Putative Class of Pharmaceutical Representatives' Offensive Collateral Estoppel Argument In Support of Overtime Claim Rejected by Pennsylvania Court
The question of the exempt status of pharmacy representatives has spawned numerous class and collective actions against the pharmaceutical industry. A recent case reflects the court’s rejection of a creative attempt to challenge the exempt status of a putative class of drug sales representatives.
In Ibanez v. Abbott Laboratories.pdf, No. 09-1406, 2011 WL 5572621 (E.D. Pa., Nov. 15, 2011), a court recently held that pharmaceutical sales representatives (“PSR’s”) are exempt from overtime pay. The Court concluded that the “administrative exemption” to overtime applies to PSR’s because they regularly exercise discretion and independent judgment with respect to matters of significance such as pre-planning of calls to physicians, managing their territories and events, and “relationship building” with physicians based on the physicians’ unique practices and circumstances.
In reaching its decision, Ibanez rejected the named plaintiff’s argument that a previous adverse judgment against Abbott in an Illinois federal court precluded the Court from finding the PSR’s exempt from overtime. In Jirak v. Abbott Laboratories, Inc., 716 F.Supp.2d 740 (N.D. Ill. 2010), the Court granted summary judgment to a class of Abbott PSR’s, holding that the PSR’s were entitled to overtime pay because neither the administrative exemption nor the outside sales exemption applied.
The plaintiff argued that Abbott should be “estopped” from successfully arguing that its PSR’s fell within the administrative exemption because it lost the same argument as applied to its nationwide PSR’s in the Jirak case. But, Ibanez held that the plaintiff’s attempt at offensive collateral estoppel was precluded due to considerations of fairness. The named plaintiff in Ibanez had received notice of the Jirak suit and could have joined that case but opted to sit on the sidelines and pursue a separate class action in Pennsylvania for strategic reasons. Ibanez indicated that precluding Abbott’s defense based upon the outcome in Jirak would create an incentive for potential plaintiffs to adopt a “wait and see” attitude instead of promptly asserting their claims. Such an approach does not promote judicial efficiency because the plaintiff would not have been bound had Abbott prevailed in the Jirak litigation. Ibanez found that permitting offensive collateral estoppel in this context could encourage excessive and superfluous litigation.
After concluding that it need not defer to the Jirak decision based upon collateral estoppel, Ibanez distinguished Jirak based on the later court’s deference to the Department of Labor’s amicus brief. Ibanez emphasized that the Third Circuit in two recent cases refused to defer to the Department of Labor’s position concerning the PSR’s entitlement to overtime. See Smith v. Johnson & Johnson, 593 F.3d 280 (3d Cir. 2010); Baum v. AstraZeneca, No. 09-2150, 2010 WL 1063935 (3d Cir. Mar. 24, 2010). And, the Court opined that it would reach the same conclusion regarding the Department of Labor brief even if it were not bound by the Third Circuit’s view of the briefs. Ibanez emphasized that PSR’s necessarily exercise discretion and independent judgment because they obviously could not be effective by merely spitting out a pre-planned script while interacting with physicians.
Courts remain split over whether PSR’s are exempt from overtime. As a result, litigation outcomes on this issue differ from Circuit to Circuit and sometimes from court to court. While the uncertainty this presents is problematic, Ibanez highlights that an employer’s loss in one part of the country on this same issue does not necessarily dictate the outcome in another venue.
The Bottom Line: The exempt status of pharmacy sales representatives is still a hot litigation topic. Creative attempts to use collateral estoppel offensively against an employer may fail if the court is willing to delve into the merits.