Presenting a live 90 minute webinar with interactive Q&A Hybrid FLSA Collective Actions and State Wage and Hour Class Actions Navigating Procedural and Substantive Challenges in Pursuing or Defending Dual Filed Claims TUESDAY, JUNE 11, 2013 1pm Eastern 12pm Central 11am Mountain 10am Pacific Td Today s faculty features: Patrick G. Brady, Attorney, Epstein Becker & Green, Newark, N.J. Richard J. (Rex) Burch, Partner, Bruckner Burch, Houston Noah A. Finkel, Partner, Seyfarth Shaw, Chicago The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
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Hybrid FLSA Collective Actions and State Wage and Hour Class Actions Patrick G. Brady Patrick G. Brady Epstein Becker & Green, P.C. PBrady@ebglaw.com June 11, 2013 Webinar
Introduction Hybrid actions: FLSA collective actions and Rule 23 state wage hour class actions FLSAcollective actions: Opt in Conditional certification Similarly l situated Rule 23 state wage hour class actions: Opt out Numerosity, commonality, typicality, adequacy and superiority 6
Program Outline Recent trends and case law developments Considerations for litigating hybrid cases: Removal and Jurisdiction Class certification Settlement Q&A 7
Hybrid FLSA Collective Actions and State Wage and Hour Class Actions Navigating Procedural and Substantive Challenges in Pursuing or Defending Dual-Filed Claims Richard J. (Rex) Burch BRUCKNER BURCH PLLC 8 Greenway Plaza, Suite 1500 Houston, Texas 77046 Telephone: 713.877.8788 rburch@brucknerburch.com 8
Trends in Hybrid Collective Actions Among FLSA cases, the most complex type is the hybrid action where state wage and hour violations are brought as an opt out class action in the same action as the FLSA opt in collective action[.] Beckman v. KeyBank, N.A., 12 CIV. 7836 RLE, 2013 WL 1803736 (S.D.N.Y. Apr. 29, 2013) 9
Types of Hybrid Actions FLSA collective action combined with: 1. State law equivalents Statutory law Common law 2. State law supplements (e.g., claim for gap time ) 3. FLSA collective action with related federal claims (e.g., FLSA plus ERISA, FLSA plus RICO) 10
Ross v. RBS Citizens, N.A. 7th Circuit affirmed certification of both an off-theclock class and a misclassification class, in the same case; Supreme Court GVR d in light of Comcast Corp. v. Behrend. Parties announced settlement May 31, 2013 No longer precedent, but may be persuasive 11
Wang v. Chinese Daily News, Inc. Court originally certified under FRCP 23(b)(2) ) and 23(b)(3) 9 th Circuit it affirmed certification under FRCP 23(b)(2), did not reach FRCP 23(b)(3) SCOTUS GVR d based on Wal-Mart Stores v. Dukes 9th Circuit vacated Rule 23(b)(2) and 23(b)(3) certification, remanded for consideration under Dukes. u 12
Espenscheid v. DirectSat USA, LLC Hybrid class/collective actions are common and permissible Suggests standards for second stage collective certification and Rule 23 certification are similar (conflicts with Second, Third, Sixth, Tenth, and Eleventh Circuits). Decertification of collective action & Rule 23 class affirmed based on lack of representative evidence. 13
Defending Hybrid Wage Hour Actions: A Defense Df Perspective on Removal and Jurisdiction Patrick G. Brady Epstein Becker & Green, P.C. PBrady@ebglaw.com
Removal to Federal Court 28 U.S.C. 1441(a) a defendant may remove any civil action for which federal courts have original ii ljurisdiction i 28 U.S.C. 1331 original jurisdiction by virtue of a federal question, e.g., theflsa claim 28 U.S.C. 1446(b) each defendant has 30 days from its own date of service to file a notice of removal all defendants must consent to removal 15
No Federal Court Discretion to Hear State Law Claims In the Absence of Original or Supplemental Jurisdiction Federal Courts Jurisdiction and Venue Clarification Act of 2011: Modifies 28 U.S.C. 1441(c) Eliminates federal court discretion to hear state law claims not within ihi the original ii or supplemental ljurisdiction i of the district i court Requires that, upon removal, the district court shall sever from the action all claims [not within the original or supplemental jurisdiction of the court] and shall remand the severed claims to the State court from which the action was removed Applies to removed cases commenced, within the meaning of state law, on or after January 6, 2012 Thus, either original or supplemental jurisdiction is required to avoid remand of state wage hour claims 16
Supplemental ljurisdiction Over State t Wage Hour Claims 28 U.S.C. 1367(a) generally, district courts shall have supplemental jurisdiction over all other claims that are so related to claims [over which the court has original jurisdiction] that they form part of the same case or controversy With limited exception, Section 1367(a) requires the district court to exercise supplemental jurisdiction over such claims Lindsay v. Gov t Employees Ins. Co., 448 F.3d 416 (D.C. Cir. 2006) (citing New Rock Asset Partners, L.P. v. Preferred Entity Advancements, Inc., 101 F.3d 1492 (3d Cir. 1996)) 17
Same Case or Controversy Shahriar v. Smith & Wollensky Restaurant Group, Inc., 659 F3d234 F.3d (2d Cir. 2011) claims form part of the same case or controversy if they derived from a common nucleus of operative fact Ervin v. OS Restaurant Services, Inc., 632 F.3d F3d971 (7th Cir. 2011) same case or controversy requirement is satisfied where state law claims are closely related to an FLSA collective action De Asencio v. Tyson Foods, Inc., 342 F.3d 301 (3d Cir. 2003) [w]here the same acts violate parallel federal and state laws, the common nucleus of operative facts is obvious 18
District i t Courts May Decline To Exercise Supplemental Jurisdiction Where: 28 U.S.C. 1367(c) The state claim substantially predominates over the federal claim The state claim raises a novel or complex issue of state law The court has dismissed all claims over which it has original jurisdiction Other exceptional circumstances where compelling reasons for declining jurisdiction exist 19
State t Wage Hour Claim Substantially ti Predominates Over Federal Claim E.g., De Asencio v. Tyson Foods, Inc., 342 F.3d 301 (3d Cir. 2003) Plant employees brought representative action alleging violation of the FLSA and Pennsylvania wage hour law Employees first obtained collective action certification i under the FLSA, then moved for, and obtained, Rule 23 class certification of the state law claims Tyson appealed the Rule 23 certification, challenging gthe employees use of Rule 23 opt out provisions where an FLSA optin collective action had been certified, and disputing the district court s exercise of supplemental jurisdiction The Third Circuit held, in part, that the district court should not have exercised supplemental jurisdiction because the state law claims substantially predominated over the FLSA claim 20
[A] court must examine the scope of the state and federal issues, the terms of proof required by each type of claim, the comprehensiveness of the remedies, and the ability to dismiss the state claims without prejudice to determine whether the state claim constitutes the real body of the case. This necessarily is a case specific analysis. Here the federal action is an appendage to the more comprehensive state action. [P]ermitting litigation of all claims in the district court can accurately be described as allowing a federal tail to wag what is in substance a state dog. 21
Lindsay v. Gov t Employees Ins. Co., 448 F3d F.3d 416 (D.C. (DC Cir. 2006) Predomination i relates to the type of claim and where the state law claims li essentially ill replicate the FLSA claims, the state law claims plainly do not predominate 22
Original Jurisdiction Over State Wage Hour Claims: Section 1332(a) Diversity Jurisdiction 28 U.S.C. 1332(a) Between citizens of different states A corporation is a citizen of every state by which it has been incorporated and of the state where it has its principal p place of business Complete diversity Matter in controversy exceeds the sum or value of $75,000 Claims may not be aggregated to achieve the jurisdictional minimum ExxonMobilCorp.v. Allapattah Services, Inc.,et al., 545U.S. 546 (2005) 28 U.S.C. 1367(a) authorizes supplemental jurisdiction over those plaintiffs in a diversity action who do not allege a sufficient amount in controversy to invoke original jurisdiction 28 USC U.S.C. 1441(b) a civil action otherwise removable solely on the basis of diversity jurisdiction under Section 1332(a) may not be removed if any defendant is a citizen of the state in which the action is brought 23
Oii Original Jurisdiction idi i Over State Wage Hour Claims: Section 1332(d) CAFA Jurisdiction Class Action Fairness Act of 2005, codified at 28 U.S.C. 1332(d) district courts have original jurisdiction over any civil action: (a) In which the matter in controversy exceeds the sum or value of $5 million; and Claims of individual d class members are aggregated (b) Is a class in which any plaintiff is a citizen of a state different from any defendant Class action is a class under Rule 23 or similar state statute or procedural rule authorizing an action brought by one or more representatives as a class action 24
The Standard Fire Ins. Co. v. Knowles, 133 S.Ct. 1345 (2013) Plaintiff sought to certify a class of policyholders seeking certain insurance loss payments py and included in the Complaint a stipulation that aggregate damages would be less than $5 million On plaintiff s motion, the district court remanded, concluding that, in light of plaintiff s stipulation, the amount in controversy fell below the jurisdictional threshold Having granted certiorari, the U.S. Supreme Court concluded that a stipulation must be binding and, here, plaintiff s stipulation could not bind members of the proposed class before the class was certified [F]ederal jurisdiction cannot be based on contingent future events. Thus,stipulationstipulation by a class action action plaintiff, prior to certification of the class, that he, and the class he seeks to represent, will not seek damages that exceed $5 million, does not remove the case from CAFA s scope 25
Declining CAFA Jurisdiction Permissive 28 U.S.C. 1332(d)(3) District courts may decline the exercise of CAFA jurisdiction over a class action in which greater than 1/3 but less than 2/3 of the class members, and the primary defendants, are citizens of the state in which the action was originally filed, and upon consideration of various factors, including: Whether the claims asserted involve matters of national or interstate interest Whether the claims asserted will be governed by laws of the state in which the action was originally filed or by the laws of other states 26
Mandatory 28 U.S.C. 1332(d)(4) District courts shall decline to exercise CAFA jurisdiction over: A class action in which: (1) greater than 2/3 of class members are citizens of the state in which the action was originally filed; (2) at least 1 defendant is a defendant from which significant relief is sought; whose conduct forms a significant basis for the claims asserted; and who is a citizen of the state in which the action was originally filed; and (3) principal injuries were incurred in the state in which the action was originally filed; and During the 3 year period preceding the filing of that class action, no other classactionaction hasbeenfiled assertingthe the same or similarfactual allegations against any of the defendants on behalf of the same or other persons or Where 2/3 or more of the class members, and the primary defendants, are citizens of the state in which the action was originally filed 27
Be Careful What You Wish For: Defense Position on Supplemental Jurisdiction With Respect to Removal, Motions to Dismiss, and Opposing Class Certification Supplemental jurisdiction arguments may again arise in connection with motions to dismiss and/or opposition to class certification With respect to supplemental jurisdiction, consider if your position for purposes of removal/remand is in conflict with your position on a motion to dismiss and/or when opposing class certification 28
Defending Hybrid Wage-Hour Actions: A Defense Perspective On Certification and Settlement Noah A. Finkel Seyfarth Shaw LLP nfinkel@seyfarth.com
When to Oppose Hybrid Certification From the employer s perspective: the earlier, the better Removing class allegations could limit the scope of discovery The threat of opt-out class treatment is always a threatening specter for an employer and increases the settlement value of the case But be careful what you wish for 30 Copyright 2012 Seyfarth Shaw LLP
When to Oppose Hybrid Certification The usual case prevents three possible chances: At the pleading stage on a motion to dismiss In response to the plaintiff s motion for class certification In a preemptive, Vinole-style motion to deny class certification The timing is bound up with the strengths of the various arguments at these different stages 31 Copyright 2012 Seyfarth Shaw LLP
How to Oppose Hybrid Certification: Arguments for a Motion to Dismiss Impermissible supplemental jurisdiction DeAscencio v. Tyson Foods, Inc., 342 F.3d 301 (3d Cir. 2003) (declining supplemental jurisdiction over state law wage-hour claim where the exercise of jurisdiction would case the federal tail represented by a comparatively small number of plaintiffs to wag what is in substance a state dog. ) But now CAFA usually provides supplemental jurisdiction Plaintiff may file separate case in state court in response 32 Copyright 2012 Seyfarth Shaw LLP
How to Oppose Hybrid Certification: Arguments for a Motion to Dismiss FLSA preemption of state law overtime or minimum wage claims Most courts have rejected the argument Argument has force where FLSA claims are dressed up as state common law claims, which usually are brought when the state in which the employees work does not have a state overtime or minimum wage law Andersen v. Sarah Lee Corp., 508 F.3d 181 (4 th Cir. 2007) (state t common law claims for overtime are preempted by the FLSA s exclusive enforcement scheme) 33 Copyright 2012 Seyfarth Shaw LLP
How to Oppose Hybrid Certification: Arguments for a Motion to Dismiss Violation of the Rules Enabling Act Certification of a state law wage-hour class abridges the substantive opt-in right of the FLSA s Section 16(b) Dilworth v. Case Farms Processing, Inc., 2009 WL 2766991 (N.D. Ohio Aug. 27, 2007) Theory has been rejected by other courts 34 Copyright 2012 Seyfarth Shaw LLP
How to Oppose Hybrid Certification: Arguments for a Motion to Dismiss Inherent incompatibility An opt-out class action in the same case as an opt-in collective action would thwart Congressional intent behind the FLSA s opt-in requirement Many appellate courts recently have rejected the argument and have held that a plaintiff may pursue the two concurrently Busk v. Integrity Staffing Solutions, Inc., No. 11-16892 (9th Cir. April 12, 2013) Knepper v. Rite Aid Corp. (675 F3d249 F.3d (3d Cir. 2012) Ervin v. OS Rest. Servs., 632 F.3d 971 (7 th Cir. 2011) Shahriar v. Smith & Wollensky Rest. Grp., 659 F.3d 234 (2d Cir. 2011) Lindsay v. Gov t Emps. Ins. Co., 448 F.3d 416 (D.C. Cir. 2006) 35 Copyright 2012 Seyfarth Shaw LLP
How to Oppose Hybrid Certification: Arguments for a Motion to Dismiss No plausible ability to achieve class certification Twombly and Iqbal require a plaintiff to state a claim for relief that is plausible on its face and raises a right to relief above a speculative level Thus, a plaintiff in a Rule 23 case must make class allegations sufficient to show that it is plausible that they will be able to satisfy Rule 23 requirements after discovery May need a unique factual context or procedural context to succeed (i.e., near- binding adverse authority) 36 Copyright 2012 Seyfarth Shaw LLP
How to Oppose Hybrid Certification: Arguments Opposing Class Certification Just because appellate courts recently are tending to reject anti-certification arguments at the pleading stage does not mean that hybrid cases have the green light No Superiority under Rule 23(b)(3) Plaintiff bears the burden of proving that a state law wage-hour class action is superior to other available methods for the fair and efficient adjudication of the controversy. Normally, this should be difficult to do, especially post- Comcast v. Behrend. 37 Copyright 2012 Seyfarth Shaw LLP
How to Oppose Hybrid Certification: Arguments Opposing Class Certification Usually, Plaintiff already will have sent out a notice to members of the putative class advising them of their right to opt-in Opting-in requires minimal burden There is no fee to be paid Once in the case, an opt-in plaintiff can assert a state law claim to take advantage of greater remedies, limitations periods, or substantive standards Another notice could be confusing Possible exceptions: evidence of retaliation? lack of legal knowledge? 38 Copyright 2012 Seyfarth Shaw LLP
How to Oppose Hybrid Certification: Arguments Opposing Class Certification No Numerosity under Rule 23(a)(1) Rule actually asks whether joinder is impracticable It is a rigorous analysis, and not a mere counting exercise The FLSA s opt-in mechanism is among the most practicable forms of joinder Lenient standard No charge Simple form 39 Copyright 2012 Seyfarth Shaw LLP
How to Oppose Hybrid Certification: Arguments Opposing Class Certification Lack of Manageability or Standing Some cases use national FLSA collective action to locate class representatives for sub-class claims under the wage-hour laws of many states Some courts may find a multiple state law classes as posing manageability concerns under Rule 23 If the initial pleading contains claims for class actions under various state laws where the original Plaintiff did not work, there may be no standing to assert out-of-state of claims. See Smith v. Pizza Hut Inc., No. 09-cv-01632 (D. Colo. July 14, 2011). 40 Copyright 2012 Seyfarth Shaw LLP
How to Oppose Hybrid Certification: Arguments Opposing Class Certification No Predominance under Rule 23(b)(3) Not really a hybrid argument A significant hurdle in any Rule 23 case, particularly after Comcast v. Behrend Very labor-intensive, and thus expensive, to defeat 41 Copyright 2012 Seyfarth Shaw LLP
How to Oppose Hybrid Certification: Preemptive Motion to Deny Certification Vinole v.countrywide Home Loans, Inc., 571 F.3d 935 (9 th Cir. 2009) A defendant can preemptively challenge class certification because Rule 23(c)(1)(a) requires a class certification decision to be made at an early practicable time after a person sues or is sued as a class representative. Typically, plaintiff must have been given an opportunity to conduct discovery before ruling on a motion But the no-superiority/no numerosity arguments may need little discovery 42 Copyright 2012 Seyfarth Shaw LLP
Settlement Strategies in Hybrid Cases: A Defense Perspective Minimizes risk of adverse judgment Even if Plaintiff prevails only in part, Plaintiff becomes a prevailing plaintiff for attorneys fees purposes Consider whether 1/3 of settlement results in fees greater than what court would award Avoids incurring legal fees Reduces strain on the business No post-decertification individual cases to defend But may have follow-on lawsuits No risk of publicity from rulings But likely publicity of settlement from court-approval process 43 Copyright 2012 Seyfarth Shaw LLP
Settlement Strategies in Hybrid Cases: A Defense Perspective Given this, the vast majority of wage-hour collective and class litigation matters end in settlement, usually through mediation Thus, the main questions usually are: When? Who will mediate? What range? And on what terms? 44 Copyright 2012 Seyfarth Shaw LLP
Settlement Strategies in Hybrid Cases: A Defense Perspective The strong likelihood of settlement needs to be taken into account in crafting even the initial litigation strategy Many defendant employers will want to gain maximum preclusion That is accomplished with a Rule 23 class settlement under state law But such a settlement is not possible if the Rule 23 claims have been dismissed without prejudice 45 Copyright 2012 Seyfarth Shaw LLP
Settlement Strategies in Hybrid Cases: A Defense Perspective The earlier the mediation: the lower the investment made by the employer and its counsel the lower the investment made by Plaintiffs counsel Early mediation results in higher profit margin for Plaintiffs counsel the less likely Plaintiffs counsel will have discovered bad facts or additional claims But the later the mediation: the less likely the focus of the case is on conditional certification than on the difficulties in maintaining ultimate certification, the merits, and damages issues the more likely the opt-in rate benefits the employer 46 2012 Seyfarth Shaw LLP
Settlement Strategies in Hybrid Cases: A Defense Perspective (Key Terms) Where possible, include Rule 23 mechanism Claims made or common fund agreement Retention of funds/reversionary settlement if possible Use ground up calculation formula rather than top down Goal is to provide recovery to those who desire it Fees usually can be based on maximum payout FLSA opt-in mechanism on claim form If FLSA only, maximize confidentiality Gross settlement amount includes all payments to be made (including administration costs, incentive awards, employer-side payroll taxes when possible, etc.) 47 2012 Seyfarth Shaw LLP