Sixth Circuit Addresses RICO and FLSA Claims

Successful FLSA plaintiffs will likely receive not only the claimed unpaid overtime or minimum wage, but also liquidated (double damages) and payment of their attorney fees. But what if they want . . . more? Will a RICO claim get them additional funds?

That was the question the Sixth Circuit has answered in a pair of cases arising out of a small local pizza chain in western Michigan. In Torres v. Vitale, Case No. 19-1515 (6th Cir. March 31, 2020), and in Collier v. Logiudice, Case No. 19-1829 (6th Cir. June 26, 2020), the plaintiffs worked at one or more of the five “Vitale’s” family-owned pizza restaurants. According to the complaints, the company operated essentially two payroll systems. Hours up to 40 per week were recorded and paid through the regular payroll. Hours over 40 were recorded by hand and then paid out in cash at regular (not overtime) rates and (apparently) without any tax withholding. Continue Reading

Illinois District Court Decertifies FLSA Collective With 1,600 Opt-Ins

Just before the pandemic triggered closings across the country, we identified an Illinois case as a good candidate for discussion. As the pandemic has eased, we’re taking the time now to address issues relating to the decision as to whether an off-the-clock case that has been conditionally certified should be permitted to remain as a collective action.

In Meadows v. NCR Corporation, Case No. 16 CV 6221 (N.D. Ill. March 4, 2020), the plaintiffs were hourly employees whose duties related to the servicing of ATMs and registers at customer sites. They brought a collective action claiming entitlement to additional overtime, alleging a nationwide policy requiring that they and those like them were forced to work off-the-clock, focusing in particular on travel to customer locations. Continue Reading

Court Vacates Jury Award Due to Problems With Plaintiffs’ Expert Reports

Few collective actions are tried, and even when they are, unexpected problems can easily arise. Those problems in a recent case led to the court vacating a jury verdict for the plaintiffs due to what might be characterized as an untimely expert report. But the case really came down to an initial expert report that used incorrect methodology to exaggerate damages, an approach that backfired badly for the plaintiffs.

The case of Petrone v. Werner Enterprises, Inc., Case No. 8:11CV401 (D. Neb. June 22, 2020), involved trainee truck drivers. The plaintiffs contended that during their training, they were not properly compensated for breaks of short duration (such as 15 minutes) or for time spent resting in the sleeper berth of their trucks. In 2011, they brought a collective action under the Fair Labor Standards Act and a class action under Nebraska law. Continue Reading

Following AAA Rules, the Sixth Circuit Sends Non-Solicitation Action to Arbitration

We recently described how organization rules, like those of the American Arbitration Association (AAA), can have a legal impact on whether a court or an arbitrator resolves a dispute. See our blog post of May 4, 2020, regarding a recent Third Circuit opinion involving those rules. Now the Sixth Circuit has reconfirmed it.

In Blanton v. Domino’s Pizza Franchising LLC, No. 19-2388 (6th Cir. June 17, 2020), the U.S. Court of Appeals for the Sixth Circuit decided that an arbitrator should hear the dispute involving an alleged non-solicitation agreement a national pizza restaurant chain required in its franchise agreements. Continue Reading

Second Circuit Upholds Fluctuating Work Week Despite Potential Payroll Issues

More than 75 years ago, just four years after the passage of the Fair Labor Standards Act (FLSA), the United States Supreme Court recognized what has now become known as the fluctuating work week (or “FWW”) as an alternative to the strict payment of overtime at time and a half. Overnight Motor Transportation Co. v. Missel, 316 U.S. 572 (1942). The general idea is that an employer guarantees a nonexempt employee a fixed amount of pay for the work week – whether over or under 40 hours – in exchange for paying overtime at half-time rates rather than at time and a half. The Supreme Court reasoned in 1942 that the arrangement had a mutual benefit to the employer and the employee: The employee was guaranteed a set amount for budgeting and planning purposes; the employer had some relief on overtime.

It took the U.S. Department of Labor (DOL) 28 years to issue regulations on the topic, at which time it came up with the label of “fluctuating work week.” 29 C.F.R. § 778.114. Since then, there have been numerous opinion letters and cases outlining when and when not the employer might take advantage of an FWW arrangement. We’ve previously blogged about some of those cases here and here. Continue Reading

Arkansas District Court Reduces Attorney Fees in FLSA Collective Action to $1

It’s hard not to express cynicism when discussing attorney fee awards in overtime class and collective actions. Courts have adopted wildly different tests and benchmarks, and different jurisdictions apply very different levels of scrutiny. The availability of fees has fueled the epic growth in Fair Labor Standards Act (FLSA) class and collective litigation. Many of these cases at present carry relatively little risk for the plaintiffs, given the frequency with which courts will conditionally certify classes and the resulting pressure on the defendant to settle.

We’ve noted in the past the questions various courts have raised when they actually begin to examine the fees claimed by some plaintiff firms (See our blogs from 10/7/2014, 10/19/2018 & 2/7/2018), but a recent case from a district court in Arkansas details issues with a significant fee award request in what it described as a “run-of-the-mill FLSA collective action.” Vines v. Welspun Pipes, Inc., Case No. 4:18-CV-00509-BRW (E.D. Ark. June 9, 2020). The Vines case involved the settlement of a collective action with approximately 100 opt-ins. The parties initially settled the case for approximately $300,000, with $89,000 – or just short of 30 percent – going for attorney fees. When the court was presented with a motion to approve the settlement, it chose to review the attorney fee award and requested information such as a better breakdown of the two classes involved, the attorneys’ billing records and sample copies of the contingency fee agreements signed by the representative parties. That request sparked extensive motion practice, roughly nine months of litigation and further negotiation over the attorney fee issues, which culminated in the court awarding only $1 (yes, one dollar) in fees, plus roughly $2,800 in costs.

So what happened? It was a combination of things.

First, the court rejected the pragmatic argument that allowing the attorneys to agree on the fee award was “the reality of the negotiation process.” To the contrary, the court found that “it has become apparent that, in practice, lawyers’ fees are the driving force in many FLSA cases.”

Second, the court reviewed the purpose of FLSA fee awards, and fee awards in general, and noted that the plaintiffs’ FLSA lawyers were taking on less risk than for other types of cases, such as civil rights litigation, as the cases can generally be evaluated quickly and tend to settle fairly quickly. The desirability of taking on such cases was reflected in the hundreds of cases filed in that district alone, most of which essentially involve form pleadings and most of the discovery work being undertaken by the defendant.

Third, the court was plainly irritated by the focus on fees as a goal of the litigation, noting that the case had dragged on at length on the attorney fee issues, the case was grossly overstaffed (including 15 timekeepers) and there were various inadequacies in billing records. The court specifically called out as excessive a provision in the contingency agreements that the attorneys would receive both 40 percent of the overtime recovery but also any court-directed fee award.

While much of the court’s criticism was directed at the specific plaintiff’s counsel, the points it raised apply with some frequency in wage and hour litigation generally. While contingency-fee awards have become common, a more careful review of the traditional lode-star analysis and consideration of risks and downsides might yield a much different result. Successful FLSA plaintiffs, by statute, are entitled to a reasonable fee award, and many plaintiffs’ attorneys earn that fee, but the lack of uniformity and large sums involved all make these waters difficult to navigate.

The bottom line: Fee awards under the FLSA can get messy if the court delves into the merits.

Illinois District Court Denies Certification of Discrimination Action Due to Problematic Class Representatives

A key premise of a class action is that a court can, in essence, review the merits of the class representative’s claims and apply the result of that review across the class as a whole. This concept is most readily found in Rule 23(a)(2) (commonality), (a)(3)(typicality) and (a)(4)(adequacy of representation), but it also finds its way into Rule 23(b)(3) in the form of predominance and superiority.​ Most challenges to class status focus on issues such as commonality and predominance, but challenges based on Rule 23(a)(4) adequacy of representation are less common.

 

A recent case from the Northern District of Illinois, however, discusses a number of issues relating to the adequacy of the putative class representatives. In Pruitt v. Personnel Staffing Group, LLC d/b/a MVP, Case No. 16-cv-5079 (N.D. Ill. June 8, 2020), the two plaintiffs brought a putative class action against a staffing company and several of its clients, contending that they and the proposed class members were denied job assignments on the basis of race. Following a tortuous procedural history, the defendants moved the court to deny certification, relying heavily on the adequacy of representation of the named plaintiffs under Rule 23(a)(4). Continue Reading

Ninth Circuit Finds That Settlement of Individual Claims Moots Class Allegations

Why, no, a plaintiff can’t eat his cake and have it, too

It is often the case that plaintiffs who cannot proceed as a class will settle their individual claims. But what if they really want an incentive award, or their attorneys really want a class-size fee award? Can they settle the individual claim and then continue to chase the class allegations?

Nope.

At least that’s what the Ninth Circuit just held in Brady v. AutoZone Stores, Inc., Case No. 19-35122 (9th Cir., June 3, 2020). In the Brady case, the plaintiff brought relatively straightforward claims for alleged missed break periods under the law of the state of Washington. After what the court described as “several years of litigation,” the district court found no basis, and refused, to certify a class. Continue Reading

A Lawful Job Description Doesn’t Support Conditional Certification

Virtually every brief seeking conditional certification will point to an employer policy that allegedly ties the collective or class together. But as a growing number of courts are recognizing, a uniform policy is not sufficient; rather, the plaintiffs must point to some classwide policy or practice that is actually illegal.

That was the issue in the case of Elliott v. Barbecued Integrated, Inc., Case No. 19-62426-CIV-Singhal (S.D. Fla. May 29, 2020). The underlying facts were typical of misclassification cases in the restaurant industry. The defendant opted 68 Smokey Bones restaurants in a number of states. Generally, each location employed a general manager to run the restaurant as well as a kitchen manager, a service manager and a bar manager. The plaintiff, who had worked both as a kitchen manager and a service manager, contended that all but the general manager was misclassified as exempt and thus entitled to overtime. Continue Reading

Fifth Circuit Finds That Airport Supervisor Is Not Exempt From Arbitration

Once again, a court has considered the criteria for the transportation worker exemption from the Federal Arbitration Act (FAA), 9 U.S.C. § 1. This time an account manager for ISS Facility Services Inc., Heidi Eastus, who oversaw ticketing and gate agents at George Bush Intercontinental Airport in Houston, Texas, maintained that she was exempt from the FAA as a transportation worker. Eastus was assigned to supervise ticketing and gate agents for Lufthansa German Airlines, which sometimes entailed handling passengers’ luggage herself. But the Fifth Circuit panel found the FAA exemption did not apply. See Eastus v. ISS Facility Services, Inc., Case No. 19-20258 (5th Cir. May 27, 2020).

Eastus filed employment discrimination and retaliation claims against ISS and two Lufthansa entities. The defendants moved to compel arbitration premised on the arbitration provision in Eastus’ ISS employment agreement. Eastus responded that arbitration could not be ordered because she was exempt from the FAA. The district court granted the motion to compel arbitration. We have repeatedly addressed the uncertainty surrounding the tests for application of the FAA exemption. See our April 29, 2019, Sept. 13, 2019 and April 3, 2020 blog posts. As reflected in the discussion below, application of the correct test may involve analysis of complex and differing legislation. The ongoing search for proper exemption criteria has caused consternation in gig economy companies and may only be intensified by claims arising from the COVID-19 pandemic in the transportation industry. Continue Reading

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