Ninth Circuit Reverses Itself And Finds That At Least Some ERISA Claims Can Be Compelled To Arbitration

By Greg Mersol on August 23, 2019 Posted in ERISA

But Do You Really Want To In All Cases?

The Employee Retirement Income Security Act of 1974 (“ERISA”) was the largest statute ever passed by Congress at the time it was enacted and has only grown further since then. In the 44 years that have followed its effective date, so too have grown the number of opinions, and changes in direction, among the courts.

There is little question that ERISA functions unlike many other statutes. It has one of the broadest preemption clauses of any federal statute. 29 U. S. C. § 1144(a). It has its own unique enforcement provisions in section 502 (29 U.S.C. § 1132) that are deceptively short but have spawned four decades of disputes over what may or may not be a topic of litigation and the available damages. As the Supreme Court has long recognized, the statute’s enforcement provisions are a unique marriage of the common law of trusts and Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185. See, e.g., Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987); Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). Particularly as to benefit claims, ERISA not only encourages but requires claims procedures that include mechanism for review. 29 U.S.C. § 1133; 29 C.F.R. § 2560.503-1.

So, given all that, can the employer or plan require arbitration of ERISA claims? Which ones? When? And might they really want to?

Only seven years after ERISA’s passage, the Ninth Circuit addressed at least some of these questions in Amaro v. Continental Can Co., 724 F.2d 747 (9^th Cir. 1984). The Amaro case involved an interesting fact pattern. There, a unionized employer laid off a number of employees in the years following ERISA’s passage. The union grieved the terminations under the collective bargaining agreement (CBA) which, as most do, culminated in binding arbitration. The arbitrator concluded that the layoffs were precipitated by market conditions and denied the grievance under the CBA. Unhappy with this result, the employees filed suit under section 510 of ERISA (29 U.S.C. § 1140 – ERISA’s anti-retaliation provision), contending that the discharges (and those following the period covered by the arbitration decision) were motivated by a desire to prevent them from accumulating years of service under the plan. Continue Reading

Tennessee District Court Refuses Conditional Certification of Class of Assistant Managers

By Greg Mersol on August 21, 2019 Posted in FLSA

In collective actions under the FLSA, courts typically apply a lower standard to the first “conditional certification” stage. In some cases, that might be warranted, but in many instances courts will undertake an unduly lenient review and conditionally certify cases that have no business proceeding as a class and have no realistic prospect of surviving as a class at the higher second stage. These rulings likely run afoul of the admonition of the Federal Rules of Civil Procedure that district court proceedings should be employed “to secure the just, speedy, and inexpensive determination of every action . . . .” F.R. Civ. P 1. Instead, such rulings rely upon the time, expense and burden of post-notice litigation to pressure the defendant into settlement. Indeed, one line of cases notes that a court ruling on a motion for conditional certification should be mindful of its obligation “to refrain from ‘stirring up unwarranted litigation.’” Rowe v. Hospital Housekeeping Systems, LLC., Case No. 17-9376 (E.D. La. Feb. 6, 2018) (and cases cited therein).

Increasingly, when courts do undertake to examine the merits, even at the initial stage, it becomes obvious that the matter will never survive as a collective action. This is particularly true in cases in which the employer’s policies are facially lawful but the plaintiff tries to allege some class-wide policy to “violate the policy.”

A recent case from the Middle District of Tennessee illustrates this point. In Ratcliffe v. Food Lion, LLC, Case No. 3:18-cv-01177 (M.D. Tenn. Aug. 16, 2019), the plaintiffs brought a fairly typical FLSA collective action – one contending that assistant managers at a grocery chain did not exercise the appropriate amount of management responsibility or independent judgment and were therefore misclassified as exempt. When the plaintiff moved for conditional certification of a proposed class of assistant managers company-wide, the court noted and applied the traditional lower standard, but also noted that the plaintiff is still required to produce factual support “for the existence of a class-wide policy or practice that violates the FLSA.”

In this instance, many of the basic, and to some degree overlapping, facts were undisputed and were common to the claimed collective class members. They were all assistant managers working for the same employer under the same job description, and all were classified as exempt. Matters in common, yes, but none illegal. Similarly, the company used uniform policies across all of its stores. Again, nothing illegal about that. And that was the problem. The company’s job descriptions described a job that would be exempt under the FLSA. To prevail, the plaintiffs had to prove that despite the written policies there was some unwritten policy to violate them on a class-wide basis.

This is, incidentally, a fatal flaw in many FLSA cases that purport to be brought on a class-wide basis.

Both sides made evidentiary submissions mostly recounting the experiences of individual assistant managers at individual stores. The court refused to make any credibility determinations and largely ignored the employer’s evidence, but still found that proof of a nationwide, uniform “policy to violate the policy” (our words, not the court’s) was lacking. Instead, the court found, the proposed class members’ experience depended on what happened at each individual store and under the different managers at each location. Moreover, different assistant managers had different specific sets of duties. Under those circumstances, the court found that treating the case as a collective action would be both procedurally unwieldy and unfair to the defendant. It therefore denied certification.

The bottom line: Absent genuine evidence of a “policy to violate the policy” on a company-wide basis, courts should decline even conditional certification when the employer’s policies are facially lawful.

Ohio Supreme Court Addresses Waiver of the Right to Arbitrate in the Putative Class Action Context

By John Lewis on August 19, 2019 Posted in Arbitration

In Gembarski v. PartsSource, Inc. (Slip Opinion No. 2019-Ohio-3231, decided Aug. 14, 2019), the Supreme Court of Ohio clarified the standards for waiver of the right to arbitrate in the class action context where only unnamed putative class members but not the single named plaintiff had agreed to arbitration. The court ultimately concluded that the employer did not waive the right to raise the “arbitration defense,” and that not raising arbitration in the answer had no impact on the company’s ability to challenge Civil Rule 23 issues at class certification.

The Background

In October 2012, Edward Gembarski brought a class action against his prior employer, PartsSource, claiming breach of contract, unjust enrichment, conversion, equitable restitution, constructive trust and “money had and received.” PartsSource filed an answer denying the class action allegations and that the action could proceed as a class action. Nearly three years later, in September 2015, Gembarski, for the first time, sought class certification.

The trial court referred the case handling to a magistrate. PartsSource opposed the motion to certify, arguing, among other things, that Gembarski could not meet the typicality or adequacy requirements for certification because those putative class members who signed arbitration agreements could not be part of the class. In response, Gembarski maintained that PartsSource knew of its claimed right to arbitrate at the beginning of the action yet failed to assert any “arbitration defense.”

District Court Decertifies FLSA Collective Action With Independent Contractor Issues

By Greg Mersol on August 9, 2019 Posted in FLSA

We’ve commented many times before that relatively few collective actions survive the “second stage” motion to decertify or, relatedly, an unofficial “third stage” when the trial court actually considers how the matter will be managed at trial. Here is another variation on that theme – an unusual case involving a lender’s claimed involvement in the failure to pay wages.

The case of Garcia v. Peterson, Civil Action H-17-1601 (S.D. Tex., August 5, 2019), arose out of the wind-down of Graebel Van Lines, which once billed itself as the largest privately owned moving company in the United States. The company operated through its own employees, through affiliates and by independent contractor arrangements. According to the 31 plaintiffs, all of whom worked as independent contractors for Graebel affiliates, they received limited payment or no payment at all for the services they performed during the last three to four months of the company’s operation. They settled their claims against both Graebel and its affiliates, but continued the litigation against one of its secured lenders, contending that controlled Graebel’s operations during its final months and should be liable to them. Continue Reading

Ninth Circuit Undermines Use of Time Studies in Disposing of Wage and Hour Claims in California

By Greg Mersol on August 8, 2019 Posted in Off-the-clock

Two years ago, we blogged a pair of cases with similar fact patterns and outcomes involving the successful use of time studies (See our October 13, 2017 and October 16, 2017 blog posts). In both cases, shoe retailers required employees to undergo brief security checks before leaving the store. The employees in both cases brought Rule 23 class claims under California law to recover wages and the usual list of California damages arising from the time spent in those checks. In both cases, the district court relied on time studies that the time spent was minimal, and thus granted summary judgment for the employer under the de minimis doctrine.

One of those two cases, Rodriguez v. Nike Retail Services, Inc., Case No. 17-16866 (9^th Cir., June 28, 2019), has now been reversed. Relying on the intervening California Supreme Court authority in Troester v. Starbucks Corp., 421 P.3d 1114 (Cal. 2018), the court found that the district court had improperly applied the federal de minimis doctrine to the plaintiffs’ claims. Although the state Supreme Court in Troester had rejected the federal 10-minute standard, it had left open the door to the question of whether California would apply the doctrine to a shorter span of time. The Ninth Circuit concluded, however, that the application of a shorter period was unlikely, and found that there probably was no de minimis defense available under California law.

So does that mean time studies are worthless? Nope. First, the Rodriguez case was decided under California law. Nothing in the opinion suggests that a time study could not be used effectively under existing FLSA case law. Such a study can still be used to demonstrate that the time spent in uncompensated activities was, indeed, de minimis and would not give rise to a claim under federal law. Hence, proper time studies can still be dispositive under the FLSA and the laws of most states.

Second, the studies did show that the time spent in the security checks was minimal, and thus would have lessened the amount of time (and pay) the plaintiffs were claiming. Such a reduction would also be valuable in a claim under the FLSA and its state law counterparts in several respects. It would, of course, reduce the available recovery. In many cases, it might also reduce the claim to zero, particularly in “gap time” situations in which the employees continue to earn above the minimum wage but have not worked in excess of 40 hours per week.

The bottom line: Despite recent unfavorable Ninth Circuit authority under California law, time studies can be a useful tool to limit or dispose of wage and hour claims.

The Fifth Circuit Agrees With Its Sister Circuits That Class Arbitrability Is a Gateway Issue for Courts, Not Arbitrators

By John Lewis on July 24, 2019 Posted in Arbitration, Arbitration Agreements, Class Action Litigation

In a predictable decision, the Fifth Circuit has held that the availability of class arbitration is a gateway issue for the courts to decide, absent “clear and unmistakable” language in the arbitration agreement to the contrary. The appellate court didn’t find such language in 20/20 Commc’ns v. Crawford, Case No. 18-10260 (5th Cir. July 22, 2019).

Instead, the Court followed the lead of several of its sister circuits – the Fourth, Sixth, Seventh, Eighth, Ninth and Eleventh Circuits. We previously blogged a number of those decisions dealing with “gateway issues” and arbitration (See our October 25, 2018 blog that also referenced our prior articles on the subject).

One might question why this issue deserves a blog, but it is indeed one of note because of the view of the arbitrator, one that unfortunately is not alone. In this case, the arbitration agreement used straightforward language allowing the arbitrator to “hear only individual claims” and generally forbidding class or collective arbitration. Undeterred, the arbitrator permitted class arbitration on the theory that the class action prohibition was invalid under federal law. Continue Reading

NY Law Doesn’t Prevent Arbitration of Sexual Harassment Claims

By John Lewis on July 1, 2019 Posted in Arbitration

Recent New York legislation in reaction to the #MeToo movement has sought to limit or foreclose arbitration of employment-related disputes. See N.Y. C.P.L.R. § 7515 (“§ 7515”) and its June 19, 2019, amendment, bill S6577/A842. The bill, initially signed into law in April 2018, was to “deal[] with the scourge of sexual harassment.” See N.Y. State Senate, Stenographic Rec., 241st Leg., Reg. Sess., at 1855 (Mar. 20, 2018). But some believed that the Federal Arbitration Act (FAA) would likely preempt the legislation, especially when § 7515(b) expressly provided “[e]xcept where inconsistent with federal law.”

Now, one district court has found the legislation is preempted by the FAA. See Mahmoud Latif v. Morgan Stanley & Co., LLC, et al., Case No. 1:18-cv-11528 (S.D. New York 6-26-19). On June 26, 2019, District Judge Denise Cote found provisions of New York law impacting arbitration preempted by the FAA. In reaching that conclusion, Judge Cote applied an analytical approach consistent with recent U.S. Supreme Court decisions. Continue Reading

Tennessee District Court Conditionally Certifies ADEA Collective Action

By Greg Mersol on June 14, 2019 Posted in FLSA

Connecting the dots will likely be a problem down the road . . .

The overwhelming majority of employment class or collective actions today are wage and hour matters. The two-step paradigm for certifying wage and hour claims under the Fair Labor Standards Act has, despite Congressional intent to the contrary, enabled much of that boom in overtime litigation.

The Age Discrimination in Employment Act expressly incorporates much of the FLSA’s enforcement procedure, including the section 16(b) requirement that similarly situated claimants actually opt in. Indeed, one of the most commonly cited early decisions supporting the procedure, the Lusardi opinion (118 F.R.D. 463 (D.N.J. 1987)), was actually in an ADEA case. Incidentally, the same procedure applies under the Equal Pay Act, although such claims are far less common than those for overtime. But while the ADEA uses FLSA procedures, collective actions under that statute are still much less common than those under the FLSA. Continue Reading

Can Delivery Drivers Be Compelled to Arbitrate After New Prime? New Jersey Appellate Courts Seem to Take Conflicting Positions

By John Lewis on June 10, 2019 Posted in Arbitration

After New Prime v. Oliveira, 139 S. Ct. 532 (2019), many wondered if state arbitration law could be applied when transportation workers were found to be exempt from the Federal Arbitration Act (FAA) based on § 1. See our January 17, 2019, March 12, 2019 and April 29, 2019 blog posts on the issues raised by New Prime in the transportation industry. Two New Jersey appellate panels now have considered the issue and reached what appear to be conflicting positions.

In the first decision, Colon v. Strategic Delivery Solutions, LLC, Case No. A-2378-1714 June 4, 2019), a panel of the Appellate Division considered a trial court order dismissing a class action complaint brought by three drivers who delivered pharmaceutical products and general merchandise to Strategic Delivery Solutions, LLC (SDS) customers. Without deciding whether Gloria Colon and the other plaintiffs fell within the § 1 exemption, the trial court required individual arbitration of their New Jersey wage and hour claims while dismissing their class action complaint and jury demand. Continue Reading