Employment Class Action Blog - Information and Commentary on Employment Class Action Cases Affecting Employers

A class action over socks?!

Employers operating in California are subject many state-law employment regulations and the resulting ever-present threat of class action litigation. Suits over employment practice seem to come in waves based on industry and type of employee (e.g. insurance claims adjusters, retail managers) or specific policies (such as the current spate over meal and rest periods). Many lawyers monitor lawsuits filed in the state to watch for the next trend.

A recent case suggests that it may very well NOT be minor apparel items. California Labor Code section 2802 provides that "[a]n employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties as such, or of his or her obedience to the directions of the employer."

In Gallardo v. United Parcel Service, Inc.pdf., Case no. 2:10-cv-08624 (C.D. Cal. Aug. 22, 2011), the plaintiff claimed that UPS required its drivers wearing shorts to purchase and use socks in UPS brown and with the UPS logo. She contended that this policy violated Labor Code section 2802, because such a purchase constituted an "expenditure" required by the employer, and she sought to represent a proposed class of over 10,000 employees to recover their cost.

The plaintiff argued that the issue of certification was simple. She contended that there was a state-wide policy of requiring the logo socks and that, in any case, it was "obvious" that if drivers bought and wore the UPS socks it must have been because they were told to do so.

As is true in many of these cases, the real facts were not quite so simple. UPS was able to demonstrate that each of its 150 or so locations operated differently. It had different policies at different locations and supervisors had discretion regarding how they interpreted and enforced the company's requirements over uniforms. Some permitted merely brown socks; while others expressed a preference for the logo socks. UPS argued that these variations undermined the elements of commonality and typicality under Rule 23(a) and those of predominance and superiority under Rule 23(b)(3).

With issues as to commonality and typicality being raised, one would naturally expect the Supreme Court's recent decision in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (June 20, 2011), to be discussed. Interestingly, however, the District Court's decision cited and relied upon the Ninth Circuit's Dukes decision, one that was overruled by the Supreme Court as being too lenient. Even under that standard, though, the court found that the plaintiffs had failed to demonstrate the necessary commonality and typicality. It also agreed with the defendant that the 23(b) requirements of predominance and typicality had not been met. The court thus denied certification and set the case for a trial on the plaintiff's individual claims, which could not have amounted to more than a few dollars, later in the fall.

The Bottom Line: Plaintiff's attorneys are experimenting with new theories to drive employment class action in California. Variations in the application of employment policies will still serve to defeat class certification even for large employers.

Another court has denied certification of a rest and meal period case under California law, this one relying at least in part on the Supreme Court's recent decision in Wal-Mart Stores, Inc. v. Dukes, Case No. 10-277, 564 U.S.___ (Jun. 20, 2011).  While many courts are simply staying California rest/meal period cases pending the outcome, if there ever is one, in Brinker Restaurant  Corp. v. Superior Court, in this case did reach the question of class certification.

In Camuti v. Apple Inc.pdf., Case No. CGC-09-492590 (San Francisco Sup. Ct., June 21, 2011), the lead plaintiff was a "Genius" at the "Genius Bar" of an Apple retail store.  He brought a putative class action in California state court under the California equivalent to Rule 23, purporting to represent 480 Geniuses at 48 California retail Apple Stores.  The crux of his claim was that Apple subtly discouraged Geniuses from taking their rest breaks through a combination of a computerized schedule known as "Concierge" and a strong customer service commitment.  Much like the employer in Dukes, however, the formal Apple policy provided for and required the taking of breaks. While a proposed class of "geniuses" could prompt any number of puns and comments, the court's opinion is remarkably devoid of any.

Before the decision in Dukes was handed down, the plaintiff moved for certification and Apple moved for decertification of the class.  Immediately after the Supreme Court announced its decision in Dukes; however, the court found that the case was not appropriate for certification.  Much as in Dukes, the court concluded that because the company's policies complied with the law, the plaintiffs had to rely upon unwritten policies or practices that deprived Geniuses of their rest or meal periods.  Because of the problems of proving such a practice, citing Dukes, the court found that it was appropriate to review the merits of the plaintiff's contention.  It ultimately found that he could not make any class-wide showing that such a policy existed and also questioned his adequacy as a class representative given his inability to establish such a policy, his authority at times to schedule breaks for others, and his generally poor recollection of the instances in which he missed breaks.

The Bottom Line:  The Dukes decision is being applied to wage and hour litigation in California.  Courts are increasingly skeptical of class action claims that rely on "unwritten" policies that violate the law when the employer's formal policies are lawful.

A recent case from the Eastern District of New York reflects that race discrimination class actions can be brought, and also reflects the type of claim which will likely still survive in the wake of last week's Supreme Court decision in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (2011). (See our June 20 post on the Dukes decision). It also reflects some of the special issues that will continue to arise when employees of differing interests are included in a single class.

In United States v. City of New York.pdf Case No. 07-CV-2067 (June 6, 2011), the United States Justice Department challenged a test and related procedures used by the New York City Fire Department on the grounds that they had a disparate impact on minority applicants. During the course of the case, a black firefighters group known as the Vulcan Society successfully intervened and sought class certification, claiming a pattern and practice of race discrimination under Title VII and seeking to represent applicants who had been hired, but whose hire had allegedly been delayed as a result of the testing procedure. No, the Vulcan Society had nothing to do with Mr. Spock, but was a clever reference to the Roman god of things related to fire. In 2009, the District Court, following the grant of certification on the issue of liability only, found that the testing procedures did discriminate.

In a 48-page opinion issued on June 6, 2011, the court granted the Vulcan Society's motion to certify with respect to the remedial phase of the case, but with conditions. Interestingly, the City of New York did not appear to oppose certification per se, but did focus on the fact that the proposed class included both applicants and those who were hired. The City apparently agreed that the class was proper under Rule 23(b)(2) in that the primary goal was equitable or injunctive relief. The Dukes decision would likely have little effect on the accuracy of these positions because the resolution of one issue, the validity of the test, would resolve the entire case.

Because the primary issues were not in dispute, most of the opinion concerns the creation and management of subclasses. In a nutshell, the court concluded that while certification was appropriate in the remedial phase, the case would have to be managed through separate subclasses of applicants who were hired and those who were not. Because the Vulcan Society did not represent the non-hired applicants, and because its members had an inherent conflict of interest with those who were never hired, it also found that it could not be an appropriate representative as to the entire class. Interestingly, the court expressed concern whether the United States would adequately make determinations as to the unsuccessful applicants and appointed a Special Master to review their claims. These rulings likely flow from the court's earlier decision that the tests were discriminatory and discriminated against the entire class, and the analysis might have been different under Dukes if the plaintiffs had claimed discrimination arising from issues that were less wide-spread.

The Bottom Line: Testing cases may yet live long and prosper as class actions in the wake of Dukes. Conflicts among the class may make subclasses or other special procedures appropriate.

There’s a saying in Hollywood – “The last sequel is the one that doesn’t make any money.”  Unfortunately for moviegoers, too often a franchise is exhausted beyond its foreseeable lifespan by a studio looking to cash in on characters one last time before the end, despite an audience’s waning interest in the series.  Thus, instead of having a nice, complete story that ends with the hero riding off into the sunset, we find the characters dragged out and dusted off for one more round, and more often than not, that final sequel serves to end the series on a sour note.

Such was the situation with Judge Hellerstein’s May 2, 2011, decision in Cortes v. Foot Locker, Inc.pdf, Case No. 1:06-cv-01046 (S.D.N.Y.).  In this case, assistant managers at Foot Locker, Inc. completed a trilogy of failure when the judge refused to certify an opt-out class of employees who alleged that their employer mandated that they work off-the-clock.  Three times the plaintiffs asked for Judge Hellerstein to amend his January 20, 2010 order.pdf, and three times their requests were denied. 

The case itself began over four years ago, when the plaintiff Foot Locker employees sued their employer alleging that the store managers continually altered the workers’ time sheets to decrease hours and meet corporate quotas. The case proceeded for three years until it was conditionally certified as an opt-in class under the FLSA in January 2010.  In the year that followed, 43 assistant managers joined the action. 

In his conditional certification order, Judge Hellerstein specifically denied the plaintiffs’ request to certify an opt-out class, pursuant to Federal Rule of Civil Procedure 23, as to claims arising under New York State Labor Law (which has a six-year statute of limitations).  This decision, much like the decision to make a Godfather Part III fifteen years after Part II, raised a few eyebrows, as some courts will certify both a Rule 23 class and an FLSA opt-in action simultaneously, despite their apparent incongruity (an issue which has been discussed previously in this blog (see “Court Finds FLSA Precludes State Overtime Class Actions” – May 30, 2011; and “Seventh Circuit Finds That Overtime State Class Actions And FLSA Collective Actions Are Not Incompatible” – January 26, 2011)). 

When he certified the opt-in class, however, Judge Hellerstein permitted the plaintiffs to take discovery beyond the FLSA’s statute of limitations and allowed them to renew their motion for class certification if they uncovered evidence that Foot Locker had committed violations outside of the collective action window.  On January 14, 2011, the plaintiffs moved to alter or amend the 2010 order.  Foot Locker replied and claimed that plaintiffs had “cherry-picked” testimony to bolster their allegations.

Like the writers who “crafted” The Hangover Part II in less than two years from the original hit, Judge Hellerstein did not wait long to strike.  Before plaintiffs could reply to Foot Locker, he denied certification, and noted that an opt-out class would delay the trial.

Plaintiffs, however, were undaunted, and continued their earnest campaign to amend the court’s order to certify the Rule 23 class.  Like the long-labored production of Indiana Jones and the Kingdom of the Crystal Skull, they struggled against the odds to finish what they had started.  They requested that the court provide them with another several days in which to file a reply, which the judge promised he would consider in a third, and final ruling.  On April 12, 2011, plaintiffs filed their reply.

Seven days later, Judge Hellerstein renewed his denial of the Rule 23 certification.  His reasoning was simple and consistent with his previous arguments, as well as the arguments made by most defense attorneys involved in simultaneous collective and class actions:  “If an opt-out class were certified on the New York state labor law claims, the proofs on those claims would potentially overshadow and overwhelm the claims that arise under federal law.”  Put another way, the judge did not want to watch the case become engulfed in a dense, complicated motion and discovery process that would potentially swallow the opt-in class that he had already certified.  (Much as On Stranger Tides threatens to overshadow any good memories that fans of the previous Pirates of the Caribbean films may still have for Captain Jack Sparrow).

The Bottom Line: Echoing the concerns raised by many defense attorneys, some courts still recognize that simultaneous opt-in and opt-out classes are incompatible.

In the wake of the oral argument in the mega class action, Wal-Mart v. Dukes, The New York Times ran an interesting April 3, 2011 article by Adam Liptak entitled “When a Lawsuit Is Too Big.”  The subtitle, “Class-action suits can be large and impersonal.  Critics say this is why they are often unfair to everyone involved,” actually presents the theme.  And while we might not normally look to The New York Times for legal commentary, this article identified several legitimate issues applicable to many employment-related class actions, including Dukes.  These issues negatively impact claimants and companies alike and include deprivation of due process, decision making by formula and settlements that only benefit plaintiffs’ counsel. 

The article summarized the concerns Justice Antonin Scalias raised during oral argument in Dukes, that reliance “on statistical formulas rather than testimony and personnel records to decide how much money the company would have to pay” is not due process.  (Transcript.pdf of the March 29, 2011 argument. Justice Scalias’ comments can be found on page 48.)

The New York Times’ article also quoted Judge Richard Posner of the United States Court of Appeals for the Seventh Circuit writing in Randall v. Rolls-Royce Corporation.pdf (case No. 10-3446, decided March 30, 2011).  In Randall Judge Posner expressed reservations about the Plaintiffs’ use of Rule 23(b)(2) of the Federal Rules of Civil Procedure which is to be applied only when any monetary payment is incidental to a grant of injunctive or declaratory relief.  But as Judge Posner recognized, Rule 23(b)(2) deprives class members of notice and opt-out protections found in a Rule 23(b)(3) actions.  Rule 23(b)(2) is the same section relied upon by the Plaintiffs in Dukes.  Indeed, since Rule 23(b)(2) actions can secure back pay in addition to injunctive relief, calculating the monetary relief can be an overwhelming obstacle.  (See Employment Class Action Blog's related post on the Randall decision from 4/14/2011). 

Judge Posner noted in Randall that “calculating the amount of back pay to which members of the class would be entitled . . . would require 500 separate hearings.  The monetary tail would be wagging the injunctive dog.”

The underpinnings of the Dukes case illustrate the concerns expressed in The New York Times article regarding overreliance on statistical evidence in the name of expediency and some purported “higher calling.”  In Dukes, the "higher calling" that purportedly justified exclusive reliance on statistical data was some subjective notion of “social justice” for low-wage employees.  In essence, the Dukes plaintiffs insist that Wal-Mart uniformly and systemically undervalues and discriminates against its female employees on the basis of their gender.  These claims will be litigated, if Plaintiffs’ counsel have their way, on behalf of more than one million women, none of whom will have the option of declining to participate in the case.

What form of discrimination have these class members claim to have experienced?  Well … that varies from person to person.  For some individuals, it’s promotions.  For some, it’s wages.  For others, it’s discipline.  Which policy or policies do they claim are discriminatory?  That’s another hard question.  It’s not really a policy per se that they claim to be discriminatory.  It’s the fact that Wal-Mart doesn’t have enough policies, and, if they did, they supposedly may have kept discrimination out of the workplace.  Who, according to the Plaintiffs’ lawyers, carries out all of these discriminatory decisions?  That depends, too.  Typically, it’s the thousands of individuals Wal-Mart employs in local store management positions.  But, that’s a problem itself, because more than 500 of those individuals are also female class members, having been promoted during the relevant timeframe.  And, that raises a potential conflict of interest that Judge Posner cautioned against in Randall.   

We should at least know what kinds of unlawful considerations Wal-Mart managers took into account and how often they did so, right?  Not really.  What we know is that the sociologist hired by Plaintiffs’ counsel really and truly believes that Wal-Mart, at least theoretically, might possibly have discriminated against someone at some point somewhere on the basis of her gender.  And, how does he know this?  Is it based on actual evidence pertaining to current or former Wal-Mart employees?  Not at all.  It’s based on what the sociologist claims to be “a large body of social science research on the impact of organizational policy and practice on workplace bias.” What it really comes down to is this particular sociologist’s firmly held belief that all managers, not just those employed by Wal-Mart will invariably discriminate in violation of the law if they have discretion in personnel matters.

All meager attempts at humor aside, this theory and the appurtenant lack of supporting evidence raise very serious questions regarding the use of the class action device in the Dukes case and others of its kind.  There appears to be precious little evidence in Dukes of intentional discrimination on Wal-Mart’s part.  Rather, Wal-Mart is presumed by the Plaintiffs to have discriminated by virtue of the simple fact that it is an employer.  On the other hand, the courts thus far have rejected Wal-Mart’s evidence demonstrating that it does not discriminate, finding that such evidence will only be relevant at the “merits stage” of the class action.  The logic behind this dichotomy seems curious to say the least.

As noted above, the section of the Federal Rules under which the Dukes case was certified (Rule 23(b)(2)) does not entitle absent class members to notice or an opportunity to opt out of the case.  Even worse, Plaintiffs’ counsel have defended this surprising anomaly on the basis that most women may be too intimidated to file suit on their own or to remain in the suit if given a chance to opt out.

In short, stripped to their essence, Dukes and cases similar to it stand on three assumptions:

1) That all employers, particularly large employers, are guilty of discrimination;

2) That the victims of employment discrimination do not understand or complain about the discrimination they’ve suffered.

3) That, because employers discriminate and because their victims will not defend themselves, social justice can only be achieved by allowing broad license to the plaintiffs’ bar to use Rule 23 to correct those conditions they perceive as unjust.

This paternalistic co-opting of the class action device will allow neither facts nor law to stand in the way of punishing those who were in a position to do something wrong, regardless of whether they actually did so.  To state that such proceedings trample the due process rights of absent plaintiffs and defendants alike is to state the obvious.

Finally, as the Times noted: “Class actions can also distort the usual incentives in the adversary system, offering more rewards for lawyers than for plaintiffs.”  And, no one can seriously doubt that because of cost, class actions coerce settlement even when valid defenses may exist.

The Bottom Line: In this instance, The New York Times essentially got it right – “In a class-action suit, a lawyer can represent your rights without your consent.  Such suits test the limits of the Court’s role in society.”

Authorship credit: John B. Lewis and Todd A. Dawson

In the wake (no pun intended) of the Horizon gulf oil spill, what could be worse than (a) representing BP; (b) in Louisiana; (c) on a case involving personal injuries allegedly sustained on an oil platform? How about making the injury one for alleged radiation exposure? And the defendant wins! We don't ordinarily comment on personal injury class actions, even ones by employees, but the case of DeHart v. BP American Inc.pdf was just too interesting to pass up.

Here’s what happened. The plaintiff worked on a decommissioning project for a BP platform in the Gulf of Mexico in early 2007. He and others contended that they were injured by exposure to radioactive dust and liquids and brought personal injury claims for negligence under the Jones Act, 33 U.S.C. section 905(b). Following a removal and procedural wrangling, the plaintiff moved for certification. So far, so good for the plaintiffs.

After that, it seems, nothing went right under Rule 23. First, in response to some of the defendants’ arguments, the plaintiff had re-defined and limited the proposed class from 130 to as few as about 35 individuals. This number was below that generally recognized to support “numerosity” under Rule 23(a), and the actual number of class members exhibiting symptoms was even lower than that. More importantly, the court found that the plaintiff could not satisfy Rule 23(b)(3)’s predominance requirement because of highly individual inquiries required to determine what exposure caused what injury, including the type and magnitude of exposure, the duration of exposure, the employee’s prior health condition, the alleged health condition(s), what treatment they needed, and difficulties inherent to the specific materials claimed by the plaintiffs to have harmed them. Indeed, the court found these features so strong as to preclude a finding of typicality. Further, these differences undermined the element of “superiority.” The court also found that because DeHart claimed not to be exhibiting symptoms of radiation exposure and other putative class members did, they had an inherent conflict over whether they wanted a large present recovery, or monitoring and payment of future medical costs. Thus, the court found, the plaintiff could satisfy virtually none of the elements of Rule 23 and denied certification.

The bottom line: Sympathetic facts or a locally unpopular defendant won't support a class action if the Rule 23 requirements aren’t present.

We’ve already written twice now on the case of Dukes v. Wal-Mart Stores, 605 F.3d 571 (9th Cir. 2010), most recently to argue (August 27, 2010) that the Supreme Court should accept certiorari and reverse.   The Supreme Court has now accepted cert., but has done so in a manner that leaves the scope of the review up to question.  The Dukes case presented numerous cert.-worthy issues relating to, among other things, the sheer size of the class, manageability, the trial court’s proposed methodology for trial, and the use (or mis-use) of expert testimony at the Rule 23 stage.  At first blush, Wal-Mart's petition for certiorari rested on two questions:  (1) whether a court may certify a class under Rule 23(b)(2) when the plaintiffs seek substantial money damages; and (2) whether the trial court should have certified such a case at all.  We’ve obviously paraphrased their brief, and the actual questions are set forth below. Wal-Mart, of course, wove several of the other issues into these two, but the second issue would have had especially broad application.  That issue attacked the practical effect of the trial court's decision, which was to grant the plaintiffs a gargantuan class and their very best evidence while denying Wal-Mart the right to present its strongest defenses, the individual situations of the putative class members.

On December 6, 2010, the Supreme Court did indeed accept certiorari, but not on every issue.  Commentators are already discussing the ruling and its potential to change the employment class action landscape, but the entry itself is rather cryptic. You can find the order at  http://www.supremecourt.gov/orders/courtorders/120610zor.pdf, but it reads, in its entirety:

WAL-MART STORES, INC. V. DUKES, BETTY, ET AL.

The petition for a writ of certiorari is granted limited to Question I presented by the petition. In addition to Question I, the parties are directed to brief and argue the following question: “Whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a).”

Of course, most orders granting cert. are just as brief, and there is no debate that this order accepts the Issue I for review.  Wal-Mart phrased the issue in its petition as:

I.   Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2)--which by its terms is limited to injunctive or corresponding declaratory relief -- and, if so, under what circumstances.

This issue is certainly important, and has been an issue meriting Supreme Court review for at least a decade. The decisions in Allison v. Citgo  Petroleum Corp., 151 F.3d 402 (5th Cir. 1998), and Jackson v.  Motel 6  Multipurpose, Inc., 130 F.3d 999 (11th Cir. 1999), finding that Rule 23(b)(2) could not be used when compensatory and punitive damages are sought,  have curtailed certain types of class actions in the Fifth and Eleventh Circuits.  The Ninth Circuit in Dukes rejected those holdings, and the Second Circuit takes a third viewpoint still.  While this would ordinarily be an issue that should be reviewed, however, it was not the broadest issue presented in the case.  The Court denied, without explanation, review of Wal-Mart’s second issue, which it broadly defined as:

II.  Whether the certification order conforms to the requirements of Title VII, the Due Process Clause, the Seventh Amendment, the Rules Enabling Act, and Federal Rule of Civil Procedure 23.

Very broad, but then again so was the Ninth Circuit’s lengthy order.  The Supreme Court, however, as is the norm, did not explain why it rejected it.  The rejection of this issue would have been a major setback but for the additional language of the Court’s Order granting certiorari.  That language directed the parties to brief “[w]hether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a).”  

This question is somewhat ambiguous because the Court did not identify which provision of Rule 23(a) might be in question.  Numerosity, pursuant to Rule 23(a)(1), cannot possibly be worthy of Supreme Court review as the putative class has well over 1 million members.  While there was some concern expressed by one of the dissents before the Ninth Circuit over the claims of some of the named plaintiffs, there is no issue of the competence of plaintiffs' counsel that would ordinarily implicate adequacy of representation under Rule 23(a)(4).  Some commentators assume that the court may be referring to the Rule 23(a) elements of commonality and typicality, but the Order references Rule 23(a) in its entirety, and not subsections (3) and (4).

Another possibility relates to the Court's mention of Rule 23(b)(2).  One construction of the Court's question is to read in an issue relating to the interplay between Rules 23(a) and 23(b), but that does not require Supreme Court review.  All class actions need to satisfy the requirements of Rule 23(a), whether they are certified under Rule 23(b)(1), (2), or (3). 

Our best guess is that the Court was trying to set limits on Wal-Mart’s second issue and to focus the question on those portions of Rule 23 that are at issue, primarily commonality and typicality.  These provisions largely leave out Wal-Mart’s intriguing arguments about the net effect of the lower court's rulings, and also have little to do with the predominance arguments under Rule 23(b)(3) that now at the forefront of many employment class actions.  A Supreme Court ruling more tightly prescribing the commonality and typicality requirements would seriously affect many class actions, as would a decision resolving the split in the Circuits on the appropriate use of Rule 23(b)(2).   Most of Wal-Mart’s arguments will clearly be in play, but the limited issue may result in an opinion that fails to reach some important aspects of the trial court's decision.

The Bottom Line:  The Supreme Court has accepted certiorari in Dukes, but don't bet on it settling the most important issues.

Courts have long recognized that class actions are not available under the FLSA because it has its own collective action procedure contained in section 16(b) of the Act, 29 U.S.C. section 216(b).  Section 16(b) permits a collective action to proceed if the members of the putative class are “similarly situated.” Among other differences from Rule 23, the FLSA’s collective action provisions require that claimants affirmatively "opt into" the litigation. 

Many states, of course, have their own versions of the FLSA, but most do not echo its enforcement provisions.  Thus, in most such jurisdictions, plaintiffs can assert a state law wage and hour claim through the vehicle of a Rule 23 class action.  Any number of tactical decisions can drive the decision whether to assert state law claims, including the available damages, statute of limitations, or counsel's preference for the Rule 23 or section 16(b) standards.

But what if the plaintiffs want to bring a section 16(b) collective action and a Rule 23 state law class action in the same case?  Does that mean that the putative class members will receive confusing notices telling them that they must opt into the federal claims/do nothing on the state claims versus do nothing on the federal claims/opt out of the state?

Courts are divided, but a pair of recent cases holds that because the two procedures are incompatible, and because the state law claims would interfere with the federal scheme.  These courts have found that state law Rule 23 class cannot be combined with a collective action claim and that, in fact, the differences are so vast that it may even be necessary to dismiss the state law claim outright.  Most recently, in Pittman v. Westgate Planet Hollywood Las Vegas, LLC.pdf, the plaintiffs, who worked in various positions for the Planet Hollywood Towers in Las Vegas, contended that their employer did not pay them for overtime hours.  The court conditionally certified the class under the FLSA, but following the filing of opt-ins, they sought to add a Rule 23 class action under Nevada state law.   The court found that the plaintiffs could not pursue both class and collective action claims because it had already conditionally certified the class under the FLSA, and the state law claims were preempted.  It found that the state enforcement scheme was incompatible with the federal and that, in any case, it appeared that individual issue might prevail.

Three days later, the Ninth Circuit refused review of a similar decision from the same court.  In Daprizio v. Harrah's Las Vegas, Inc.pdf a different judge for the District of Nevada also found that the FLSA preempted state law class actions for the same reasons.  The Daprizio action involved casino staff who claimed that they were required to come in 10-15 minutes early each day for pre-shift meetings, but were not paid for the time.  Importantly, the court had held that preemption required the actual dismissal of the state law claims.  The Ninth Circuit refused to accept the appeal under Federal Rule 23(f) because the trial court’s order technically was not a decision refusing to certify the case, and thus did not fall within Rule 23’s ambit.

The Bottom Line:  Class and collective actions make look alike in some respects, but the differences between the two are great.  While some courts will permit them to proceed in tandem, others have found that the two are in fact incompatible, and that the state law claim should give way to the federal.

A Postscript:  An astute reader alerted us that on December 7. 2010, the court in Daprizio reconsidered its order in light of the intervening Ninth Circuit decision in Wang v. Chinese Daily News, Inc.pdf 623 F.3d 743 (9th Cir. 2010).  The Wang decision is not strictly on point in that it did not deal with the procedural conflict between FLSA collective actions and Rule 23 class actions, but rather reached the unremarkable result that the FLSA's substantive provisions do not preempt similar state law requirements.  While the district court noted that Wang did not address the same issues, still it concluded that reconsideration was appropriate, and directed the case to proceed as two separate classes, one under the FLSA, and one under state law.

A Second Bottom Line:  Attempts to combine FLSA and state wage and hour law claims often lead to unpredictable results.

Anyone who practices in the class action arena is aware of the requirements of Rule 23(a) of the Federal Rules of Civil Procedure, which, as a threshold matter, obligate a plaintiff to demonstrate (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy of representation. As a practical matter, most challenges to certification focus on commonality and typicality and upon the 23(b)(3) requirements that class action issues predominate and that a class action be the superior means of handling the case.

These requirements are often not a major issue in cases under the WARN Act, 29 U.S.C. §§ 2101 et seq., because of the very nature of the statute. The WARN Act doesn't even apply unless at least 50 employees have suffered a loss of employment, so that numerosity is generally not an issue. Because the statute requires that the same notice be given to the employees, and because its obligations are triggered based upon the size of groups of employees, commonality, typicality, and predominance are likewise usually not hard to prove. Put another way, unlike statutes such as the Fair Labor Standards Act, the substantive law rarely dictates an individualized inquiry, so that the hardest elements of Rule 23 are not difficult to establish. Thus, in some respects it is easier for a plaintiff to obtain certification of a WARN Act class than those under many other statutes.

Continue Reading