Three years ago, the Supreme Court found in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551-52 (2011) that courts “frequently” will need to look to the merits in determining whether certification is appropriate, particularly where the issues of the merits and certification may overlap. Despite this pronouncement, plaintiffs often assert that courts should not consider the merits in making the certification determination. In some instances, however, irrespective of certification, problems as to the merits will dispose of the case entirely, as two cases decided the same day by the United States District Court for the Southern District of New York demonstrate. Lola v. Skadden, Arps, Slate, Meagher & Flom LLP, Case No. 13-cv-5008 (RJS) (S.D.N.Y. Sept. 16, 2014); Saleem v. Corporate Transportation Group, Ltd., Case No. 12-CV-8450 (JMF) (S.D.N.Y. September 16, 2014). The two cases look very different in many respects, but both failed on dispositive motions because the named plaintiffs, or perhaps the class as a whole, had no claim.
In the first case, Lola, the putative class members were licensed attorneys doing work on a Skadden, Arps project through a legal staffing agency. While the lead plaintiff worked for the agency, apparently (and successfully) to garner greater publicity, he named the Skadden, Arps firm first as the lead defendant. The crux of his claim was that although he was an attorney, the work he did was basic document review that did not require any special legal judgment or discretion. As a result, he contended, he should have been paid overtime for hours worked in excess of 40 hours per week. Rather than engage in class discovery, the defendants moved to dismiss the claims under Rule 12(b)(6). They asserted that the work was exempt under the professional exemption regardless of whether it was “glamorous”, “high-profile”, or neither. The court found that the matter of whether the work was professional or not turned on state law, and as the work was performed in North Carolina, that state’s law controlled. While the court ultimately concluded that the work could have been done by a non-lawyer under a lawyer’s supervision, that did not change the fact that document review (as opposed to mere photocopying or collating) was a legal service. Without ever having to address whether a class was warranted, the court concluded that the work described in the complaint was within the scope of the practice of law and dismissed the case.The second case, Saleem, involved very different facts and a different procedural posture. The Saleem case involved for-hire limousine drivers in New York. They contended that they were misclassified as independent contractors and thus deprived of overtime under state and federal law. Unlike the Lola case, the court had conditionally certified a class under section 16(b) of the FLSA (but, tellingly, had refused to certify a Rule 23 class under state law). Both parties moved for summary judgment on the issue of whether the plaintiffs were independent contractors or employees, and the defendant moved in the alternative to decertify the class. As to the merits, the parties drew predictable lines. The plaintiffs asserted that they were actually employees because they were given assignments by the company, were monitored and at times disciplined by the company, were at the mercy of the company’s dispatch system, had to observe the company dress code, were subject to a non-compete agreement, used only basic driving skills, had often worked for the company for years. The defendant asserted that the plaintiffs could and did turn down assignments, were permitted to take on work for other companies despite the covenant not to compete, were rewarded (or lost business opportunities) based on their own initiative, and bore the risk of profit and loss. On balance, the court found that the plaintiffs were independent contractors and granted summary judgment for the defendant. This ruling mooted the need to decertify the class. One wonders, however, in light of the fact-intensive inquiry and earlier denial of Rule 23 certification, whether the case would have withstood that motion had it not failed on the merits.
The Lola and Saleem cases both demonstrate that the merits can and often do matter in employment class actions. While frequently the clash over the importance of the merits takes place at the certification stage, they can result in disposal of the case either before or after it is certified. The timing of a dispositive motion will obviously depend on what precisely has been alleged and, often, the court, but it may result in the case being dismissed entirely, and not just resolution of the class issues.
The bottom line: Merits issues may not only undercut a class, but dispose of it entirely.