Want to read tea leaves?  One of the questions arising immediately in the wake of the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. __, 131 S. Ct. 2541 (2011), was whether its holdings would apply to cases under the FLSA.  Defendants can point to much of the Dukes Court’s language, but plaintiffs, and some courts, question whether it does apply given that Rule 23 does not govern collective litigation under section 16(b) of the FLSA.  A recent Supreme Court entry has suggested to some that the Court has applied Dukes to FLSA cases, but a more realistic reading may be less optimistic.

Many of you are already aware of the lengthy and colorful saga of the case of Wang v. Chinese Daily News, Inc., a combined FLSA and California state law case that began at roughly the same time as the original district court decision in Dukes. The plaintiffs in Wang asserted that the employer had misclassified newspaper reporters as exempt.  The district court certified a class of 187 employees in 2005 under both state and federal law.  The court was soon chagrined, however, by generally low opt-in numbers with respect to the FLSA claim and, more importantly, by the extremely high opt-out rates with respect to the state law claims.  The plaintiffs successfully claimed that the employer had sought to deter class participation by conduct such as terminating one of the representative plaintiffs on the day before her deposition and making opt-out forms on a table at work with the sign “Don’t Tear the Company Apart!”.   After addressing questions regarding the employer’s communications with the class members, the district court turned to the merits of the plaintiffs’ claims that they had been misclassified.  In a decision that was noteworthy itself, the district court granted summary judgment on the merits in the plaintiffs’ favor, finding that the reporters did not perform exempt work.  In 2007, after a long trial relating to damages, a jury awarded the class $2.5 million, an amount that grew to $7.7 million after the trial court completed a bench trial regarding injunctive relief and state law issues.  The district court further directed an additional, supervised opt-in period to expand the class. The Ninth Circuit affirmed, citing what it described as the employer’s coercive tactics in discouraging class participation. The defendant sought certiorari from the United States Supreme Court.

On October 3, 2011, the Supreme Court vacated and remanded the case. Its entry, in its entirety, states:

    “Petition GRANTED. Judgment VACATED and case REMANDED for further consideration in light of Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ____ (2011). Justice Breyer took no part in the consideration or decision of this petition.”

A housekeeping matter:  Justice Breyer did not participate because district court Charles R. Breyer, who sat on the Ninth Circuit panel in the case by designation, is his brother.

Obviously, there is no written opinion, but the entry has raised hopes by some as an indication that the Supreme Court has explicitly held that Dukes will apply to FLSA cases.  Analytically, we believe that Dukes does apply to such claims, as the Supreme Court’s commonality analysis in Dukes was identical to that used to determine whether the plaintiffs are “similarly situated” under section 16(b) of the FLSA. Still, the entry is less than clear on this point.  The Ninth Circuit in Wang relied heavily on its own en banc decision in Dukes (the opinion the Supreme Court reversed) and permitted a 23(b)(2) class to proceed using the analysis the Supreme Court expressly rejected in Dukes.    While the Wang case contained a collective action claim under the FLSA, given the Rule 23 and state law issues, it is hard to say that the Supreme Court definitively addressed the FLSA issue.

The Bottom Line:  Dukes applies to wage and hour litigation and should apply under the FLSA, but there is still an open question as to whether lower courts will follow it in FLSA cases.