected this argument,
as “[t]he opt-in forms submitted provide absolutely no information regarding the
individual’s job duties, pay provisions or any other aspect of their employment.” Id. at
*12. After initiating the litigation, Plaintiff had used a website to solicit potential opt-in
plaintiffs. Defendant moved to strike the opt-in forms received after the litigation
commenced. The Court held that Plaintiff’s counsel “should have waited to submit
consents to opt-in, whether solicited directly or obtained indirectly, [after] this Court’s
determination of the motion to conditionally certify the class for purposes of notice.” Id.
at *17.
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Herring, et al. v. Hewitt Associates, Inc., 2006 U.S. Dist. LEXIS 56189 (D.N.J.
Aug. 11, 2006). Plaintiff, a benefit analyst, filed suited alleging that she had been
misclassified as exempt from federal and state overtime requirements. Plaintiff claimed
that she worked in excess of eight hours a day and 40 hours a week but received no
overtime compensation. She sought class certification of her state law claims under
Rule 23, as well as a collective certification of her FLSA claims under 29 U.S.C.
§ 216(b). The employer successfully moved to strike Plaintiff’s class action allegations.
The Court, in explaining its rationale for granting the motion to strike, determined that
Plaintiff should not be permitted to circumvent the FLSA’s opt-in procedures by calling
upon state statutes similar to the FLSA. The Court reasoned that Congress intended to
limit such claims to collective actions. The Court also determined that Congress created
the opt-in procedure under the FLSA for “the purpose of limiting private FLSA plaintiffs
to employees who asserted claims in their own right and freeing employers from the
burden of representative actions.” Id. at *6.
Himmelman, et al. v. Continental Casualty Co., 2006 U.S. Dist. LEXIS 56187 (D.N.J.
Aug. 11, 2006). Plaintiff, who had worked for Defendant as a claims analyst, contended
that he was incorrectly classified as exempt and was denied overtime compensation. He
filed suit alleging violations under the FLSA and New Jersey state wage & hour law. His
complaint sought to prosecute both an FLSA collective action and a Rule 23 class action
for state law claims on behalf of a nationwide class of claims analysts. In an unusual
procedural gambit, Defendant moved for dismissal of Plaintiff’s Rule 23 claim on the
grounds that a Rule 23 class action is incompatible with § 216(b) opt-in collective action.
The Court granted Defendant’s motion and dismissed Plaintiff’s class action claim based
on state law. In so holding, the Court reasoned that collective actions and Rule 23 class
actions are “inherently incompatible” schemes because one method requires putative
members to opt-in (collective action) while the other method requires putative members
to opt out (Rule 23 class) of the action. Id. at *5. Moreover, the Court determined that in
creating the opt-in procedure under the FLSA, Congress sought to free employers from
the burden of defending representative (Rule 23 class) actions. Thus, the Court
concluded that Plaintiff should not be permitted to circumvent the FLSA’s opt-in
requirement by asserting similar state law claims in a Rule 23 class action.
Otto, et al. v. Pocono Health System And Pocono Medical Center, 2006 U.S. Dist.
LEXIS 78756 (M.D. Pa. Oct. 27, 2006). Former employees of a health care system filed
both a federal collective action and state wage class action claims for overtime
compensation, as well as a claim under Pennsylvania’s wage payment statute. The Court
granted Defendant’s motion to dismiss the state overtime claim, relying on a line of cases
from other courts holding that the bringing of both federal collective actions and state
class actions alleging overtime payments owed are “inherently incompatible,” given that
Congress intended the opt-in procedure of 29 U.S.C. § 216(b) to ensure individuals
would not have their overtime claims litigated without their input and knowledge. Id. at
*5. The Court held that permitting a Rule 23 opt-out class action would be counter to this
Congressional purpose.
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(iv)
Fourth Circuit
No reported cases.
(v)
Fifth Circuit
No reported cases.
(vi)
Sixth Circuit
Carlson, et al. v. Leprino Foods Co., 2006 U.S. Dist. LEXIS 48589 (W.D. Mich.
June 30, 2006). Plaintiffs were hourly production workers who claimed that they were
not compensated for time spent donning and doffing protective clothing and walking
between their dressing areas and their individuals work sites. They filed suit under the
FLSA, and moved the Court to certify a collective action consisting of all hourly workers
at nine U.S. plants who were required to wear protective clothing while on the job and
who were not compensated for time spent donning and doffing. Plaintiffs were all
employed at the defendant’s Allendale, Michigan plant. The proposed class excluded
those workers who were covered by a collective bargaining agreement that provided that
employees would not be compensated for such activities. Defendant denied that it had a
company-wide policy of not compensating workers for time spent dressing in work
uniforms and walking to and from their work stations, and provided evidence in support
of its position. The evidence showed that, at certain locations, production workers
received compensation for putting on their protective gear. Other complicating factors
included the facts that new policies were implemented at some plants during the relevant
time period, and more than 100 employees at the Allendale plant received back pay
compensation covering part of the relevant time period stemming from a DOL
enforcement action and settlement, whereby the DOL concluded that employees had not
been compensated for time spent donning and doffing. The Court concluded that it
would not be appropriate to certify a nationwide class due to the absence of a uniform
policy among Defendant’s nine plants. The Court, however, agreed to certify a class
consisting of workers employed at the Allendale plant only. While acknowledging the
presence of differing factual circumstances among the Allendale workers (e.g., based on
the DOL settlement), the Court determined that the differences were “manageable in
terms of the expected trial process” and could be addressed through the use of detailed
jury instructions or by creating distinct classes or sub-classes, if necessary. Id. at *17.
Comer, et al. v. Wal-Mart Stores, Inc., 454 F.3d 544 (6th Cir. 2006). Plaintiffs were
former Assistant Store Managers (“ASM’s”) who claimed that they were denied overtime
by Wal-Mart because they were misclassified as exempt under the FLSA’s executive
exemption. Plaintiffs sought conditional certification of a collective action. Plaintiffs
proposed several different classes, the most expansive being a nationwide collective
action consisting of current and former ASM’s during a three-year period. The district
court agreed to conditionally certify the least restrictive option proposed by Plaintiffs – a
collective action consisting of current and former ASM’s employed in Region 3
(consisting of employees in Michigan, Northern Indiana, and Northern Ohio). The
district court further determined that notice could be sent to approximately 1,200
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potential class members. Defendant sought an interlocutory appeal. The Sixth Circuit
held that it did not have jurisdiction to hear the appeal because the order Defendant
sought to appeal from was not final and irrevocable. The Sixth Circuit held that the
manner in which Defendant framed the issue was “too narrow and therefore improper.”
Id. at 549. Contrary to Defendant’s contention that the issue was whether notice should
be issued, the Sixth Circuit held that what Defendant was really challenging was the
conditional certification of a collective action. As to the conditional certification order,
the Sixth Circuit held that Defendant could not satisfy all of the requirements for an
interlocutory appeal because the district court had conclusively determined a disputed
question (i.e., whether a collective action is proper).
Landsberg, et al. v. Acton Enterprises, Inc., 2006 U.S. Dist. LEXIS 23439 (S.D. Ohio
Mar. 22, 2006). Plaintiff, a store manager employed by Acton, sued for allegedly unpaid
overtime. In seeking conditional certification and Court approval to send opt-in notices
to all store managers employed nationwide by Acton for the past three years, Plaintiff
presented only his own affidavit and that of one other fellow employee who also worked
in Gallia County, Ohio. Plaintiff theorized that it was “highly unlikely” that Acton would
pay Plaintiff differently than other employees. Id. at *10. The Court noted that the Sixth
Circuit has not determined what standard should apply in assessing whether to
conditionally certify a FLSA collective action. The Court decided that conditional
certification should not be granted unless Plaintiff presented some evidence to support the
allegations in his complaint that other store managers employed by Acton were similarly
situated to him. The Court found the submission of two affidavits and Plaintiff’s theory
of a uniform pay policy to be insufficient to warrant conditional certification of a
collective action. The Court reasoned that several of the statements in Plaintiff’s affidavit
regarding Defendant’s pay policies constituted inadmissible hearsay that the Court could
not use as a basis for conditional certification, and as Plaintiff had submitted no evidence
as to how many potential Plaintiffs might exist in the proposed class.
White, et al. v. MPW Industrial Services, Inc., 236 F.R.D. 363 (E.D. Tenn. 2006).
Plaintiffs were industrial cleaning and facilities management workers who alleged that
Defendant compensated them only for time spent at customer sites and not for time spent
at Defendant’s branch locations in preparation for the day’s work or for time spent
traveling to and from customer sites. Plaintiffs sought conditional certification of a
FLSA collective action and authorization to send notice of the lawsuit to all potential
class members. In support of their motion, Plaintiffs submitted affidavits that Defendants
challenged as constituting inadmissible hearsay. Defendant cited a line of cases holding
that the Rule 56(e) standard for affidavits should apply to affidavits submitted in support
of a motion for conditional certification under 29 U.S.C. § 216(b). The Court disagreed
with the argument based on this line of cases, and concluded that to require affidavits
submitted in support of a motion for conditional certification to meet the standard applied
to affidavits in support of a motion for summary judgment would defeat the purpose of
having a two-stage analysis for determining certification of a collective action. In other
words, while the Court recognized the value of requiring Plaintiff to provide some factual
support for class allegations, the Court held that a lower evidentiary standard should
apply during the conditional certification stage. The Court considered the affidavits,
declarations, and depositions submitted by Plaintiffs and concluded that Plaintiffs had
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provided sufficient evidence, for purposes of the notice stage, that a company-wide
policy existed of not compensating employees for shop time and not properly
compensating for travel time; Defendant had not compensated employees for mandatory
safety and branch meetings; and Defendant had failed to record accurately all time
worked by employees. The Court acknowledged the validity of Defendant’s argument
that evidence of a company-wide policy of not paying employees for all hours worked
does not establish that Defendant violated the FLSA. Moreover, the Court implied that,
under different circumstances, the evidence submitted by Plaintiffs would fail to meet the
similarly-situated requirement for conditional certification. Nevertheless, the Court
granted conditional certification in this case because Defendant’s lack of record-keeping
would make it difficult for Plaintiffs to produce evidence of their failure to receive
appropriate overtime pay.
(vii)
Seventh Circuit
Austin, et al. v. CUNA Mutual Insurance Society, 232 F.R.D. 601 (W.D. Wis. 2006).
In an earlier order, the Court, without considering whether to conditionally certify a
collective action, had granted in part Plaintiff’s motion for court-facilitation of notice and
had ordered Defendant to disclose names and addresses of employees who might be
similarly situated to Plaintiff. Thereafter, Plaintiff sought conditional certification of a
collective action of law specialists employed by Defendant, an insurance company. In
determining whether to grant conditional certification of a collective action, the Court
noted that, at the stage of conditional certification, the Court should focus on Plaintiff’s
complaint and her affidavit, not on Defendant’s fact-specific arguments of predominance
of individualized inquiries or the dissimilarities between the job duties of Plaintiff and
other potential opt-in Plaintiffs. Based on the Complaint and the affidavit, the Court
found that Plaintiff had demonstrated a reasonable basis for her belief that she was
similarly situated to potential class members. The Court found compelling the facts that
when Defendant hired Plaintiff, Defendant had classified her and the other potential
opt-in Plaintiffs as exempt; Plaintiff alleged that Defendant continued not paying
overtime to law specialists until the summer of 2004; and Plaintiff alleged she regularly
worked more than 40 hours per week. The Court determined that these allegations
sufficiently suggested, for purposes of conditional certification, that Defendant had
subjected all of its law specialists to a policy that violated the FLSA.
Jonites, et al. v. Exelon Corporation, 2006 U.S. Dist. LEXIS 75510 (N.D. Ill. Oct. 4,
2006). A group of linemen and repairmen sued Defendant for failing to compensate them
properly for on-call time and time outside of scheduled work hours spent responding to
calls. Plaintiffs sought to certify concurrently a Rule 23 class for their state law wage &
hour claims, and a collective action for the FLSA claims. The Court first considered
Plaintiffs’ request for conditional certification of a collective action and determined that
Plaintiffs had met the similarly-situated requirement. The Court determined that
Plaintiffs’ showing was sufficient as Plaintiffs contended that all potential class members
were hourly employees who spent uncompensated time working while “on call;”
Plaintiffs were all linemen or repairmen who were subject to the same on-call procedures;
the reporting, response requirements, and disciplinary actions applied uniformly
throughout Defendant’s different locations; and the fact that Plaintiffs’ other employment
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duties may have varied did not negate the relevant fact that their duties under the “oncall” system were the same. The Court then considered whether Plaintiffs had met the
Rule 23 (a) & (b)(3) requirements for certification of a class for their state law wage &
hour claims. The Court concluded that Plaintiffs had met these Rule 23 requirements. In
addition, the Court found dual certification appropriate because the notice proposed by
Plaintiffs explained in great detail the difference between the claims, explained the need
to opt in for the FLSA claim and how to opt out for the other claims, and color-coded the
opt-in and opt-out forms.
(viii)
Eighth Circuit
Carlson, et al. v. C.H. Robinson Worldwide, Inc., 2006 U.S. Dist. LEXIS 71483 (D.
Minn. Sept. 26, 2006). Plaintiffs in this case alleged that Defendant misclassified them
as exempt from the FLSA’s overtime pay requirements. Plaintiffs were salaried
employees of Defendant in the U.S. who worked in a sales, operations, or support
position for one of the six different branches. Plaintiffs sought and obtained conditional
certification of a collective action under 29 U.S.C. § 216(b). Three years later, after the
close of discovery, Defendant sought to decertify the collective action. In determining
whether to decertify the collective action, the Court undertook a fact-intensive inquiry
that considered several factors, including the extent to which each individual Plaintiff’s
factual and employment settings differed; the extent to which the defenses available to
Defendant varied for each individual Plaintiff; and fairness and procedural considerations
in decertifying or not decertifying the collective claim. The Court devoted much of its
analysis to the testimony of individual Plaintiffs and determined that Plaintiffs fell into
approximately six different job categories with different job duties; Defendant’s different
branches made different deductions from Plaintiffs’ pay; the factual and employment
settings of the named Plaintiffs and opt-in Plaintiffs varied considerably; a determination
of whether the administrative exemption applied to an employee would require a factintensive inquiry; and that the Court could not fairly and efficiently administer as a
collective action the exempt status of several hundred individuals where the
circumstances warranted individualized inquiries. Thus, the Court ordered decertification
of the collective action.
The result in Carlson illustrates that a collective action once certified does not necessarily
mean it will not be decertified after discovery. Conditional certification is often granted
based upon mere allegations; once discovery undermines those allegations, an employer
has a much better chance to demonstrate the lack of “similarly situated” class members in
the context of a motion to decertify.
(ix)
Ninth Circuit
Edwards, et al. v. City Of Long Beach, 2006 U.S. Dist. LEXIS 93141 (C.D. Cal.
Dec. 12, 2006). In this case, the Court granted certification of an FLSA collective action
while simultaneously denying certification of a Rule 23 class action of state law claims in
a case brought by a former Long Beach police officer who claimed he was denied meal
and rest breaks and was not properly reimbursed for business expenses. Plaintiff alleged
that there was no policy for police officers to record missed meal or rest periods or
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request compensation for business expense such as maintaining clean uniforms. Plaintiff
requested certification of two class actions, one under Rule 23 for state law claims and
the other under 29 U.S.C. § 216(b) for the FLSA claims. Noting the two-step approach to
certification of collective actions, the Court granted certification of the FLSA action
finding that employees could opt-in to the class and that the differences in job duties
pointed out by Defendant were better suited for a motion for decertification after the opt
in period had passed. In denying certification of the state law claims under Rule 23, the
Court noted two reasons why a collective action was superior to a Rule 23 class action.
As opposed to a Rule 23 opt-out class, an opt-in FLSA collective action would be more
efficient and better for allowing employees to monitor their participation. Additionally,
having two simultaneous classes would likely to confuse class members. Since the FLSA
claims were the ones providing the Court with jurisdiction, it reasoned that certification
of a Rule 23 class which mainly covered state labor law claims would pose jurisdictional
concerns since state issues would substantially predominate over the federal claims.
Gerlach, et al. v. Wells Fargo & Co., 2006 U.S. Dist. LEXIS 24823 (N.D. Cal. Mar. 28,
2006). Plaintiffs had worked as business systems employees and claimed that Defendant
had violated the FLSA by failing to pay them overtime. Plaintiffs moved for conditional
certification and facilitation of notice to potential collective action members under
29 U.S.C. § 216(b). Because the Ninth Circuit has not decided the method for
determining whether Plaintiffs are similarly-situated to the potential opt-in Plaintiffs, the
Court first analyzed how to determine whether Plaintiffs had met the similarly-situated
requirement. Defendants contended that the commonality requirement of Rule 23 should
apply to a determination of who is “similarly situated” for purposes of conditional FLSA
collective action certification. The Court disagreed and noted that the similarly-situated
requirement is considerably less stringent than the requisite showing under Rule 23.
Defendants also contended that the Court should apply heightened review to Plaintiffs’
request for certification as if the Court were deciding a decertification motion because
Defendants had produced over 40,000 pages of documents in response to 116 document
requests from Plaintiffs. Moreover, Plaintiffs already had deposed 16 witnesses.
Plaintiffs responded that while much discovery had occurred, discovery had not been
completed, particularly on the issues underlying collective action certification. The Court
agreed that because the parties had not completed discovery, the Court should
conditionally certify the class and allow Defendants to move for decertification of the
class, if necessary, only after the parties had completed discovery.
Honojos, et. al. v. The Home Depot, Inc., Case No. 06-CV-108 (D. Nev. Dec. 1, 2006).
In this case, Plaintiffs alleged that employees were not paid overtime in violation of the
Fair Labor Standards Act. Plaintiffs filed a motion for conditional certification of a
collective action and seeking to send court-authorized notices to all full-time current and
former retail store hourly employees employed at any time during the past three years at
more than 1,800 Home Depot stores nationwide. The Court denied Plaintiffs’ motion.
The Court held that Plaintiffs had failed to make the required showing under 29 U.S.C.
§ 216(b) that there was a class to whom they were similarly situated. Specifically, the
Court reasoned that Plaintiffs failed to present evidence of any improper common
practice, policy, or culture at Home Depot that would justify conditional certification on a
nationwide or even a statewide basis. In addition, the Court concluded that Defendant’s
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survey of current and former Nevada employees – which showed that unpaid-off-theclock work and improper time reductions were rare occurrences in Defendant’s Nevada
stores – undercut Plaintiffs’ claims and theories. The Court further held because there
would be a need for individualized determinations to resolve the claims of each Plaintiff
and there would not be a common representative who could testify about a single policy
or practice applicable to the class as a whole, it was unlikely that the action would be
managed on a collective basis.
Rees, et al. v. Souza’s Milk Transportation Co., 2006 WL 738987 (E.D. Cal. Mar. 22,
2006). Plaintiffs, two former truck drivers for Souza’s Milk Transportation Co., brought
this action seeking recovery for willful violations of the FLSA and violations based on
California’s Unfair Competition Law (“UCL”). Plaintiffs’ motion for certification sought
to certify two classes. The first class was based on current and/or former truck drivers of
Souza that hauled dairy products within California, whom did not receive overtime
compensation for hours worked in excess of forty hours per week on or after February 28,
2002, in violation of the FLSA. The second class was based on current and/or former
truck drivers of Souza that hauled dairy products within California, whom did not receive
overtime compensation for hours worked in excess of forty hours per week on or after
February 28, 2001, in violation of the UCL. The main difference between the two classes
at the certification stage was that the FLSA class would be certified under Section 216(b)
whereas the UCL class would be certified under Rule 23. In considering the FLSA
claim, the Court noted that there is not one approach to the “similarly situated” analysis;
rather, three approaches have developed throughout the federal circuits: (1) the twotiered ad hoc approach; (2) incorporation into § 216(b) of the requirements of the current
version of Rule 23; and (3) incorporation into § 216(b) of the requirements of the pre1966 version of Rule 23. The Court applied the ad hoc approach and found that the case
was at the first tier, or the “notice” stage, which places a light burden on Plaintiffs to
demonstrate they were similarly situated to potential class members. The Court
determined that Plaintiffs met this light burden through detailed allegations in the
complaint, affidavits from the two Plaintiffs, and affidavits of 30 other potential class
members. In opposition to the FLSA certification, Souza argued an exemption from
overtime pay requirements based on the Motor Carrier Safety exemption. In support of
its argument, Souza contended that although these particular truck drivers were intrastate
drivers, the routes for these products were interstate and thus the exemption applied. The
Court found that Souza’s evidence of interstate routes was conclusory and that although
Souza transports a finished product there was no evidence that this finished product was
in “practical continuity.” Id. at *5. In light of case law that “practical continuity of
interstate commerce” could be broken by processing the product and Plaintiffs’ light
burden of proof at the “notice” stage, the Court certified the FLSA class. As to Plaintiffs’
request for certification for their UCL claims, the Court analyzed that motion under
Rule 23. In opposition to certification, Souza argued that a class action was not the
superior method to adjudicate the claims because Plaintiffs, who were highly
compensated, were motivated to institute individual suits, an individual inquiry would be
required of each potential class member’s claim, and the collective bargaining agreement
preempted the UCL claim. In granting Plaintiffs’ UCL certification request, the Court
found that some potential members still were employed by Souza and unlikely to sue
their employer. Moreover, Souza’s preemption argument, while a possible defense to the
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UCL claim, was not a defense to class certification. Thus, given a finding of common
questions of law and fact, the Court concluded that certification of Plaintiffs’ state law
UCL claim under Rule 23 was appropriate at this stage.
Sepulveda, et al. v. Wal-Mart Stores, Inc., 237 F.R.D. 229 (C.D. Cal. 2006). Plaintiffs
in this case were 2,750 assistant managers (“AM’s”) who worked for Defendant.
Plaintiffs alleged that Defendant erroneously classified them as exempt from state
overtime pay and break requirements mandated by California state law. The Court
denied Plaintiffs’ motion for class certification for failure to meet at least one of the
requirements under Rule 23(b). The Court found that there was no risk of inconsistent
judgments under Rule 23(b)(1) because it could simply treat some members of the AM
class as exempt but not others. In either case, reclassification would not affect the rights
of other AM’s. The Court also found class certification inappropriate under Rule
23(b)(2). The Court reasoned that fewer than half of the putative class members could
benefit from any injunctive relief because it could only apply to existing employees, and
the majority of putative class members no longer worked for Defendant. Further, the
Court determined that the monetary damages sought by Plaintiffs would require highly
individualized proof of the particular duties and hours of each AM. Finally, the Court
held that class certification was not proper under Rule 23(b)(3) because individual issues
predominated. There were highly individualized questions regarding, among other
things, the kind of work performed by each AM, the amount of time spent performing
exempt versus non-exempt work, and the amount of overtime owed. The Court indicated
that the statistical evidence presented by Plaintiffs’ expert was not reliable for purposes
of generalizing how AM’s spend their time, as there was too much behavioral variance to
generalize across the class of AM’s. Moreover, the Court indicated that even assuming a
duty is a non-exempt duty, the amount of time a given manager is going to spend on that
duty is highly variable and context-dependent, and those variations cannot be looked at
generally across the class of AM’s. The Court thus reasoned that even accepting
Plaintiffs’ argument that there was little variance among the duties of AM’s, Defendant
was entitled to present evidence that individual AM’s performed primarily exempt tasks
under state law.
Whiteway, et al. v. FedEx Kinko’s Office And Print Services, Inc., 2006 U.S. Dist.
LEXIS 69193 (N.D. Cal. Sept. 14, 2006). In this case, Plaintiff worked as a Center
Manager (“CM”) for a California retail location of Defendant. Plaintiff alleged that
Defendant improperly exempted CM’s from certain employment benefits, particularly
overtime compensation, by categorizing the group as “executive exempt.” Plaintiff
claimed that Defendant’s classifications of CM’s as executive exempt, and failure to
investigate the propriety of that classification, violated the California Labor Code and the
California Business & Professional Code. Plaintiff filed a motion for class certification
under Rule 23 to certify “all members who are/were employed as salaried Store
Managers of Kinko’s, and were classified thereby as overtime-exempt employees at any
time between the commencement of the payroll period during May 19, 2001 and the
present.” Id. *2. The Court granted Plaintiff’s motion and certified the class. The Court
held that although the managers in the class worked in different kinds of stores and in
different locations, sufficient common issues and policies existed to justify class
treatment. The Court further held that although there appeared to be a difference in the
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job duties of CM’s, commonality was not defeated because these differences were
minimal.
(x)
Tenth Circuit
Gieseke, et al. v. First Horizon Home Loan Corp., 408 F. Supp. 2d 1164 (D. Kan.
2006). Plaintiffs were current and former loan officers for First Horizon Home Loan
Corporation who brought an action to recover overtime pay for violations under the
FLSA and Kansas state law. Plaintiffs’ sought to certify a collective class under
29 U.S.C. § 216(b) and to certify a Rule 23 class action regarding their state law claims.
In considering Plaintiffs’ motion for certification under the FLSA, the Court applied the
lenient “notice” stage standard. In applying the “notice” stage standard there are various
approaches, and the Court noted that the Tenth Circuit has endorsed the ad hoc method.
The ad hoc approach consists of the Court’s determination of whether Plaintiffs are
“similarly situated.” In applying this standard, the Court noted that some courts require
nothing more than “substantial allegations that the putative class members were together
the victims of a single decision, policy, or plan,” while other courts require Plaintiffs to
“factually support his allegations.” Id. at 1166. In this case, the Court avoided this issue
because the parties already engaged in discovery and Plaintiffs provided some evidence
to support their claims. First Horizon argued that the Court should skip the “notice” stage
standard and apply the stricter “similarly situated” standard because the parties already
had engaged in discovery. In support of its position, First Horizon pointed to discovery
relating to policies, procedures, duties, and responsibilities of opt-in Plaintiffs,
depositions of the President of National Sales Support (“NSS”), NSS employee services
representative, two opt-in Plaintiffs, and First Horizon’s production of almost 6,000
documents. Despite First Horizon’s evidence regarding this discovery, the Court applied
the “notice” stage standard finding that discovery had been “limited,” the Report of
Parties’ Planning Meeting and Scheduling Order contemplated a two-tiered approach,
and the potential prejudice to Plaintiffs of bypassing the tier one approach would be
significant. In applying this standard, the Court found that Plaintiffs provided sufficient
evidence of similar job duties, as loan originators from both divisions that certification
was requested for worked in excess of forty hours per week that required overtime, they
were not paid for this overtime because a uniform policy misclassified them as exempt,
and all loan originators were subjected to the same centralized management system
responsible for determining FLSA issues.
(xi)
Eleventh Circuit
Brown, et al. v. Dolgencorp, Inc., Case No. 02-CV-673 (N.D. Ala. Aug. 7, 2006).
Plaintiffs were 2,470 store managers for Dollar General who filed suit alleging that they
had been misclassified as executive employees and were improperly denied overtime pay,
sales incentives and commissions, bonuses, and vacation and sick time. The store
managers argued that they worked between 60 and 90 hours a week but only performed
managerial duties five to 10 hours a week. Dollar General contended that the store
managers spent at least 50% of their time performing managerial activities. In 2004, the
Curt certified a collective action that consisted of store managers who regularly worked
more than 50 hours a week and either supervised fewer than two employees or lacked the
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authority to hire or fire or sometimes performed managerial duties at a store other than
the one they were assigned to manage. The case went to trial. Following a week of
testimony at trial, the Court decertified the class on Dollar General’s motion and struck
the testimony of Plaintiffs’ expert on their damage calculations. The Court held that the
opt-in Plaintiffs were not similarly situated with respect to damages.
The result in Brown reflects that courts have a continuing duty under § 216(b) – much
like the duty to a class under Rule 23 – to ensure that a collective action proceeds only if
the class is “similarly situated” to the named Plaintiffs.
Fox, et al. v. Tyson Foods, Inc., Case No. 99-CV-1612 (N.D. Ala. Nov. 15, 2006).
Plaintiffs were employees of Defendant’s chicken-processing facilities in seven different
states who brought suit to challenge Defendant’s refusal to pay them for the time spent
donning and doffing their required safety and sanitary gear. The Court analyzed
Plaintiffs’ certification request under 29 U.S.C. §216(b) by noting that the Eleventh
Circuit has implemented a two-step inquiry for determining conditional certification.
This test examines whether other employees exist who wish to opt into the action, and
whether those other employees are similarly situated to the named Plaintiffs by virtue of
their job requirements and pay provisions. In addition, the Court stated that while named
Plaintiffs may not have to show a uniform policy, plan, or scheme by the employer that
results in a violation of the FLSA to obtain conditional certification, Plaintiffs must make
at least a basic showing of commonality between the grounds for the claim and the
grounds of the potential claims of the proposed class members, beyond the showing of
similar job duties and pay provisions. Despite its discussion of the Eleventh Circuit’s
two-tiered approach to deciding whether to certify a collective action, the Court found the
first stage of conditional certification inapplicable to the case as Plaintiffs had engaged in
extensive discovery before moving for certification. Thus, the Court skipped the first
stage of the two-step process for certifying collective actions and moved immediately to a
determination of whether the facts available from discovery would support a finding that
the named Plaintiffs and the proffered class were similarly situated. The Court found,
from the evidence before it, that individual plant managers, department heads, or line
managers at Defendant’s various locations decided whether to compensate employees for
donning and doffing time. As the Court found that Defendant did not have a uniform
policy of not paying its employees for time spent donning and doffing safety gear, the
Court concluded that the members of the proposed collective action could not be
similarly situated to the named Plaintiffs. Moreover, the Court determined that it could
not manage a collective action of the magnitude proposed by the named Plaintiffs
because it would encompass approximately 250,000 current and former employees of
Defendant who worked over a period of nine years in different positions, at different
plants, with different pay grades, in multiple states, and subject to different inter-plant
and intra-plant policies. Thus, the Court denied Plaintiffs’ motion to certify a collective
action.
Kreher, et al. v. City Of Atlanta, Georgia, 2006 WL 739572 (N.D. Ga. Mar. 20, 2006).
Plaintiffs were current police officers of the City of Atlanta who brought a lawsuit to
recover unpaid overtime compensation in violation of the FLSA. Plaintiffs sought
conditional certification of a collective action consisting of current and former City of
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Atlanta police officers from September 10, 2001 to the date of the lawsuit. Specifically,
Plaintiffs alleged that they did not receive overtime compensation for hours worked in
excess of the statutory maximum, were required to accept compensatory time instead of
overtime pay without agreement, and did not receive compensatory time at the rate of one
and one-half hours for each hour in which overtime compensation was required. The
City of Atlanta attacked the merits of Plaintiffs’ case. The City argued that Plaintiffs
failed to offer any evidence that they were entitled to overtime pay or compensatory time
under the FLSA. Moreover, the City argued that there was a “well-established
understanding” between it and Plaintiffs to provide compensatory time off in lieu of
overtime pay. Id. at *2. The Court found that an analysis of the merits of Plaintiffs’
claims was inappropriate at this preliminary stage in the litigation. Id. at 4. In
considering Plaintiffs’ motion for conditional certification, the Court confirmed that the
Eleventh Circuit has approved the use of the two-tiered approach to certification under
Section 216(b). Id. at *2. In granting conditional certification, the Court found that
Plaintiffs, “albeit barely,” demonstrated a reasonable basis that they were entitled to
overtime pay and either did not receive or were inadequately compensated in violation of
the FLSA and that the violations occurred on a class-wide basis. Id. at *3. In support of
its finding, the Court relied on Plaintiffs’ declarations to establish the existence of other
employees in similar positions who were subjected to similar policies.
Rodgers, et al. v. CVS Pharmacy, 2006 WL 752831 (M.D. Fla. Mar. 23, 2006).
Plaintiff, on behalf of himself and others similarly situated employed by CVS Pharmacy
during the three years prior to the lawsuit, brought a suit alleging CVS failed to pay
overtime in violation of the FLSA. Plaintiff moved to certify a collective action
consisting of all current and former hourly non-management employees of CVS for the
three years prior to the filing of the lawsuit. CVS opposed the motion arguing that
Plaintiff had failed to identify potential opt-in Plaintiffs interested in joining the lawsuit
and, regardless, any potential opt-in Plaintiffs were not similarly situated to Plaintiff. In
addition, CVS argued that the potential class was too large and, as such, treatment of the
litigation on a class basis would violate CVS’ due process rights and not meet the
required goal of judicial economy and efficiency. In denying Plaintiff’s motion for
certification, the Court found that the case was at the “notice” stage and, therefore, it had
to determine the existence of any employees who desired to opt-in to the action, and
whether the employees who desired to opt-in were similarly situated to Plaintiff. In
support of his motion, Plaintiff had submitted his own affidavit and affidavits from two
former CVS employees who desired to join the action, DOL documents showing wage &
hour complaints against CVS, a previous lawsuit against CVS for improper payroll
deductions, and two newspaper articles. Upon review of the evidence, the Court found
that the three affidavits, the DOL documents, and the previous lawsuit failed to reveal
individuals who desired to join the litigation. Furthermore, the two newspaper articles
were general, and vague, and replete with hearsay. In contrast, CVS provided thirty-one
affidavits from current employees, who worked with all three individuals for whom
Plaintiff produced affidavits, who all denied Plaintiff’s allegations and expressed no
desire to join the lawsuit. As for the similarly-situated prong, the Court looked at
whether employees were similarly situated with respect to job requirements and pay
provisions, and the commonality of their claims. Id. at *5. The Court found that Plaintiff
was not similarly situated to the other two affiants nor any other potential class plaintiffs.
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According to the Court, Plaintiff’s belief that all hourly non-management employees
utilized the same computer system to clock in and out of work and shared the same job
functions was insufficient to show that they were similarly situated. Moreover, Plaintiff’s
reliance on CVS job descriptions, without more, prevented the Court from making a
proper comparison of job requirements. Thus, the Court denied Plaintiffs’ motion to
certify a collective action because there was no evidence of similar duties of the potential
opt-in Plaintiffs.
(xii)
District Of Columbia Circuit
Lindsay, et al. v. Government Employees Insurance Co., 448 F.3d 416 (D.C. Cir.
2006). Plaintiffs were automobile claims adjusters who alleged that they were
misclassified as exempt administrative employees and denied overtime under both the
FLSA and New York state law. They filed suit against Defendant, claiming that its
actions were willful. Plaintiffs sought certification of an opt-in class under the FLSA and
an opt-out class for their state overtime claims under Rule 23(b)(3). The district court
granted certification of a collective action pursuant to 29 U.S.C. § 216(b). The class was
defined as all claims adjusters who worked for Defendant nationwide. The district court
refused to certify a class pursuant to Rule 23, for Plaintiffs had sought a class made up of
claims adjusters who were New York citizens. In denying Rule 23 class status for
Plaintiffs’ state claims, the district court concluded that the FLSA’s opt-in requirement
precluded it from exercising supplemental jurisdiction over the state law claims of
adjusters who had not opted into the FLSA action. In other words, the district court
concluded that it did not have the original jurisdiction necessary to exercise supplemental
jurisdiction under Section 1367(a). Plaintiffs appealed. The D.C. Circuit reversed the
district court’s ruling and remanded the case to decide anew whether to exercise
supplemental jurisdiction over the state law claims. The D.C. Circuit rejected
Defendant’s arguments that the language of § 216(b) prohibits supplemental jurisdiction
over state law claims of persons who did not join the FLSA action, since the section does
not mention supplemental jurisdiction. The D.C. Circuit also rejected Defendant’s
contention that the state law claims were not part of the same case or controversy as the
FLSA claims. In remanding the case, the D.C. Circuit stated that the district court
remained “free to consider whether it ‘may decline to exercise’ supplemental
jurisdiction” but must do so this time by applying the criteria set forth in Section 1367(c).
Id. at 44. At the same time, the D.C. Circuit instructed the district court on what grounds
it could not refuse to exercise supplemental jurisdiction. The D.C. Circuit indicated that
the district court could not refuse supplemental jurisdiction because the state law claims
were novel or complex; that the state claims would predominate over the case; or that the
mere procedural differences between a FLSA and a Rule 23 class action (opt-in/opt-out)
satisfied the exceptional circumstances/other compelling rationale, in light of the broad
grant of jurisdiction provided to the courts under Section 1367.
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B.
Other Federal Rulings Affecting The Defense Of FLSA Collective Action Claims
(i)
First Circuit
O’Brien, et al. v. Town Of Agawam, 440 F. Supp. 2d 3 (D.Mass. 2006). In this case
current and former police officers of the Town of Agawam contended that it omitted
certain wage augmentations from its calculations of the officers’ rate of pay, which
reduced the amount they received for overtime. Pursuant to their collective bargaining
agreement (“CBA”), the officers claimed they were entitled to various types of pay
enhancements, including shift-differential pay, longevity pay, and career-incentive pay.
The district court rejected Plaintiffs’ claims. On appeal, the First Circuit found that the
town was required to include all of these contractually guaranteed types of pay in its
calculation of the officers’ regular rates of pay, and then remanded the case to the district
court for a determination of damages. The parties agreed that the officers were entitled to
the difference, if any, between FLSA overtime and contractual overtime pursuant to the
CBA. Contractual overtime was to be determined by dividing an officer’s annual salary
by 1,950 hours (the number of regularly scheduled hours for every officer) and
multiplying the resulting rate by 1.5. Further, officers were contractually guaranteed to
receive overtime for every hour they worked beyond their regularly scheduled time.
Officers were scheduled to work either 32 or 40 hours each week. Given this work
structure, officers began receiving overtime at hour 33 during weeks when they were
scheduled to work only 32 hours. The fluctuation between the officers’ scheduled hours
made it difficult to accurately calculate a “regular rate of pay” for overtime purposes
because they worked a different number of hours each week and thus did not have a
“fixed weekly salary.” At the same time, the CBA provided that the officers were
compensated 1/52 of their salary each week. To address this anomaly, the First Circuit
followed 29 C.F.R. § 778.108 and applicable case law to determine what actually
happened with respect to the officers’ hours of work and rate of pay under the CBA. It
determined that the contractual overtime calculation was correct and thus upheld the
determination that the officers should continue to be compensated based on 1,950 hours
of work every year.
(ii)
Second Circuit
Barfield v. New York City Health And Hospitals Corp., 2006 U.S. Dist. LEXIS 56711
(S.D.N.Y Aug. 11, 2006). After the Court granted Plaintiff summary judgment on her
overtime compensation claims under the Fair Labor Standards Act, Plaintiff submitted an
itemized statement of her damages and moved for an award of $340,375 in attorney’s
fees and $6,565.79 in costs. Defendant did not dispute Plaintiff’s compensatory and
liquidated damages figures, but challenged the requested hourly rate as well as the
computation of attorney’s fees and costs sought by Plaintiffs’ counsel. Defendant argued
that the billing rate of $350 per hour sought by Plaintiff’s counsel’s exceeded the market
rate. The Court held, however, that the billing rate was reasonable given the attorney’s
significant wage and hour experience. Second, the Court held that the calculations for the
400 hours of time spent by Plaintiff’s counsel on the case were excessive because her
attorney’s vaguely written time entries made it difficult for the Court to evaluate whether
the time spent on the litigation was reasonable; Plaintiff’s counsel could not recover for
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time spent on certain administrative tasks; and Plaintiff’s previous failure to produce a
modicum of evidence in support of her motion to certify the case as a collective action
justified a reduction in the ultimate fee award to take this negative result into account.
Finally, the Court modified the billing rate for claimed expenses performed by Plaintiff’s
counsel that should have been performed by a paralegal and reduced the attorney’s billing
rate by half, as is customary in the Second Circuit, for any travel time related to
depositions. Ultimately, the Court awarded Plaintiff $49,889 in attorney’s fees and
$6,565.79 in costs, a reduction of nearly $300,000 in terms of what Plaintiff’s counsel
had sought.
The result in Barfield is instructive for the defense of a fee award when Plaintiff’s
counsel is unsuccessful in securing certification under 29 U.S.C. § 216(b). The time and
effort on litigating the § 216(b) certification motion typically will dwarf the alleged
damages of a named plaintiff. Barfield is a strong precedent for undercutting a plaintiff’s
fee petition in these circumstances.
Coheleach, et al. v. Bear, Stearns & Co., Inc., 440 F. Supp. 2d 338 (S.D.N.Y. 2006).
Plaintiff, a securities broker, alleged that his employer improperly treated him as exempt
from receiving overtime and improperly deducted money from his wages. He filed suit
in federal court under the FLSA as well as state and city laws, and sought certification of
a collective action and class action. Defendant moved to dismiss all claims or, in the
alternative, to compel arbitration of the FLSA claim and stay the class action claims. In
support of its motion, Defendant asserted that Plaintiff was a party to two separate
arbitration agreements, one which was included in his job offer letter and the other in his
Uniform Application for Securities Industry Registration. These agreements required
Plaintiff to arbitrate any claims arising out of his employment relationship. The NASD
rules generally exclude class actions from arbitration. Plaintiff argued that a collective
action should be treated as a class action under NASD rules and be excluded from
arbitration. Without interpreting the NASD rule, the Court determined that because no
other employee opted to join the collective action within the time provided by the Court,
Plaintiff’s claim under the FLSA was simply an individual claim and was subject to
arbitration. Thus, the Court granted Defendant’s motion to compel arbitration of the
FLSA claim. The Court stayed Plaintiff’s class claims under state and city laws pending
the outcome of the NASD arbitration. The Court held that in signing the two agreements,
Plaintiff “did not agree to arbitrate claims encompassed within a putative class action
unless and until class certification is denied.” Id. at 341.
Conzo, et al. v. City Of New York, 438 F. Supp. 2d 432 (S.D.N.Y. 2006). A group of
current and former emergency medical technicians and paramedics who worked for the
New York City Fire Department sued for overtime violations under the FLSA, and
sought certification as a collective action. The City moved to dismiss, arguing that a
provision in Plaintiffs’ collective bargaining agreement (“CBA”) required that they
engage in an informal administrative remedy created specifically for FLSA disputes
before they could bring their claims in court. The procedure involved submitting FLSA
controversies to a special “FLSA panel” within 60 days of the date after the claim arose,
and also submitting it to the “applicable agency head or designee for review and
resolution.” Id. at 434. There were also provisions for appealing an adverse decision by
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the panel. The procedure stated that using the FLSA panel did not constitute a waiver of
Plaintiffs’ rights under the FLSA. While the City argued that the procedure was a
required prerequisite for filing an FLSA claim in court, Plaintiffs contended that it was
merely an alternate form of relief for individuals who did not want to incur the time or
expense of a federal lawsuit. The Court agreed with Plaintiffs, finding that the procedure
was ambiguous because it did not state the consequences for Plaintiff or class of Plaintiffs
who failed to utilize the procedures before filing an FLSA action in court. Further, the
procedure, with its 60 day limit for filing a claim, effectively reduced the statute of
limitations for filing FLSA claims. Finally, despite the fact that the dispute resolution
procedure had been in place in the CBA for at least 11 years, the City had never sought to
enforce it, even though it had been faced with several other lawsuits brought under the
FLSA. Given these circumstances, the Court allowed Plaintiffs to go forward with their
lawsuit in court.
Relyea, et al. v. Carman, Callahan & Ingham, 2006 U.S. Dist. LEXIS 63351 (E.D.N.Y.
Sept. 6, 2006). Plaintiffs worked as non-lawyer real estate “closers” for a law firm.
They claimed that they were eligible for overtime pay under the FLSA and New York
state law. Defendant brought a motion for summary judgment, arguing that Plaintiffs
were not eligible to receive overtime under federal or state law because they fell under
the “bona fide executive” exemption. The Court disagreed, holding that Defendant failed
to show that Plaintiffs satisfied the duties test component of the bona fide executive
exemption. The duties test requires that an employee’s primary duty consists of office or
non-manual work that is “directly related to management policies or general business
operations” of the employer, and requires “the exercise of discretion and independent
judgment.” Id. at *2. The Court found that the work Plaintiffs performed consisted of
preparing documents prior to the closing, overseeing and attending the closing, and
completing documents after the closing. These duties, the Court held, did not relate to
Defendant’s management policies or general business operations. Rather, the Court
characterized Plaintiffs as production, as opposed to administrative, workers in that their
duties did not “involve the crafting of those policies, but rather the application of
[existing] policies.” Id. at *3. Thus, the Court denied Defendant’s motion for summary
judgment as to both Plaintiffs’ FLSA and state law claims.
Ward, et al. v. The Bank Of New York, 455 F. Supp. 2d 262 (S.D.N.Y. 2006). Two
former bank employees filed overtime pay claims under the FLSA and New York state
law. One employee sought to represent a class of individuals employed as bank tellers.
The second employee sought to represent a class of individuals employed as bank
managers. Defendant filed a motion to dismiss Plaintiffs’ claims prior to anyone opting
in to the case and before the Court certified the purported class, but after Defendant had
made a Rule 68 offer of judgment to Plaintiffs for $1,000 plus reasonable attorneys fees.
Plaintiffs rejected Defendant’s offer. In granting Defendant’s motion, the Court held that
Defendant’s offer of judgment rendered Plaintiffs’ claims moot, regardless of the
rejection of the offer. The Court based its decision on the fact that as no other employees
had opted in to the case, it rendered the claim as one for individual relief, and as
Defendant’s offer far exceeded the amount that Plaintiffs could potentially recover if the
case went to trial. Critical to this holding was the fact that the parties did not dispute the
amount allegedly owed to Plaintiffs in overtime wages, nor did they dispute that Plaintiffs
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had voluntarily terminated their employment. As Plaintiffs’ undisputed voluntary
resignations rendered equitable relief unavailable, and no relief in excess of the offer of
judgment could be obtained at trial, the Court determined that dismissal was appropriate.
(iii)
Third Circuit
Davis, et al. v. Mountaire Farms, Inc., 453 F.3d 554 (3d Cir. 2006). Plaintiffs were
current or former “crew leaders” who claimed that they were improperly denied overtime
compensation because they were misclassified as exempt employees. As crew leaders,
Plaintiffs were responsible for supervising other employees known as “chicken catchers.”
Their supervision entailed transporting these employees to and from farms where
chickens were harvested, directing the crew’s work, issuing disciplinary warnings, and
signing off on requests for holidays or receipt of pay in lieu of vacation or holidays.
Plaintiffs were paid on a salaried basis, but were subject to partial day deductions for
partial time off from normal work hours and their vacation and holiday pay were
calculated based on an hourly rate. At one time Plaintiffs were paid on an hourly basis.
Following an audit review by the U.S. Department of Labor, Plaintiffs became salaried
employees but experienced no changes in their duties and responsibilities. The district
court found that Plaintiffs were exempt under the FLSA’s executive exemption and
granted summary judgment for the employer. On Plaintiffs’ appeal, the Third Circuit
reversed and remanded the case, concluding that there were genuine issues of fact
regarding whether Plaintiffs satisfied all the requirements of the exemption. The
administrative element in issue was whether Plaintiffs satisfied the fourth prong of the
exemption, i.e., whether Plaintiffs had the authority to hire or fire or make
recommendations as to hiring, firing, or promotion. The Third Circuit initially observed
that Plaintiffs’ written duties did not include the ability to recruit, hire, or fire crew
members. Plaintiffs’ testimony revealed that they rarely made hiring recommendations
and their disciplinary powers were quite limited. The employer argued that Plaintiffs’
averments by affidavit should be disregarded because their affidavit and deposition
testimony was contradictory. The Third Circuit, however, found no inconsistencies in
Plaintiffs’ testimony, only contradictions between Plaintiffs’ testimony and their
employer’s testimony. Consequently, the Third Circuit concluded that there were
genuine issues pertaining to whether Plaintiffs were properly classified as exempt under
the executive exemption.
Lawrence, et al. v. Philadelphia, 2006 U.S. Dist. LEXIS 71389 (E.D. Pa. Sept. 29,
2006). A group of paramedics employed by the City of Philadelphia Fire Department
brought a collective action under the FLSA. They contended that the City failed to pay
them overtime in weeks when they worked more than 40 hours. Given the Fire
Department’s scheduling structure, paramedics were assigned to platoons which operated
in eight-day rotating shifts, resulting in 34 hours and 48 hours of work per week.
Regardless of the exact hours worked, paramedics were paid for 42 hours of work per
week, and receive overtime for pay for 2.4 hours per week. The City claimed that this
pay structure did not violate the FLSA because the paramedics qualified for the “fire
protection employee exception” to the FLSA at 29 U.S. C. § 207(k); this exemption does
not require payment of overtime for individuals who worked in fire protection unless they
work more than 61 hours in an eight day work period. The Court agreed with the City’s
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argument, finding that the exception covered paramedics who were also trained in fire
suppression, had the legal authority to engage in fire suppression, and were employed by
a fire department. Further, the Court determined that the paramedics actually were
engaged in the prevention, control, and extinguishment of fires. Even though the
paramedics were not trained as extensively as firefighters in the act of fire suppression,
the Court concluded that they did have such training and were expected to engage in such
work when necessary (such as during response to a fire). Therefore, the Court ruled that
the FLSA exception applied to them and they were not entitled to overtime for working
hours of less than 61 hours in an eight-day period.
Moeck, et al. v. Gray Supply Corp., 2006 U.S. Dist. LEXIS 511 (D.N.J. Jan. 6, 2006).
Former employees of Defendant who had worked at various time between 1991 and 2002
filed overtime claims under the FLSA and New Jersey wage & hour law, along with
common law fraud and negligent misrepresentation claims. Plaintiffs’ overtime claims
related to Defendant’s alleged practice of requesting employees to work an additional
one-half hour both prior to and at the end of their eight hour shifts. Defendant
purportedly referred to this extra time as “free time.” Id. at *1. Defendant moved for
summary judgment on plaintiffs’ claims, asserting that the FLSA preempted the
plaintiffs’ common law claims, that the Labor Management Relations Act (“LMRA”)
preempted the FLSA claims, and that both the FLSA and state law wage & hour claims
were time barred. Plaintiffs also moved for class certification. The Court granted
Defendant’s motion for summary judgment in part, and denied Plaintiffs’ motion to
certify in its entirety. The Court granted Defendant’s motion only as to the preemption of
Plaintiffs’ common law claims and the time-barred status of the state law wage & hour
claims. The Court held that the FLSA preempted Plaintiffs’ fraud and misrepresentation
claims because the common law claims related to false statements Defendant allegedly
made concerning Plaintiffs’ entitlement to overtime for “free time.” Id. at *4. As these
claims related to Plaintiffs’ entitlement to overtime pay, the Court held that these claims
must be brought under the FLSA. The Court determined that Plaintiffs’ state law wage &
hour claims were time barred because the New Jersey statute only provided for a twoyear statute of limitations and the last day of employment of Plaintiffs was over two years
from the date Plaintiffs filed their complaint. In denying Defendant’s motion on the
LMRA preemption issue, the Court relied on U.S. Supreme Court precedent holding that
FLSA rights cannot be abridged by contract or otherwise waived, and that FLSA rights
take precedent over conflicting provisions of a collective bargaining agreement.
Moreover, at issue in the case were questions of law and fact relating to Plaintiffs’
alleged entitlement to overtime, which required a determination of their “regular rate”
and “workweek,” not an interpretation of terms contained in the collective bargaining
agreement. Id. at *6. The Court based its denial of the motion for summary judgment as
to the expiration of the FLSA statute of limitations on the existence of a genuine issue of
material fact relating to whether Defendant’s actions constituted a willful violation of the
FLSA, which would render the three year statute of limitation applicable to Plaintiffs’
claims. The evidence supporting the existence of this disputed issue included the
testimony of both Plaintiffs and non-party witnesses, which provided that Plaintiffs had
repeatedly complained to their supervisors about not receiving overtime without any
change to Defendant’s practice of not paying overtime for “free time;” evidence that a
supervisor told a complaining Plaintiff that if he did not want to work the “free time he
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could look for another job;” and evidence indicating that Defendant purportedly ended
the alleged policy of requiring employees to work “free time” a few weeks before a nonparty’s deposition in the case. Id. at *16. The Court also denied Plaintiffs’ motion for
class certification as to both the FLSA and state law wage claims. The case was at the
“notice stage” for purposes of conditional class certification under the FLSA, which
required only “substantial allegations that the putative class member were together the
victims of a single decision, policy or plan.” Id. at *12. The Court found that Plaintiffs
could not meet even this lenient standard given the lack of evidence that more than a
single supervisor had a policy of requiring that employees work “free time.” As to
Plaintiff’s state law wage & hour claims, the Court held that the Congress designed the
FLSA’s opt in procedure to limit claims to those employees who asserted claims in their
own right and to permit employers to avoid the burdens of representative actions. The
Court reasoned that the filing of a Rule 23 class action under state law would circumvent
this Congressional intent. Additionally, the Court held that Plaintiffs had failed to
demonstrate either commonality or typicality necessary to find a class action appropriate.
(iv)
Fourth Circuit
Barnett, et al. v. Commtec/Pommeroy Computer Res. Inc., 439 F. Supp. 2d 598
(S.D.W.Va. 2006). In this case, the Court ruled that employees who installed computer
cables in public schools were not performing construction or improvement work and
thus, were not covered by West Virginia’s Prevailing Wage Act and did not have to be
paid the prevailing hourly rate. The Court ruled that the West Virginia Prevailing Wage
Act required payment of wages that were “no less that the prevailing hourly rate of wages
for work of a similar character in the locality” to “workmen employed by or on behalf of
a public authority in the construction of public improvements.” Id. at 600. The Court
looked to similar 2 statutes in other states and held that unlike similar statutes, the West
Virginia statute required payment of prevailing wages on “construction of public
improvements.” Id. at 600-01. It held that the computer cabling work performed by
Plaintiffs could not be considered as an “improvement” because the definition of the term
improvement between the words “construction” and “enlargement” made clear that the
some type of physical improvement to the structure of the buildings worked in was
required. Id. at 602. Because cabling installers like Plaintiffs did not change the physical
structure of the schools they worked in by either construction or improvement, the Court
held that Plaintiffs were not entitled to a prevailing-wage compensation.
Chandler, et al. v. Cheesecake Factory Restaurants Inc., 2006 U.S. Dist. LEXIS 45649
(M.D.N.C. July 5, 2006). Plaintiff alleged on behalf of himself and other employees that
Defendant’s tip-pooling arrangement improperly denied them wages under the North
Carolina Wage & Hour Act. Plaintiff alleged that Defendant required tipped employees
to contribute at least 4.1% of their gross sales into a tip pool for other employees. Under
state law, tipped employees must be allowed to retain at least 85% of their tips. Plaintiff
filed suit under state law only. Defendant sought removal to federal court, and Plaintiff
moved to remand, arguing that the federal court had no jurisdiction over the case because
no federal claims had been asserted and the requirements of diversity jurisdiction had not
been met. The Court agreed with Plaintiff. The Court rejected Defendant’s assertion that
Plaintiff’s claims arose under federal law on the basis that the state law had incorporated
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certain definitions and exemptions from the FLSA. As to the possibility that Plaintiff’s
claims were exempted under state law, the Court held that such a scenario did not call for
the conclusion that Plaintiff’s claims arose under federal law. Rather, it merely meant
that federal law would have served as a defense to Plaintiff’s state law claims. The Court
additionally held that diversity jurisdiction was lacking because Defendant could not
show that the matter in controversy exceeded $75,000. The Court reasoned that in a class
action where there are separate and distinct claims, a determination of the amount in
controversy is based upon each Plaintiff’s claims and not upon the aggregate of those
claims. The Court found that there was no evidence in the record to suggest that any of
the purported class members had a claim exceeding $75,000. Alternatively, Defendant
argued that under the “either viewpoint” rule, the amount-in-controversy requirement was
satisfied because the cost to the restaurant for compliance with any declaratory judgment
entered against it would exceed $75,000. Id. at *21. The Court initially noted that the
Fourth Circuit had yet to consider whether the “either viewpoint” rule was applicable to a
putative class action. Even assuming that the rule applied in the instant case, the Court
nevertheless concluded that Defendant had not shown with “any specificity that the costs
would exceed $75,000 as to each individual class plaintiff if a declaratory judgment were
entered in this case.” Id. at *22. Lastly, the Court denied Plaintiff’s request for costs and
fees in conjunction with its motion to remand. The Court held that Plaintiff was not
entitled to fees and costs because Defendant acted “in apparent good faith and on a
colorable claims of removal.” Id. at *25.
Chao v. Self Pride, 2006 U.S. Dist. LEXIS 18865 (D. Md. Jan. 17, 2006). The
Secretary of the U.S. Department of Labor (“DOL”) sued Self Pride, Inc., claiming that it
failed to pay overtime and violated the record-keeping provisions of the FLSA. Self
Pride provides community living centers for the mentally ill, mentally retarded, and
developmentally disabled. Liability had been determined by the Court in an earlier
decision granting summary judgment for Plaintiff, but two issues remained unresolved at
the bench trial, including whether Defendant willfully violated the FLSA, thereby
triggering an exception to the two year statute of limitations, and the appropriate damages
figure for Defendant’s liability. On the first question, the Court found that certain
assistants were assigned to work a continuous forty-eight hour shift on the weekend.
Nevertheless, Self Pride only paid these assistants for 40 hours of work because they
were granted a four-hour break each day. Some employees, however, were told that they
were not allowed to take breaks if no other worker was available to monitor the residents.
Furthermore, the assistants who received breaks were often forbidden from leaving the
premises. Despite these policies, Self Pride continued to deduct the four-hour break
periods from employees’ pay regardless of whether employees actually took their break.
Additionally, employees were double-docked for arriving late to their shifts and time was
deducted if an employee failed to follow an hourly call-in procedure. The Court held that
this manipulation of payroll records did not alone constitute per se willfulness. The
Court then considered whether the DOL’s preliminary investigation placed Self Pride on
notice that it was violating the FLSA. The DOL’s first investigator did not specify to
Self Pride what provisions were being violated, did not go into any detail about
regulations governing weekend shift practices, and did not leave any literature for
Defendant to review. The Court noted, however, that a subsequent investigator provided
a more detailed explanation to Defendant of why the DOL thought Self Pride was
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violating the FLSA. Nonetheless, the Court found that this evidence was insufficient to
establish willfulness. Turning to the question of damages, the Court considered whether
the DOL produced sufficient evidence about the amount and extent of the unpaid
overtime. At trial, the DOL used the declarations of 34 employees to calculate the unpaid
overtime for 392 employees. The Court determined that this technique was appropriate
because Self Pride kept poor records. The Court also concluded that Self Pride failed to
present evidence to rebut the DOL’s estimates of the unpaid overtime.
Schultz, et al. v. Capital International Security, Inc., 466 F.3d 298 (4th Cir. 2006).
Five security agents for a prince of the Saudi royal family filed a claim for overtime pay
under the FLSA against both the security firm for which the agents worked and the firm’s
president. After a bench trial, the district court entered judgment for the firm and its
president, holding that the agents were independent contractors, and therefore were not
entitled to overtime pay. In vacating that judgment and remanding the case for further
proceedings, the Fourth Circuit held that the facts established that because the prince and
the firm were joint employers, the agents were “employees” for purposes of the FLSA.
The Fourth Circuit also determined that the facts developed in the district court
established that the firm’s president (a longtime employee of the prince) created the
security firm solely for the purpose of replacing a prior security company providing such
services. Once the president created the firm, one of the prince’s employees ran the
firm’s day-to-day operations, including supervising the security detail leader, and making
decisions on hiring, work assignments, scheduling, compensation, discipline, and
termination of firm agents. In addition, the firm president sent a memo to all agents
indicating that they needed to obtain certain security licenses so that they could be
classified as independent contractors and not employees, and that agents who did not
obtain such licenses would be relived of duty. However, the security firm did not enforce
this policy until threatened with an audit by the state agency that issued the security
licenses; only then did the firm reclassify those employees not having the license and
reduce their pay to an hourly wage. Based on this record, the Fourth Circuit examined
the FLSA’s definition of “employee,” which it held is broader than traditional agency or
common law principles provide. Under the FLSA, the key issue is the economic realities
of the relationship between the worker and the alleged employer. The Fourth Circuit held
that the facts of the case demonstrated that the prince and the firm were the agent’s joint
employers in accordance with the FLSA’s regulations. Among other things, the agent’s
work benefited both the prince and the firm, they shared control over the agent’s
employment, both were involved in hiring, the detail leader reported to the prince’s
employee, and the prince and the firm shared responsibility for supplying the agents with
equipment. As a result, the Fourth Circuit deemed the employment arrangement as “one
employment” for purposes of applying the economic realities test to determine
employee/independent contractor status. Id. at 305. Examining the facts in this light lead
to the conclusion that the agents were employees of the joint employer (the prince and the
firm), given the degree of control exercised over the agents, the time oriented nature of
their work, their lack of investment in their equipment, the scripted nature of the tasks the
agents performed, the permanency of the agent’s employment relationship, and the fact
that the services the agents performed were an integral part of the firm’s business
(security) and the prince’s household (safety).
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(v)
Fifth Circuit
Belt, et al. v. EmCare, Inc., 444 F.3d 403 (5th Cir. 2006). Plaintiffs, 59 physician
assistants (“PA”) and 20 nurse practitioners (“NP”), claimed that EmCare, Inc. violated
the FLSA by failing to pay overtime. EmCare asserted the defense that it did not owe
Plaintiffs overtime because PA’s and NP’s qualified for an exemption as bona fide
professionals. The district court dismissed the lawsuit on this basis. On appeal, Plaintiffs
and the U.S. Department of Labor (“DOL”) as amicus curiae argued that the regulations
interpreting the professional exemption did not speak to the question before the Court and
that the agency’s informal interpretive statement – which excluded Plaintiffs from the
exemption – merited deference. The Fifth Circuit ruled that “the sole interpretive issue in
this appeal is whether NP’s and PA’s hold a license permitting, and actually engage in,
‘the practice of . . . medicine or any of [its] branches.’” Id. at 407 (quoting 29 C.F.R.
§ 541.3(e) (1973)). Defendant argued that the language was clear and that case law,
dictionary definitions, and the employment duties of NP’s and PA’s established that
Plaintiffs fell within the broad scope of employees that engage in the practice of
medicine. The Fifth Circuit disagreed and concluded that “the practice of . . . medicine”
language was ambiguous. Id. at 405. Because the language was ambiguous, the Fifth
Circuit turned to the DOL’s interpretation of the regulation to determine the key issue at
hand. Based on the DOL’s interpretation, the Fifth Circuit concluded that “PA’s and
NP’s, despite higher barriers to entry and the increasing sophistication of their practice,
are nascent professionals in need of the FLSA’s protection against the threat of the evil of
overwork as well as underpay.” Id. at 417.
Liger, et al. v. New Orleans Hornets NBA Ltd. Partnership, 2006 U.S. Dist. LEXIS
72670 (E.D. La. Oct. 4, 2006). Plaintiffs were sales and fan relations employees who
claimed that they were owed overtime and should not be treated as exempt under the
FLSA’s amusement and recreation exemption. The Court certified a conditional class
consisting of employees who worked in Defendant’s business offices, specifically in sales
and fan relations. Plaintiffs sought summary judgment on the question of whether they
should have been exempt under the amusement and recreation exemption. The
amusement and recreation exemption applies to employees of an amusement or
recreational establishment if one or two conditions apply: (1) the establishment does not
operate for more than seven months in a calendar year; or (2) its average receipts for one
six-month period do not exceed 33 1/3% of its average receipts for the other portion of
the year. The Court concluded that Plaintiffs’ motion for summary judgment was
premature and denied it. The Court initially found that it was unclear whether Defendant
met the definition of an amusement or recreational establishment. The Court found that
Defendant did not satisfy the first condition, and no determination could be made as to
whether Defendant satisfied the second condition. Rather, Plaintiffs’ arguments focused
on their contention that the exemption did not apply to them because they worked in
Defendant’s business office, which was a separate establishment from Defendant’s
amusement or recreational activities. While observing that courts have applied different
analyses to determine whether an establishment is separate, the Court declined to state
which analysis it believed was correct. Rather, the Court concluded that there were
insufficient facts in the record to determine whether Defendant’s business office was a
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separate establishment, and thus, whether Plaintiffs’ were properly treated as exempt
employees.
McGavock, et al. v. City Of Water Valley, 452 F.3d 423 (5th Cir. 2006). Plaintiffs were
firefighters who filed a FLSA collective action against Defendant, claiming that they
were entitled to overtime pay for all hours worked in excess of 40 hours. Defendant
argued that Plaintiffs were subject to the 7(k) exemption under the FLSA. Both parties
moved for partial summary judgment on the question of whether Plaintiffs were engaged
in “fire protection activities” and, thus, covered by the 7(k) exemption. The district court
ruled in favor of Plaintiffs on the grounds that the firefighters did not meet the definition
of someone engaged in fire protection activities because they spent more than 20% of
their time engaged in exempt (non-firefighting) activities. The district court refused to
reconsider its ruling, but certified the case for an interlocutory appeal. On appeal, the
Fifth Circuit reversed and remanded the ruling. The Fifth Circuit held that the district
court’s decision was flawed, in that it relied on a regulation of the U.S. Department of
Labor (“DOL”) that it now believes is obsolete, although it is still on the books. The
regulation in question is 29 C.F.R. Sec. 553.212. Prior to the 1999 enactment of 29
U.S.C. Sec. 203(y), which now defines who is engaged in “fire protection activities” for
purposes of applying the 7(k) exemption, those seeking guidance on whether someone
was engaged in fire protection activities referred to two DOL regulations, Sections
553.210 and 553.212. Section 553.210 provided a four-part test to determine which
employees qualified as “employees in fire protection activities” and much of its language
appears in Section 203(y). Section 553.212 sought to clarify one of the prongs of the
four-part test by stating that an employee could not spend more than 20% of his time
performing non-exempt (non-fire suppression) activities and be subject to the 7(k)
exemption. This is sometimes referred to as the 20% or 20/80 rule. Significantly, the
language pertaining to the 20% rule was not included in Section 203(y). Because
Section 553.212 (20% rule) was intended to “refine the now obsolete § 553.210
definition,” the Fifth Circuit reasoned that both regulations were now obsolete and
without effect. Id. at 427. Having argued that the 7(k) exemption did not apply to them
solely based on application of the 20% rule, the Fifth Circuit held that Plaintiffs were
subject to the exemption.
Recinos-Recinos, et al. v. Express Forestry Inc., 233 F.R.D. 472 (E.D. La. 2006).
Plaintiffs were migrant workers from Guatemala and Mexico who alleged that they were
not properly compensated (both as to wages and overtime pay) as required under the
FLSA and their H-2B visas. Plaintiffs also claimed that Defendant failed to keep proper
payroll records. After a collective action had been certified and Plaintiffs served
discovery, Defendant transferred its only copies of critical employment records from the
company office, located in Arkansas, to a Gulf Coast beach house located 600 miles
away. The documents, which were moved less than a month before Hurricane Katrina
hit, were lost in the storm. In addition to the loss of these business records, Defendant’s
electronic records were purportedly wiped off the computer system by accident. A
computer forensics expert hired by Plaintiffs was able to retrieve some of the missing
records and determined that other records had been erased. Moreover, Defendant failed
to instruct its supervisors to retain handwritten documentation that was relevant to the
case. In these circumstances, the Court sanctioned Defendant in the amount of $36,000,
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for its refusal to provide written records relating to pay stubs and timekeeping, name and
address information in response to plaintiffs’ discovery requests, as well as for the
company’s negligent handling of its business records. The sum awarded was to
compensate Plaintiffs for attorneys’ fee and the cost of hiring a computer forensics
expert.
(vi)
Sixth Circuit
Musarra, et al. v. Digital Dish, Inc. 454 F. Supp. 2d 692 (S.D. Ohio Sept. 28, 2006).
In this case, a provider of satellite dish television service successfully demonstrated that it
operated in interstate commerce, and thus its installation technicians were exempt from
FLSA overtime requirements by the Motor Carriers Act, which exempts employers from
paying overtime to their employees if the employers are subject to the Secretary of
Transportation’s power to establish qualifications and maximum hours of service, i.e.,
“motor carriers” and “motor private carriers” as defined by the Act. In this case, the
question was whether the technicians were motor private carriers, and more specifically,
whether their employer transported goods in interstate commerce. The Court applied a
seven part test in resolving this issue and found that the test favored finding that
Defendant and its technicians did in fact deliver and install the dishes for customers in
interstate commerce. It did not matter that Defendant operated solely in Ohio; its parent
company, from which it obtained the equipment, was outside the state and the Supreme
Court has held that an entity that operates solely in one state may be operating in
interstate commerce if it is part of a chain of goods moving from a point of origin outside
the state to a destination inside the state. Therefore, the Court concluded that the
technicians were exempt from the FLSA’s overtime requirements.
Smith, et al. v. Lowe’s Home Centers, Inc., 236 F.R.D. 354 (S.D. Ohio 2006). Plaintiffs
were current and former non-exempt employees who alleged that Defendant used a
method of computing their overtime compensation that was not proper. After a class was
conditionally certified and notice sent pursuant to 29 U.S.C. § 216(b), more than 1,500
current or former employees opted in to the litigation. Thereafter, Defendant sent
discovery in the form of interrogatories and requests for production to each class
member. Plaintiffs moved for a protective order to limit discovery to a representative
sample of 90 randomly selected persons. In support of their request for a protective
order, Plaintiffs argued that Defendant’s discovery would be unreasonably burdensome
and result in unwarranted duplication. Defendant argued that it needed to obtain
discovery from all of the class members to establish that they were not similarly situated.
The Court sided with Plaintiffs. It held that obtaining discovery from a “statistically
significant representative sampling” of class members would provide Defendant with a
reasonable opportunity to obtain evidence to support a motion for decertification and
would not impose an “extraordinary burden” on Plaintiffs. Id. at 357. The Court directed
the parties to devise a method of identifying a significant sample while, at the same time,
leaving the door open to the possibility of allowing Defendant to obtain additional
discovery.
Wilks, et al. v. Pep Boys, 2006 U.S. Dist. LEXIS 69539 (M.D. Tenn. Sept. 26, 2006).
In this case, current and former employees asserted that Pep Boys violated the FLSA by
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requiring employees to work “off the clock,” failing to properly calculate the rate of pay
for certain workers, “shaving” hours from payroll records and failing to pay overtime to
employees who were compensated on a flat-rate basis. Pep Boys moved to dismiss the
class action, arguing that the class did not share similar or common claims. The Court
disagreed, finding that the company’s timekeeping and pay practices came from its
national office, and that differences between groups of employees could be managed
through the use of sub-classes. The Court indicated as well that it might be willing to
bifurcate the damages portion of the case at a later date. The Court also rejected
Defendant’s motion for partial summary judgment with respect to the employees who
were paid on a flat-rate scale. The company argued that these workers were actually
retail employees paid on a commission basis, but the Court followed an opinion letter of
the U.S. Department of Labor (“DOL”), which held that for such employees to be exempt
from overtime requirements, there needed to be a relation between the employees’
compensation and the costs passed onto the customer. The Court construed the FLSA
exceptions to the overtime requirements narrowly, and gave deference to the DOL
opinion letter. Therefore, the Court allowed the employees’ collective action to go
forward.
(vii)
Seventh Circuit
Allen, et al. v. Harrah’s Entertainment Inc., 2006 U.S. Dist. LEXIS 88102 (N. D. Ind.
Dec. 4, 2006). In this case, the Court ruled that casino table game supervisors working
for Harrah’s were not owed overtime because they qualified for the administrative
exemption under the FLSA. The Court rejected the workers’ suit for overtime
compensation based on its conclusion that Plaintiffs were interpreting the FLSA
regulations too literally and failed to account for all their responsibilities to determine
which of their tasks could be classified as exempt. The Court held that the relationship
the table game supervisors had to Harrah’s customers made clear they were
administrative supervisors because their responsibilities went beyond mere clerical tasks.
Significantly, table game supervisors could offer discounts or free meals to customers,
and were responsible for monitoring games and identifying irregularities or unusual
behavior. The Court also noted that the supervisors oversaw casino dealers by making
decisions about their training and discipline, and impacted operational decisions such as
when games needed to be opened or closed. As a result, the Court determined that the
table supervisors exercised discretion regarding significant matters in the operation of the
casino and were not entitled to overtime compensation.
Melo, et al. v. Quantum Foods, Inc., Case No. 06-CV-03386 (N.D. Ill. Dec. 13, 2006).
Plaintiffs filed an action in Illinois state court alleging that Defendant had failed to pay
them proper minimum wages and overtime for the time spent donning and doffing safety
equipment. The state court dismissed the suit on the basis that § 301 of the Labor
Management Relations Act preempted the claims or, in the alternative, on the basis that
Plaintiffs had failed to exhaust their internal remedies pursuant to the collective
bargaining agreement. Plaintiffs appealed the dismissal to the Illinois Appellate Court,
which affirmed the decision. Plaintiffs then petitioned the Illinois Supreme Court for
Leave to Appeal the affirmance. While the Petition for Leave to Appeal was pending, a
subset of the same Plaintiffs brought a second suit against Defendant in federal court.
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The new federal complaint asserted a collective action under the FLSA and three state
tort claims that Plaintiffs had not asserted in the state court action. Defendant moved to
dismiss the federal lawsuit on the grounds of claim splitting or res judicata. The Court
denied Defendant’s claim splitting argument, but found that the res judicata requirements
had been met with respect to the FLSA collective action claim but not with respect to the
three state tort claims. The Court determined that res judicata would not bar the state tort
claims because Plaintiffs had not raised the tort claims in the state court and because the
new state tort claims would require Plaintiffs to prove a different set of facts. The Court
determined that res judicata should bar Plaintiffs’ FLSA collective action claim, but the
Court denied the motion to dismiss on the grounds that applicable case law required it to
stay the federal case pending exhaustion of Plaintiffs’ state court proceedings. When the
Illinois Supreme Court subsequently denied Plaintiffs’ Petition for Leave to Appeal two
months later, Defendant moved the federal court to dismiss Plaintiffs’ FLSA collective
action claim on the ground of res judicata. The Court granted Defendant’s motion,
ordered dismissal of Plaintiffs’ FLSA collective action claim under the doctrine of res
judicata, and remanded the three state tort claims to state court.
United Food & Commercial Workers Union, Local 1473, et al. v. Nestle USA Inc.,
2006 U.S. Dist. LEXIS 87379 (W.D. Wis. Nov. 29, 2006). In this case, production and
maintenance employees and their union filed a class action against Nestle in Wisconsin
state court alleging that the company violated state law by failing to pay employees for
the time they spent donning and doffing required uniforms and protective gear at the
beginning and end of the workday, and during unpaid meal breaks. Nestle removed the
lawsuit to federal court, arguing that Section 301 of the Labor Management Relations Act
(“LMRA”), which governs the enforcement of collective bargaining agreements,
preempted the state law wage claims. Plaintiffs moved for remand, and the Court granted
their motion, reasoning that § 301 would preempt the claims only if the resolution of the
claims would be “substantially dependent” on an analysis of the relevant CBA. Id. at *3.
If, as the Court determined the case to be with Nestle’s CBA, “resolution require[d]
reference to, but not interpretation of the CBA, the claim [would] not [be] preempted.”
Id. at *3-4. The Court found that Wisconsin’s pay regulations provided detailed
requirements pertaining to pay for preparatory activities, like donning work attire, and
that the determination of compliance with those requirements was “entirely a question of
proof of the facts and circumstances involved in the preparatory activities, and
application of those facts to the regulations.” Id. at *4. Although most of Nestle’s
arguments would “go to whether union members [were] contractually required to perform
the donning, doffing and other activities in question,” the entitlement of employees to pay
under state law did not require resolution of that issue. Id. at *5. Instead, the Court
reasoned, “the question [was] whether as a matter of fact, the activities [were] an integral
part of the job the employee [was] asked to perform. Reference to the CBA [was] simply
not required to make that determination.” Id. at *5-6. Thus, the Court concluded that
§ 301 did not apply to preempt the state law claims, and therefore the case should be
remanded back to state court.
Vennett, et al. v. American Intercontinental University Online, et al., 2006 WL 908030
(N.D. Ill. Apr. 5, 2006). Plaintiffs worked as admissions advisors for Defendant and
filed a collective action under the FLSA for overtime wages against the university, its
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corporate parent, and an officer of both entities. Previously, the Court had conditionally
certified the action and approve the sending of a notice to potential opt-in plaintiffs. To
facilitate the sending of this notice, Defendants were ordered to provide a list of names
and addresses of individuals employed as admissions officers during a designated time
period. Defendants provided the list, but excluded the information for those individuals
who were employed through temporary agencies, asserting that these individuals were
merely independent contractors and not employees under the FLSA. To support this
assertion, Defendants provided evidence that the temporary agency paid the wages of
these individuals, they were not eligible for benefits, and they worked for periods of less
than ninety days. Where Defendant later directly employed a temporary employee,
Defendants disclosed that individual’s name and address. Plaintiffs moved to compel
production of this information. In granting the motion to compel, the Court held that the
issue was not whether those individuals employed by temporary agencies were
employees or independent contractors of Defendants; rather the issue was whether for
FLSA purposes, Defendants had sufficient control over the individuals to be considered
their sole or joint employer. As Plaintiffs had presented evidence supporting a finding
that such control existed, the Court ordered Defendants to provide the names and
addresses of the individuals.
(viii)
Eighth Circuit
Senger, et al. v. City Of Aberdeen, 466 F.3d 670 (8th Cir. 2006). Plaintiffs were current
and former firefighters who claimed the City owed them overtime pay under the FLSA.
The City denied that Plaintiffs were owed overtime, and argued that they were only
entitled to receive overtime for hours they have actually worked. The issue arose in the
context of a FLSA provision that allows firefighters to work for one another. Under the
substitution arrangement, the City would pay an employee scheduled to work straight
time, even though a substitute employee worked the hours. The City took the position
that the scheduled employee was not entitled to overtime pay because he or she did not
actually work the hours in question. The scheduled employee was responsible for paying
the substitute employee for the hours he or she worked pursuant to a private agreement
struck by the two employees. On cross motions for summary judgment, the district court
granted summary judgment for Defendant, concluding that the FLSA’s plain language
only authorized payment of overtime wages to employees who actually worked. On
appeal, the Eighth Circuit reversed. In holding that the City was required to pay overtime
to Plaintiffs, the Eighth Circuit rejected the City’s interpretation of § 207(a)(1). The City
had argued that the phrase “engaged in commerce or in the production of goods for
commerce” meant that the employee had to work to be eligible for receive overtime. Id.
at 673. The Eighth Circuit disagreed, and reasoned that the word “engaged” did not
relate to whether the employee actively worked but to whether the “employer’s or
enterprise’s work was of a certain kind.” Id. at 673-74. Additionally, the Eighth Circuit
examined the legislative history of § 207(p)(3), the section that addresses the practice of
voluntary employee substitutions, and found that the only way to “fashion a way to allow
voluntary substitutions without having overtime costs spiral out of control” is for
employers to credit employees for the hours they would have worked under their normal
work schedules. Id. at 674.
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(ix)
Ninth Circuit
Fleming, et al. v. Dollar Tree Stores, Inc., 2006 U.S. Dist. LEXIS 67749 (N.D. Cal.
2006). In this case, the Court denied Defendant’s motion to dismiss a class action filed
by former employees of Dollar Tree Stores. Plaintiffs alleged that Defendant violated the
California’s Labor Code Section 212 by paying their wages with paychecks issued by an
out-of-state bank, without an in-state address for presentation and no provision for
negotiation in California. Accordingly, Plaintiffs were required to pay a fee to cash their
paychecks or had a hold placed on the funds. The Court held that this constituted a
violation of the statute inasmuch as the employees were not being paid their wages with
an instrument that was payable on demand, without discount, within the state of
California, containing the name and address of a place of business to pay the employee in
accordance with the provisions of the Labor Code. In doing so, the Court also rejected
Defendant’s argument that the statute violated the commerce clause by discriminating
against out-of state interests. The Court held that because the statute required every
employer within the state to abide by the same provisions and left the means up to the
employer, it did not have the effect of requiring any entity to do business with in-state
banks.
Hicks, et al. v. Macy’s Department Stores, Inc., 2006 U.S. Dist. LEXIS 68268 (N.D.
Cal. Sept. 11, 2006). Plaintiff filed suit on behalf of himself and other similarly situated
employees, claiming that Macy’s failed to pay overtime, waiting time, and other wages to
non-exempt workers in violation of the FLSA and California law. Plaintiff sought
certification of a collective action and a class action. Defendant moved to compel
arbitration and to dismiss Plaintiff’s class claims. Defendant argued that Plaintiff had
previously agreed to submit all disputes arising out of the employment relationship to
arbitration. In 2003, Macy’s implemented a dispute resolution program called Solutions
InStore (“SIS”), which involved a four-step process. The fourth step called for binding
arbitration. SIS prohibited the arbitration of class claims. Prior to activation of the
program, employees were given two separate opportunities to opt out of the binding
arbitration component of SIS. To opt out, employees were required to sign and return an
opt-out form. The Plaintiff did not exercise his right to opt out, although 10% of Macy’s
employees did exercise their right to do so. In response to Defendant’s motion to compel
arbitration, Plaintiff argued that he never agreed to submit his disputes to arbitration
because he never signed an agreement to arbitrate, and the class action waiver in the
arbitration agreement was unconscionable. The Court rejected both of Plaintiff’s
arguments. With respect to the first argument, the Court held that a person can be bound
by an agreement to arbitrate without having signed anything. The Court concluded that
Plaintiff had “impliedly agreed” to arbitrate his employment-related claims by failing to
exercise his opt-out provisions. Id. at *7. Moreover, the Court observed that Plaintiff
never provided an explanation with respect to why he did not return the opt-out forms.
Plaintiff’s reliance on the statute of frauds was equally unavailing in that it does apply to
an employment agreement of indefinite duration because of the possibility that the
employment arrangement could be completed within one year. As to Plaintiff’s second
argument that the class action waiver was unconscionable, the Court held that the
provision was not procedurally unconscionable because Plaintiff had been given a
meaningful opportunity to opt out of the arbitration agreement. Having determined that
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the agreement (and the waiver) was not procedurally unconscionable, the Court
determined that it did not need to address its substantive unconscionability. As such, the
Court struck the class action allegations and ordered that Plaintiff’s remaining claims be
submitted to mandatory arbitration.
In Re Farmers Insurance Exchange, 2006 U.S. App. LEXIS 26671 (9th Cir. Oct. 26,
2006). Insurance claims adjusters filed several overtime class action lawsuits against
Farmers Insurance alleging that they had been improperly classified as exempt and
denied overtime under the FLSA and several other states’ wage & hour laws. Farmers
Insurance defended against the suit by alleging that the adjusters were exempt from the
FLSA’s overtime requirements under the administrative exemption. The district court
held that certain types of claims adjusters were exempt (e.g., personal injury adjusters),
while others were not (e.g., automobile damage adjusters). Moreover, the district court
created a “$3,000 in claims paid per month” rule which meant that some adjusters were
non-exempt if more than 50% of their payouts in a given month were less than $3,000.
Id. at *2. Reversing the district court, the Ninth Circuit held that the claims adjusters
were exempt under the FLSA. The Ninth Circuit determined that the DOL has long held
the view that insurance claims adjusters are exempt from the FLSA. In fact, the
Department of Labor reiterated this view when it promulgated the new “white-collar”
regulations in 2004. Specifically, the DOL created 29 C.F.R. § 541.203 providing that
insurance claims adjusters generally meet the duties tests for the administrative
exemption, if their duties include activities such as interviewing insureds and witnesses;
inspecting property damage; reviewing factual information to prepare damage estimates;
and determining liability. Although the regulation was not in effect at the time the
district court made its ruling, the Ninth Circuit held that the regulation was simply a
codification of the DOL’s long held view and “consistent with existing [law].” Id. at *14.
The Ninth Circuit also held that the district court’s own findings, summarizing the duties
of the claim adjusters, tracked the language of the DOL’s new regulation and established
that the claims adjusters were exempt. Specifically, the district court found that all of the
claim adjusters in the case determine whether the policy covers the loss; recommend a
reserve upon estimating Farmers’ exposure on the claim; interview the insured and assess
his (or others’) credibility; advise Farmers regarding any fraud indicators or the potential
for subrogation and underwriting risks; negotiate settlements; seek additional authority
from their supervisors, which is granted “75 to 100 percent of the time” when the
recommended settlement exceeds their established authority; and communicate with
opposing counsel and Farmers’ counsel. Id. at *10. The Ninth Circuit further held that
the claims adjusters’ use of computer software did not eliminate their discretion and
judgment to a level whether they were outside the scope of the administrative exemption.
Finally, with respect to the district court’s creation of the $3,000 test, the Ninth Circuit
held that it lacked support in the record or law, and was unworkable because an adjuster’s
exempt or non-exempt status could constantly be in flux, even though his or her job
duties would remain the same.
The Ninth Circuit’s ruling resulted in the vacating of a verdict of $52.5 million. It also
signaled the death knell for insurance adjuster FLSA overtime pay claims pursued with
vigor by the plaintiffs’ bar over the past five years. In Re Farmers Insurance Exchange
is one of the key FLSA defense victories of 2006.
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Louie, et al. v. McCormick & Schmick’s Restaurant Corp., 2006 WL 3087112 (C.D.
Cal. Oct. 16, 2006). A restaurant server sued on behalf of herself and others similarly
situated to challenge the company’s tip-sharing arrangement. At issue was language in
the California Labor Code that prohibits an employer or its agent from taking a portion of
a tip left by a patron. Plaintiff objected to sharing tips with bartenders, who did not
provide direct table service. The Court took notice of the industry-wide practice of
requiring tip-sharing with non-managerial employees who may not have directly
provided service to patrons, but routinely fall within the chain of service to customers,
and rejected Plaintiff’s argument that this practice violated the Labor Code. Thus, the
Court dismissed Plaintiff’s claims and the putative class action.
Takacs, et al. v. A.G. Edwards & Sons, Inc., 444 F. Supp. 2d 1100 (S.D. Cal. 2006).
Plaintiffs were current and former financial consultants and trainees who claimed that
they were denied overtime compensation under federal and state law because their
employer improperly treated them as exempt under federal and state exemptions.
Plaintiffs filed suit under the FLSA and various California state laws and sought
certification of four sub-classes. The Court certified each of the sub-classes. Defendant
subsequently filed for summary judgment. Defendant argued that Plaintiffs were not
entitled to overtime because they were exempt under the federal and state administrative
and commissions exemptions. The Court denied summary judgment, holding that
Defendant had not met its burden of proving that Plaintiffs satisfied the requirements of
either exemption. The Court held that Defendant failed to show that Plaintiffs were
exempt under the federal administration exemption because the firm’s system of paying
Plaintiffs a guaranteed draw did not satisfy the federal salary basis test (that employees
earned at least $1,150 per month) because it was not paid on a “free and clear” basis but
was subject to subsequent pay deductions in the event Plaintiffs failed to earn sufficient
commission in a particular month to cover the draw, and as Plaintiffs’ primary duties
were related to Defendant’s “management policies or general business operations” as
opposed to being engaged in sales or production work. Id. at 1120. The Court also held
that Defendant failed to show that Plaintiffs were exempt under the federal commission
exemption because it failed to show that Plaintiffs’ earnings were more than 1.5 times the
minimum wage during the entire time period in question, and failed to establish that
Defendant’s business qualified as a “retail or service establishment” (that at least 75% of
sales were retail in nature and no more than 25% of sales were for resale). Id. at 1114.
The Court similarly held that Defendant failed to prove that Plaintiffs were exempt under
the state’s administrative and commission exemptions. The Court also rejected
Defendant’s contention that Plaintiffs were barred from seeking federal overtime pay
under California’s unfair competition law (“UCL”) on the grounds that the FLSA
provides an exclusive remedy for the recovery of overtime. The Court held that the Ninth
Circuit, as well as other courts within the Circuit, have determined that the FLSA does
not preempt state wage laws. These courts have also found that the FLSA’s opt-in
provisions would not be “frustrated by the UCL’s opt-out procedures.” Id. at 1116. The
Court concluded that the UCL was not contrary to “the FLSA’s purpose of protecting
employees” and “would not contradict any purpose or application of the FLSA, and
therefore should stand.” Id. at 1117.
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(x)
Tenth Circuit
No reported cases.
(xi)
Eleventh Circuit
Morales-Arcadio, et. al. v. Shannon Produce Farms, et. al., 2006 U.S. Dist. LEXIS
75967 (S.D. Ga. Sept. 11, 2006). In this case, Plaintiffs moved to strike or otherwise
invalidate Defendants’ Rule 68 offer of judgment in an action brought under the FLSA.
Plaintiffs contended that the offer of judgment was improper since Defendants served it
during the time period provided by the Court for other similarly-situated employees to
join the FLSA collective action. The Court agreed. The Court held that because
Defendants made the offer approximately three months prior to the expiration of the optin period for others to join the collective action, the class was not fully identified at the
time of the offer. As a result, because Rule 68 explicitly provides that a litigant can serve
an offer of judgment upon an adverse party only, Defendants’ offer only extended to the
original named Plaintiffs and to those individuals who had joined the collective action as
of the date of the offer of judgment. Therefore, the Court held that the offer of judgment
was invalid as to the potential class members who had not opted into the litigation when
Defendants made their offer, since those individuals were not parties.
(xii)
District of Columbia Circuit
No reported cases.
(xiii)
Federal Circuit
Adams, et al. v. United States, 2006 U.S. App. LEXIS 31065 (Fed. Cir. Dec. 18, 2006).
In this case, the Federal Circuit held that the driving time spent by federal law
enforcement officers commuting to and from work in their government owned police
vehicles was not compensable under the FLSA. Plaintiffs claimed that their driving time
should be compensable because they were issued government owned vehicles and
required to commute to and from work in them, without stopping for any personal
errands, while monitoring communication equipment and carrying their law enforcement
related equipment. The Federal Circuit reviewed the Portal-to-Portal Acts provisions on
vehicular travel and noted that Plaintiffs needed to perform additional legally cognizable
work during their commute in order to be entitled to compensation, as the fact that they
were required to travel in government owned vehicles was insufficient. Rejecting
Plaintiffs’ argument to the effect that the Government bore the burden of proof, the
Federal Circuit held that it was Plaintiffs who needed to establish that they had performed
compensable work for which they were not paid. The Federal Circuit concluded that the
burdens imposed by the restrictions placed by the Government on Plaintiffs’ commuting
time were de minimus and therefore not subject to compensation.
Doe, et al. v. United States, 463 F.3d 1314 (Fed. Cir. 2006). In this case, Plaintiffs were
current and former Justice Department attorneys who alleged that they were denied
compensation for overtime, administratively uncontrollable overtime (“AUO”), and
holiday pay under the Federal Employees Pay Act. In previous rulings, the Court of
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Claims granted summary judgment for Defendant, holding that Plaintiffs were not
entitled to overtime and holiday pay based on the language of the statute. The Court of
Claims also dismissed Plaintiffs’ claim for AUO on the grounds that it did not have
jurisdiction to hear the claim. On appeal, the Federal Circuit upheld the ruling of the
Court of Claims that Plaintiffs were not entitled to overtime and holiday pay, but found
that the Court of Claims had erred in concluding that it did not have jurisdiction to hear
Plaintiffs’ AUO claim. Because the Federal Circuit concluded that the AUO claim
should have been dismissed on its merits, it held that the dismissal for lack of jurisdiction
was harmless error. With respect to Plaintiffs’ overtime and holiday pay claims, the
Federal Circuit concluded that its earlier ruling that Plaintiffs were entitled to overtime
compensation only if they could establish that the overtime was “ordered or approved in
writing” by department officials – a requirement Plaintiffs could not satisfy – foreclosed
Plaintiffs’ newly crafted alternate argument that, even in the absence of written
authorization, Plaintiffs’ right to overtime compensation should be considered authorized
and approved because the DOJ’s system for acquiring written authorization was
unreasonable. Id. at 1322. The Federal Circuit was not persuaded by the fact the DOJ
kept a record of the number of hours Plaintiffs worked as satisfying the requirement that
the department had given written authorization for overtime payments. The Federal
Circuit dispensed with Plaintiffs’ argument that the Court of Claims had not considered
their holiday pay claim in earlier rulings by holding that Plaintiffs had bound their
holiday and overtime pay claims together by having filed a motion for summary
judgment. The Federal Circuit observed that Plaintiffs never argued that their theory for
holiday pay was distinct from their overtime claim until reversal of the grant of summary
judgment. Having raise the issue at this juncture in the proceedings, the Federal Circuit
held that Plaintiffs had waived the issue. As to Plaintiffs’ claim for AUO, the Federal
Circuit held that they were not entitled to such pay because attorneys were not one of the
positions listed under the DOJ order, which authorized receipt of AUO.
Federal Air Marshals FAM 1 through FAM 1096, et al. v. United States, 2006 WL
3488906 (Fed.Cl. Nov. 30, 2006). In this case, the Court of Claims held that a group of
1,096 federal air-marshals could pursue their claims for overtime compensation under the
FLSA. Although the Federal Aviation Administration Revitalization Act of 1995
(“FAARA”) permits the FAA to establish its own personnel management system
notwithstanding the provisions of other Federal personnel laws, the Court of Claims
rejected the Government’s argument that the FLSA was such a federal law governing
personnel matters. The Court of Claims found that although the FAARA was intended to
relieve the FAA of obligations placed upon government agencies, it did not exempt it
from compliance with obligations generally imposed on public and private employers.
The Court of Claims relied on additional support for its holding on the FAA’s own
personnel management system, which defines exempt and non-exempt employees
according to the terms of the FLSA. The Court of Claims held that no exemption in the
FLSA applied to the federal air marshals relative to their claim that they were required to
work in excess of 40 hours per weeks without additional compensation.
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(xiv)
Judicial Panel On Multi-District Litigation
In Re Wachovia Securities, LLC Wage & Hour Litigation, Case No. MDL-1807 (MDL
Panel Dec. 22, 2006). In this case, Plaintiffs were securities brokers who alleged they
were entitled to overtime pay under the Fair Labor Standards Act and various states’
wage & hour statutes. In all, seven class actions were filed by various Plaintiffs, and then
transferred to the Judicial Panel on Multi-District Litigation for hearing on the motions
brought by various Plaintiffs and Defendants for centralization of the class actions in one
federal court. The class actions included two cases from the Southern District of New
York, one case from the Middle District of Florida, one case from the District of
Minnesota, one case from the Northern District of Illinois, one case from the Western
District of New York, and one case from the Eastern District of Pennsylvania. Parallel
proceedings also were on-going in multiple class actions against Defendant in several
federal courts in California. Plaintiffs included current and former employees in ten
states. Counsel for several Plaintiff classes opposed centralization of the class actions in
one federal court, but others argued in the alternative that if centralization was
appropriate, the transfer should be to the U.S. District Court for the Central District of
California. Defendant argued that centralization would be appropriate in either the
Southern District of New York or the Eastern District of Virginia. The MDL Panel ruled
that the U.S. District Court for the Central District of California was the most appropriate
transferee forum, and thus transferred all of the class actions to that district to handle
further proceedings.
VI.
CONCLUSION
Class action litigation in the employment discrimination arena grows more complex each
year. 2007 is shaping up to be a bell weather year for prosecution of class actions. The
defense of class action litigation is ever more important to Corporate America.
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