Court Refuses to Approve Collective Action Settlement Without Disclosure of Terms

Posted by Greg Mersol on January 24, 2012

Confidentiality provisions in employment settlements are routine, but they can be problematic in the context of the settlement of a class or collective action. Class action settlements require court approval under Rule 23(e) (if the class is certified) and FLSA settlements require approval from either the United States Department of Labor or a court. See Lynn's Food Stores v. United States, 679 F.2d 1353 (11th Cir. 1982). So, can the parties get that approval without publicly disclosing the terms through a court filing?

In a recent case, Rice v. Lucky Brand Dungarees Stores, Inc., Case No. 11-CV-61923 (Jan. 9, 2012), the parties settled a putative FLSA collective action, but apparently chose not to seek court approval, and simply tendered a stipulation that stated that the case was to be dismissed with prejudice. The court, however, refused to enter the stipulation and directed the parties to file the agreement publicly or to show extraordinary circumstances why the agreement should not be filed. This decision is similar to one reached two years ago by another district court in Florida in Dees v. HydraDry, Inc., Case No. 8:09-CV-1405 (M.D. Fla. Apr. 19, 2000), in which the court rejected such an attempt in a much longer opinion.

One interesting twist in the Rice case is that the parties did not explicitly ask the court to approve the settlement or to issue any class-wide relief, but had only filed the stipulation of the court. Despite the lack of any such request, the court still refused to permit so much as a stipulation for dismissal with prejudice under Rule 41.

Rice was, of course, under the FLSA, but class actions (as opposed to collective actions) are subject to the additional disclosure requirements of Rule 23(e) and the Class Action Fairness Act, 28 U.S.C. section 1715. Thus, the same, and probably higher, obligations apply.

The Bottom Line: Parties should assume that a court will demand the public disclosure of the terms of a either a class or collective action settlement.

The Supreme Court Reaffirms Manadatory Arbitration in Compucredit Corp. v. Greenwood: The Antidote for D.R. Horton?

Posted by John Lewis on January 20, 2012

Is the Supreme Court’s January 10th opinion in CompuCredit Corp v. Greenwood.pdf a potential antidote for the National Labor Relations Board’s (“NLRB”) decision in D.R. Horton? Perhaps. CompuCredit Corp. considered whether the Credit Repair Organizations Act (“CROA”), 15 U.S.C. § 1679 et seq., foreclosed enforcement of an arbitration agreement in a class action filed in the Northern District of California alleging CROA violations stemming from alleged misrepresentations made by CompuCredit in marketing its Aspire Visa credit card.

The District Court denied CompuCredit’s motion to compel arbitration, finding that claims under CROA were non-arbitrable based on its language. The Ninth Circuit affirmed and the Supreme Court reversed.

I. The Arbitration Provision

The arbitration provision in CompuCredit Corp. required individual arbitration of all claims. It provided:

Any claim, dispute or controversy (whether in contract, tort or otherwise) at any time arising from or relating to your Account . . . will be resolved by binding arbitration . . . .

* * *

In addition, you will not have the right to participate as a representative or member of any class of claimants relating to the claim subject to arbitration.

II. The CROA’s Provisions

The CROA regulates the practices of credit repair organizations and provides a private cause of action for violations as well as federal and state administrative enforcement. The CROA also has disclosure and nonwaiver provisions, which were focused upon by the District Court and the Ninth Circuit. The required disclosure statement, stated in pertinent part: “You have a right to sue a credit repair organization that violates the Credit Repair Organization Act.” (Emphasis added). The non-waiver provision declares:

“Any waiver by any consumer of any protection provided by or any right of the consumer under their subchapter – (1) shall be treated as void; and (2) may not be enforced by any Federal or State court or any other person.” (Emphasis added).

III. The FAA and Federal Statutory Claims

As a threshold matter, Justice Antonin Scalia, writing for the Court, examined the Federal Arbitration Act (“FAA”) as background for resolution of the case. He found that the FAA’s “liberal policy favoring arbitration agreements” applied to federal statutory claims “unless the FAA’s mandate has been ‘overridden by a contrary Congressional Command.’” With that understanding, Justice Scalia reviewed CROA’s provisions to determine if the Act contained such a Congressional command.

IV. CROA’s Provisions and The Duty to Arbitrate

The opinion found that the disclosure provision did not give consumers a right to bring an action in court. Instead, Justice Scalia concluded “[t]he only consumer right it creates is the right to receive the statement, which is meant to describe the consumer protections that the law elsewhere provides.”

The opinion went on to note that it was common for statutes creating civil causes of action to detail the claims, and relief available in a judicial context. Yet, the mere reference to a cause of action is insufficient to establish a “’contrary congressional command’ overriding the FAA.”

The opinion commented that in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28 (1991), an arbitration agreement was enforced as to an Age Discrimination in Employment Act of 1967 (“ADEA”) claim despite language that declared: “Any person aggrieved may bring a civil action in any court of competent jurisdiction for such legal or equitable relief as will effectuate the purpose of this chapter.” Justice Scalia emphasized that the court had “repeatedly recognized that contractually required arbitration of claims satisfies the statutory prescription of civil liability in court.”

The opinion reasoned that at the time of CROA’s enactment in 1996, arbitration provisions in agreements were not unusual. So, if Congress intended to prohibit arbitration of CROA claims it would have done so with greater clarity. This reasoning led Justice Scalia to conclude “[b]ecause the CROA is silent on whether claims under the Act can proceed in an arbitral form, the FAA requires the arbitration agreement to be enforced according to its terms.” (Emphasis added). In her concurring opinion, Justice Sotomayor attempted to place the majority opinion in the context of existing precedent. She wrote: “I do not understand the majority opinion to hold that Congress must speak so explicitly in order to convey its intent to preclude arbitration of statutory claims.”

V. The Antidote or Just Another Pro-Arbitation Opinion?

Does CompuCredit Corp. signal an even more aggressive enforcement of arbitration procedures with class action waivers? Does the silence of the 1930’s vintage National Labor Relations Act on the key “congressional command” needed to foreclose arbitration mean that D.R. Horton is destined to be overturned? Or, as Justice Sotomayor states, can the Congressional will be “discovered in the history or purpose of the statute in question?” Too soon to tell. Yet, the CompuCredit Corp. opinion plainly raises additional doubts about the future viability of D.R. Horton.

The Bottom Line: Only time will tell what role the CompuCredit Corp. opinion will play in the future development of the law on mandatory arbitration. But, the opinion certainly provides at least one basis to challenge the NLRB’s decision in D.R. Horton.

New York Court Rejects D.R. Horton; Orders Arbitration Despite Class Action Waiver

Posted by Greg Mersol on January 19, 2012

A great deal of intellectual energy has been spent on the issue of whether various employment arbitration agreements are enforceable, but the debate pretty much comes down to two camps. Over 80 years ago, in response to judicial reluctance to enforce arbitration agreements, Congress passed the Federal Arbitration Act. Virtually every court on both sides of the debate cites this statute and parrots the language of the Act and the Supreme Court opinions requiring the enforcement of arbitration agreements and stating the strong public policy favoring their enforcement. Some courts, most notably the Supreme Court, believe this language. Others simply do not, and appear willing to find or create any argument why they should not be enforced, particularly where class actions are involved.

The Supreme Court in 2010 and again in 2011 recognized the importance of enforcing arbitration agreements even when they did not permit class actions. AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011); Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010). These cases not only dispelled the notion held by some courts that the availability of class action arbitrations was a prerequisite to the enforcement of such agreements, but discussed in detail the practical and policy reasons why that was so.

Only two weeks ago, in D.R. Horton, Inc., Case No. 12-CA-25764 (dated Jan. 3, 2012), an undaunted National Labor Relations Board concluded, in spite of these holdings, that a class action waiver contained in an arbitration agreement constituted an unfair labor practice. That decision has generated a host of controversy both for its procedural irregularities and its analysis, but raised the question of the enforcement of class action waivers in the employment context.

The dust has not yet begun to settle on that decision, but it has now already been rejected by at least one court. In LaVoice v. UBS Financial Services, Inc.pdf., Case No. 11 Civ. 2308 (S.D. N.Y., Jan. 13, 2012), the plaintiff was a financial advisor for the defendant who sought to assert a federal collective action for violation of the FLSA and a Rule 23 class action for alleged violations of New York State law. The defendant moved to compel arbitration on an individual basis under arbitration agreements the lead plaintiff had signed. Those agreements also contained class action waivers.

The district court had little difficulty in concluding that Concepcion and Stolt-Nielsen dictated enforcement of the agreement. It found that they had overruled prior Second Circuit authority that had cast doubt on the enforceability of class action waivers in the arbitration context.

Following that analysis, the court simply declined to follow D.R. Horton. Instead, it found that nothing in a single-plaintiff arbitration undermined federal statutory rights. It noted that the plaintiff asserted a substantial individual claim and that he would be entitled to payment of his attorney fees if he prevailed. It rejected the complaints by plaintiff’s counsel that the case would not be sufficiently lucrative for him to pursue on an individual basis. Having rejected the plaintiff’s arguments, the court ordered that the claims be arbitrated.

LaVoice is but one of the first, if the first, decision addressing this issue in the wake of D.R. Horton. There are sure to be many others.

The Bottom Line: At least one court has already rejected the most recent view of the NLRB that class action waivers are unenforceable.

California Court Affirms Summary Judgment Against Putative Class of Insurance Agents

Posted by Greg Mersol on January 13, 2012

Court Finds That Insurance Agents Were Independent Contractors As A Matter Of Law

As we have noted in prior blogs, litigation involving alleged independent contractor status is on the rise, and is increasingly the topic of class action claims. Plaintiffs in these cases tend to argue that they were misclassified as independent contractors and were improperly denied their rights as employees, ranging from employee benefits to overtime to the right to assert certain types of discrimination claims. In several industries these challenges have proven successful, but a recent California case reflects that victory for the plaintiffs is far from a certainty.

In Arnold v. Mutual of Omaha Insurance Co.pdf., Case No. A131440 (Cal. 1st App. Dec. 30, 2011), the plaintiff sought to bring a class action against insurer Mutual of Omaha, with which she had been an agent. She claimed that although classified as an independent contractor agent, she was in fact an employee and had been denied the incidents of an employment relationship under California law, such as the right to reimbursement of business expenses and immediate payment of wages upon termination. The claims were brought solely under California law.

The trial court granted summary judgment, and the court of appeals affirmed. The court of appeals held that in California a common law test was to be used to determine independent contractor status. The primary focus of the common law test was whether the alleged employer had "the right to control the manner and means of accomplishing the result desired." Quoting S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341, 350 (1989). Although the right of control was the primary factor, it was not exclusive, and the inquiry might require review of additional factors such as whether the relationship was at will, the intent of the parties, the type of business etc.

The court rejected arguments by the plaintiff that a different (and more favorable) standard should apply under the California Labor Code. Instead, it found that the California Labor Code provisions should be read "with" the common law test for employment.

Applying the common law factors, the court concluded that the agents were independent contractors. It began by examining the plaintiffs' evidence first, but found that managers generally assisted agents rather than supervise them. The company did not reimburse agents for their expenses and paid them solely by commission. No one dictated how agents made sales or how they spent their time. Further, the contract provided that the relationship was at will and was one of an independent contractor and not an employee. Taken as a whole, the court had "little difficulty" concluding that the Mutual of Omaha agents were independent contractors.

Interestingly, the case was decided solely under California law. The court therefore had no reason to cite, and did not cite, two significant federal cases addressing the same issue of whether insurance agents were independent contractors. See Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992) (applying common law test; agents were independent contractors under ERISA); Barnhart v. New York Life Insurance Co., 141 F.3d 1310 (9th Cir. 1998) (agent was independent contractor and could not recover under ERISA or ADEA).

The Bottom Line: Even courts perceived to favor plaintiffs can be persuaded that agents are independent contractors with the right facts.

NLRB Holds Class Action Waivers Violate the National Labor Relations Act

Posted by John Lewis on January 09, 2012

In the much anticipated ruling in D.R. Horton, Inc. and Michael Cuda.pdf, released Friday, January 6, the National Labor Relations Board (“NLRB”) held that the Company violated Section 8(a)(1) of the National Labor Relations Act (“NLRA”) by “requiring employees to waive their right to collectively pursue employment-related claims in all forums, arbitral and judicial.” The decision, which will have a far-reaching impact on all employers, also concluded that recent United States Supreme Court rulings on the Federal Arbitration Act and class arbitration were not implicated. To many management observers, the ruling elevates a procedural device, a class or aggregate proceeding, to the status of an individual statutory right applicable to any employment claim. The decision reasoned:

“an individual who files a class or collective action regarding wages, hours or working conditions, whether in court or before an arbitrator, seeks to initiate or induce group action and is engaged in conduct protected by Section 7.”

The Company and the Arbitration Agreement

The Company, D.R. Horton, Inc., builds homes and operates in more than 20 states. Starting in 2006, the Company required employees to sign a Mutual Arbitration Agreement (“MAA”) that essentially provided that all employment-related disputes be resolved through individual arbitration. The Charging Party Michael Cuda worked for the Company as a superintendent and had signed the MAA. His attorney later informed the Company that it was misclassifying superintendents as “exempt” under the Fair Labor Standards Act and that he had been retained to represent Cuda and a nationwide class of superintendents. Cuda’s attorney also attempted to give notice of intent to arbitrate on a class or collective basis. When the Company resisted, Cuda filed an unfair labor practice charge with the NLRB.

A Necessary Substantive Right?

Several groups that filed Amici Curiae briefs with the NLRB urged that employees’ Section 7 rights were not impacted because they could jointly discuss their claims, pool their resources to hire a lawyer, seek litigation advice and support from a union, seek support from other employees and coordinate the filing of claims. The Board majority was unpersuaded, responding,

“if the Act makes it unlawful for employers to require employees to waive their right to engage in one form of activity it is no defense that employees remain able to engage in other concerted activities.”

The decision also categorically rejected arguments that the right to bring a class or collective action was “procedural” rather than substantive.

“Any contention that the Section 7 right to bring a class or collective action is merely ‘procedural’ must fail.”

According to the decision, the salient issue is:

“Whether [the Company] may lawfully condition employment on employees’ waiving their right under the NLRA to take the collective action inherent in seeking class certification . . . .. Rule 23 may be a procedural rule but the Section 7 right to act concertedly by invoking Rule 23 . . . or other legal procedures is not” (emphasis added).

Supreme Court Precedent Found Not Implicated

The ruling also found that the U.S. Supreme Court’s opinions in Stolt-Nielsen v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010), and AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011) (discussed in detail in other blog articles here and here) were not implicated. The Board majority reasoned that “[n]either involved the waiver of rights protected by the NLRA or even employment agreements.” AT&T Mobility (which arose in a consumer context) was distinguished by the majority because it involved a conflict between the Federal Arbitrator Act (“FAA”) and state law not where two federal statutes potentially conflict. The FAA did not preempt the NLRA which gave employees a federally protected right to engage in concerted action. And, the Cuda decision emphasized it did not require class arbitration to protect employees’ rights under the NLRA. Instead, it held “only that employers may not compel employees to waive their NLRA right to collectively pursue litigation of employment claims in all forums, arbitral and judicial.

Impact and Next Steps

The decision was completed last Tuesday and signed by the two Democratic Board members, before one, Craig Becker, had his recess appointment expire. The Board’s sole Republican member, Brian Hayes, recused himself, without explanation.

The decision, which applies both to union and non-union workforces, will undoubtedly be appealed to a federal court of appeal.

The Bottom Line: The controversial NLRB has created another potential obstacle to the enforcement of class action waivers. A federal appellate court or the Supreme Court will likely resolve these important issues.

California Supreme Court's Harris Decision May Become a Helpful Tool in Defeating Class Certification--Or Maybe it Won't

Posted by Todd Dawson on January 04, 2012

An Irritable Pessimist's View of a Welcome Decision

After several years of waiting, the California Supreme Court handed down its long-anticipated decision in Harris v. Superior Court last week. Given the natural-born suspicion held by management-side lawyers toward anything that wanders its way out of the wilderness that is the California courts, it probably comes as no surprise that we’re left a bit underwhelmed. In fact, we’re left feeling much like a patient immediately following successful brain surgery; sure, we’ve obtained the best possible outcome for which we should probably be thankful, but it feels like we just had our collective skull drilled and cut open only to get a result that might eventually develop into normalcy.

The primary issue in Harris was the degree to which the so-called "administrative/production dichotomy" is controlling in applying California's administrative exemption. Under California Wage Order 4-2001, the first element of the administrative exemption restricts its application to employees who perform work "directly related to management policies or general business operations of [an employee's] employer or his/her employer‘s customers." When applied in isolation without reference to other analytical tools, the administrative/production dichotomy interprets this provision to exclude any employee involved in producing or providing the goods and/or services that the employer is in business to provide (i.e., "production employees"). As illustrated by Bell v. Farmers Ins. Exchange, 87 Cal.App.4th 805 (2001), some California courts further restricted the "administrative" side of the dichotomy to include only those individuals who are actually involved in matters affecting the overall direction of the business and/or its policies.

In Harris, the appellate court held that Bell precluded the defendant employer from establishing a genuine issue of fact as to whether the plaintiff insurance adjusters were administratively exempt. While acknowledging that the adjusters' work was not routine or unimportant (as was the case in Bell), the appellate court held that their work nonetheless was "not carried on at the level of policy or general operations, ... [and therefore fell] on the production side of the dichotomy."

The good news is that the California Supreme Court unequivocally rejected this mechanical application of the administrative/production dichotomy, a holding that is undeniably welcome news for California employers. The breadth of its opinion, however, is somewhat difficult to decipher. For example, in addressing the appellate court's assertion that the administrative exemption is limited to employees who impact the overall business and/or its policies, the Court noted that the appellate court had conflated the proper analysis with a separate element of the exemption (i.e., that an employee's work must be of "substantial importance to the management or operations of the business"). However, the Court stopped short of deciding whether such a requirement would be appropriate in the context of the "substantial importance" prong, and disclaimed any intention to do so. Moreover, the Court specifically denied any suggestion that the dichotomy was misapplied in Bell, and emphasized that its decision in Harris was limited to holding that the appellate court erred by treating the administrative/production dichotomy as dispositive based on the factual record of that case.

So, what does that mean for class certification? Well, we’d like to believe that it means a plaintiff’s lawyer can’t create a common legal question worthy of class certification just by claiming that the putative class members fall on the production side of the administrative/production dichotomy, or by claiming that they do not exercise discretion on matters of substantial importance or significance simply because they do not possess policy-making authority. There certainly is language in the Harris opinion to support this hope. The Harris Court, for example, found unpersuasive a prior case (Bratt v. County of Los Angeles, 912 F.2d 1066 (9th Cir. 1990)) in which the Ninth Circuit suggested that policy-making authority was a requirement for an employee to be treated as administratively exempt. The Harris Court further cautioned that application of the administrative exemption is fact-specific and that courts should not ignore the language of the FLSA regulations and California Wage Order in favor of a mechanical application of the administrative/production dichotomy.

But, after all, we’re talking about California here.

The Bottom Line: Harris is, at the very least, a welcome sign for employers, but there is some measure of ambiguity in its holding for the lower courts to explore.

New Jersey Court Denies Certification of Large Sex Discrimination Class in Light of Dukes

Posted by Greg Mersol on January 03, 2012

In Dukes v. Wal-Mart Stores, Inc., 131 S. Ct. 2541 (2011), the Supreme Court held that it was error to certify a class of 1.6 million women alleging sex discrimination in employment. But what about a smaller, yet still enormous class?

In Bell v. Lockheed Martin Corp., Case No. 08-6292 (RBK/AMD) (Dec. 14, 2011), the United States District Court for the District of New Jersey addressed the sex discrimination claims of a much smaller class of 17,000 women in a case claiming gender discrimination in promotions and compensation. The class was but 1 percent of the size of the putative Dukes class.

Lockheed Martin provides information technology services to the United States government. The plaintiffs, like the plaintiffs in Dukes, sought to assert Title VII claims for alleged sex discrimination in promotions and compensation. Like the plaintiffs in Dukes, they alleged that women were promoted more slowly than men and paid less for comparable positions. They also claimed that a "word of mouth" means of announcing potential positions for advancement had a disparate impact on women. Given that during the pendency of the case (until last summer) the plaintiffs in Dukes had had scored substantial successes, not surprisingly the Lockheed plaintiffs appear to have patterned their claims and arguments after those raised in Dukes.

Lockheed moved the court to deny certification before the plaintiffs actually moved to certify the class, an increasingly common strategy. By the time of the court's ruling, the case had been pending for three years and there had been extensive discovery.

Given the similarities with the Dukes case, it is not surprising that the district court's analysis tracks that of the Supreme Court in that case. The court first addressed the issue of whether the plaintiffs could pursue a class under Rule 23(b)(2). To get around the Dukes Court's clear holding that such claims should not be certified when there are claims of individualized relief (such as back pay), the plaintiffs argued that they would not seek compensatory or punitive damages. The district court, however, quoting Dukes, found that the individualized claims of back pay alone meant that Rule 23(b)(2) did not apply.

Of equal importance, the court also found that there was no commonality under Rule 23(a)(2). The plaintiffs sought to avoid Dukes' application by asserting that they were asserting a disparate impact claim pursuant to the Supreme Court's earlier splinter decision in Watson v. Fort Worth Bank & Trust, 487 U.S. 977 (1988). Again, however, the court found that the alleged discriminatory practices giving rise to the claimed disparate impact were "substantially similar" to those alleged in Dukes. Further, it rejected the plaintiffs' statistical showing, finding that they could not demonstrate, for example, the there was "discriminatory bias on the part of the same supervisor." Dukes, 131 S. Ct. at 2551.

Finding the case to be governed by Dukes, the Court denied certification.

The Bottom Line: Most lower courts appear to be following Dukes. Defendants are being successful in opposing certification when the plaintiffs cannot identify a single individual or practice that they claim demonstrates a viable class.

California District Court Denies Certification of Second Wage and Hour Class in Less than a Month: Early Bird Catches the Worm, but Doesn't Like the Taste

Posted by Greg Mersol on December 19, 2011

Maryland staffing corporation Aerotek Scientific, LLC (“Aerotek”), allegedly required its employees who worked at one of its call centers in California to arrive at work at least ten minutes before the beginning of their shifts to log into their computers and be at the ready to receive calls at the immediate start of their shifts. While this sounds like a sound customer service practice, Aerotek employee Tamara Pryor alleged that this and other requirements resulted in she and other class members performing pre-shift work without proper compensation.

In Pryor v. Aerotek Scientific, LLC, Case No. CV-10-06575-MMM-AJW, (C.D. Cal. Nov. 15, 2011), the plaintiff brought claims against Aerotek in the Central District of California for the typical litany of state law wage and hour claims, for failure to pay wages due for pre-shift work, failure to pay overtime, failure to provide accurate itemized wage statements, failure to pay wages upon termination, and unfair business practices in violation of California Business & Professions Code Sections 17200 et seq. She further claimed that Aerotek instructed its employees to record only the time they were logged into its telephone system as time worked, although employees also spent time logging into their computer system before they were logged into it. Pryor also claimed that Aerotek required class members to round their start and end times to the nearest 15-minute interval and precluded them from logging into the telephone system before the scheduled start of their shift, which allegedly ensured that the substantial portion of any rounding would be in Aerotek’s favor.

On November 15, 2011, the district court denied certification of the class. In keeping with the growing trend among wage and hour certification decisions, the district court cited Dukes v. Wal-Mart Stores, Inc., 131 S. Ct. 2541 (2011), but denied certification on grounds unrelated to the issues focused upon in that decision. Like its decision in Lessard v. Skywest Airlines, Inc., Case No. 2:11-cv-03769-JHN-VBK (C.D. Cal. Oct. 24, 2011), less than a month earlier, the district court denied certification on the basis that the Rule 23(b) predominance requirement had not been met. The Court concluded that Aerotek’s common time reporting policies were not enough to satisfy the predominance requirement which is “far more demanding” than Rule 23(a)’s commonality requirement. The Court observed that Aerotek’s common time reporting policies would not have had a uniform impact on employees in light of the significant discrepancies in employees’ testimony regarding how early they were told to arrive at work and how long it took them to log into the telephone system. The Court also observed that Aerotek’s rounding practices necessitated individualized inquiries because “even an employee who worked for a few minutes before recording time . . . may have been compensated for the time if the employee rounded his or her total time up at the end of the day.” Accordingly, this precluded reaching a conclusion as to whether, on a classwide basis, employees were underpaid.

The Bottom Line: The Dukes decision is taking hold, at least indirectly. Plaintiffs seeking to assert class claims need to demonstrate a common policy or issue that had a uniform impact on employees that is subject to common proof.

Authorship credit: Dawn Kennedy

Pennsylvania Court Compels Arbitration of Both Class and Collective Action Claims

Posted by Greg Mersol on December 05, 2011

Another court has weighed in in favor of enforcing an arbitration agreement containing a class action waiver in the wake of the United States Supreme Court’s decision in AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740, 1746 (2011).

In Brown v. TrueBlue, Inc.pdf., Case No. 1:10-CV-0514 (M.D. Pa. Nov. 22, 2011), the plaintiffs were employees of a staffing agency. The agency paid the workers either by check or, if they preferred cash, through a voucher system. The vouchers, however, required the use of a machine for which a fee was charged. As a result of these fees, the plaintiffs sought to assert both class action wage and hour claims under Pennsylvania law and federal collective action claims under the FLSA. Fifteen months after the suit was filed, and after the plaintiffs had moved for certification of both the class and collective action claims, the defendant moved the court to compel arbitration.

In ruling on the defendant’s motion, the court noted that the plaintiffs had signed employment agreements containing promises to arbitrate all claims. Those agreements also provided in pertinent part that neither party “shall be entitled to join or consolidate claims as a representative or member of a class, representative, or collective action.” The question therefore was not whether the agreement was one requiring arbitration on an individual basis, but, rather, whether it was enforceable at all.

The court found that while the agreement likely would not have been enforceable under prior Pennsylvania law due to the class action waiver (see Thibodeau v. Comcast Corp., 912 A.2d 874-885-86 (Pa. Super. Ct. 2006)), that case was no longer good law in light of Concepcion. Indeed, it found that the statute at issue in Thibodeau was “strikingly similar” to the one considered in the California Supreme Court’s Discover Bank case the Supreme Court had rejected in Concepcion. It therefore found that the agreement was enforceable, and, implicitly, that the claims would need to be arbitrated on an individual basis.

A second, interesting part of the opinion related to waiver, as the defendant had waited fifteen months after the complaint was filed to file its motion, and only did so on the eve of the hearing on class certification. Although the court was troubled by the passage of time, and noted that such a delay would ordinarily resulted in a waiver, it found that the delay was excusable because Concepcion represented a “significant change” in the law. It also found that the plaintiffs could not articulate any prejudice from the delay as the work they had performed would have been done in arbitration as well as before a court. Accordingly, the court compelled arbitration of the dispute.

The Bottom Line: Courts are enforcing Concepcion to compel the arbitration of class and collective claims on an individual basis. Further, they recognize that Concepcion has changed the law so significantly that waiver arguments may not apply.

Court Applies Kentucky's 15-Year Statute of Limitations for ERISA Class Action Claims To Recover Benefits Due Under Terms of Plan

Posted by M. Scott McIntyre on December 01, 2011

At present, most employment class actions relate to wage and hour issues, but there are still many (and frequently hugely expensive) ERISA class actions challenging a host of benefits issues. A recent case underscores that the threat of ERISA class action litigation can be exacerbated by a very long statute of limitations.

ERISA does not contain a statute of limitations for claims to recover benefits due under the terms of a plan. Courts apply the most clearly analogous state statute of limitations to these claims. Breach of contract claims typically allow for a relatively longer statute of limitation period than for other causes of action. As a result, plaintiffs often seek to characterize the ERISA cause of action as a contract claim to take advantage of a longer statute of limitation period. See, e.g., Meade v. Pension Appeals and Review Committee, 966 F.2d 190 (6th Cir. 1992) (applying Ohio’s fifteen-year statute of limitations to alleged wrongful denial of permanent disability benefits under terms of ERISA-governed pension plan).

In Clemons v. Norton Health Care Inc. Retirement Plan, No. 08-69-C, 2011 WL 5519823 (W.D. Ky. Nov. 14, 2011), the United States District Court for the Western District of Kentucky held that Kentucky’s fifteen-year statute of limitations for contracts, KRS § 411.090 applied to the plaintiffs’ claim for benefits due under the terms of a plan. The certified class consisted of retirement plan participants who claimed that the Norton Healthcare Retirement Plan (“Plan”) made several errors when calculating their contractual lump sum retirement benefits. For example, the class claimed that the Plan failed to include the value of an annual cost of living adjustment and/or an alternative lump sum benefit when doing so would have yielded the highest value for the participant.

The Clemons court rejected the Plan’s argument to apply Kentucky’s default five-year statute of limitations for actions upon a liability created by statute, KRS § 413.120(2). It held that the cause of action did not arise from ERISA’s statutory protections, but was instead based on an independent promise or contract. The Court found that the plaintiffs’ claim for equitable relief under ERISA § 502(a)(3) based on a violation of the plan is not the same as asserting ERISA-specific statutory grounds for relief. As a result, Kentucky’s fifteen-year limitations period for breach of contract applied. The Court further held that the claims accrued on the dates the individual plaintiffs received their lump sum distributions.

Clemons distinguished two federal cases that applied Kentucky’s five-year statute of limitations to ERISA claims. In Redmon v. Sud-Chemie Inc. Retirement Plan for Union Employees, 547 F.3d 531 (6th Cir. 2008), the allegation centered on a waiver of survivor benefits that allegedly violated ERISA’s statutory protections. In Fallin v. Commonwealth Indus. Inc. Cash Balance Plan, 521 F.Supp.2d 592, 597 (W.D. Ky. 2007), the action was premised on an alleged violation of ERISA § 502 due to changes to an employee retirement plan. Clemons found that, in contrast, the class was not suing on statutory rights provided by ERISA; rather, the state law claims for breach of contract were preempted by ERISA.

The Bottom Line: ERISA cases can have extremely long statutes of limitation. When the plaintiffs seek relief primarily to recover benefits allegedly due under the terms of an ERISA-governed plan and the dispute centers around rights under a contract, the statute of limitations in Kentucky is fifteen years, not five years.