Advanced Litigation of Wage and Hour Class Cases 2008 ABA Section of Labor & Employment Law Annual CLE Conference

Advanced Litigation of Wage and Hour Class Cases 2008 ABA Section of Labor & Employment Law Annual CLE Conference COORDINATING CLASS CERTIFICATION OF STATE AND FEDERAL WAGE AND HOUR CLAIMS AND DISCOVERY ISSUES Gregory K. McGillivary WOODLEY & McGILLIVARY 1125 15 th Street, N.W., Washington, D.C. 20005 gkm@wmlaborlaw.com Telephone: (202) 833-8855

Increasing opportunity exists to successfully bring hybrid state law class actions/federal Fair Labor Standards Act (FLSA) collective actions in federal court has expanded. In the past the traditional defense raised against such actions was to attempt to convince the federal court not to exercise supplemental jurisdiction under 28 U.S.C. 1367. The advent of the Class Action Fairness Act (CAFA) 1 and the D.C. Circuit s decision in Lindsay v. Gov t Employees Ins. Co., 2 however, has essentially eviscerated this defense. In hybrid actions, counsel are confronted with a number of strategic issues. First, plaintiffs must decide whether to bring the state class action in conjunction with the FLSA action. In many states, such as California, the wage and hour claims under state law provide equal or better protections for workers than the FLSA may provide. Some other considerations are the number of plaintiffs involved in the state action, how different the state law claims may be from the federal claims, how many different state classes exist in the case and the degree to which the federal court or judge may be receptive to hearing multiple state law claims in conjunction with an FLSA action. 1 CAFA greatly expands federal court jurisdiction over class actions. It amends, among other sections of the U.S. Code, 28 U.S. C. 1332 to include a new subsection (d) which grants original jurisdiction to federal district courts in any civil action in which: the matter in controversy exceeds the sum or value of $5,000,000; is a class action with minimal diversity, meaning any member of the class of plaintiffs is a citizen of a different state from the defendant; and in reaching the $5,000,000 limit, permits the plaintiffs to aggregate the value of their claims. 2 448 F.3d 416 (D.C. Cir. 2006). On remand, the district court certified a class of New York state employees. Lindsay v. GEICO, 2008 U.S. Dist. LEXIS 51944 (July 3, 2008).

Assuming, however, that the plaintiffs decide to pursue both the state and FLSA claims in federal court, this paper discusses options and strategic considerations regarding coordination of certification of the state class action and FLSA collective action, and how to align the discovery in each. Issues can arise such as: How much discovery should be conducted/contested prior to certification? Should certification of 16(b) collective actions and Rule 23 state class actions be pursued at different phases of the litigation and, if so what are the consequences? Does the timing of certification requests affect the ability to argue for representative plaintiffs for purposes of discovery? Should class representatives serve for both 16(b) and Rule 23 actions? If plaintiffs with new state law claims in Rule 23 states opt in a 16 (b) action, should those plaintiffs claims be filed exclusively in state court? I. Coordinating Class Certification of State and Federal Claims The tension between the timing of when to seek class certification of state and federal wage and hour claims arises primarily as a result of the different standards for certification. 3 The FLSA and the state law claims are often the same or similar, and arise out of the same source of misconduct the failure to follow statutory rules regarding payment of overtime or other workplace 3 The title of this section is somewhat of a misnomer with respect to federal wage and hour claims. Since section 16(b) of the FLSA, 29 U.S.C. 216(b), requires each plaintiff to opt in the action by filing a consent form, the conditional certification is for a putative class of plaintiffs who only become actual plaintiffs when they opt in the action.

requirements such as providing meal breaks or rest periods. In addition, the state law claims may provide for broader remedies or a longer limitations period. A. Generally, Initial Certification in an FLSA Collective Action is Immediately Sought and Little or No Discovery Prior to Seeking Certification is Required or Desirable Certification of a collective action under the FLSA is more lenient and easier to obtain than the traditional Rule 23 class certification that is available for wage and hour actions in many states. Indeed, it is now well-established that courts apply a two-step process in determining whether to certify an FLSA action under section 16(b) by providing notice to all similarly situated current and former employees. 4 The first step is the notice stage in which the district court makes a decision about whether to conditionally certify the plaintiffs claims as being similarly situated to other employees and providing notice to all such employees who fall within the FLSA s limitations period. 5 In the first step, courts apply a lenient standard in making this determination and certification is conditional. 6 For example, courts do not resolve contradictory evidence or make credibility 4 See, e.g., Thiessen v. G.E. Working Capital Corp., 267 F.3d 1095, 1102-03 (10 th Cir. 2001); Hipp v. Liberty Nat l Life Ins. Co., 252 F.3d 1208 (11 th Cir. 2001);Mooney v. Aramco Servs. Co., 54 F.3d 1207, 1214 (5 th Cir. 1995); Lima v. Int'l Catastrophe Solutions, Inc, 493 F. Supp. 2d 793 (E.D. La. 2007); Trezvant v. Fidelitiy Employer Services Corp., LLC, 434 F.Supp. 2d 40, 43 (D. Mass. 2006)(recognizing that majority of courts both within and outside the First Circuit have adopted the two-step approach). 5 The FLSA contains a two year statute of limitations which is extended to three years in the case of willful violations. 29 U.S.C. 255(a). 6 E.g., Clausman v. Nortel Networks, 2003 WL 21314065 (S.D. Ind. 2003).

determinations at the initial certification stage. 7 The standard at the first step is much easier to meet than the commonality requirements of Rule 23. 8 The second step in certification of an FLSA collective action typically occurs at the end of discovery on the merits of the plaintiffs claims. The defendants may initiate the second stage of the certification by filing a motion to decertify the collective action. Certification of the collective action should be sought as soon as possible in the litigation. There are two primary reasons for this: First, the statute of limitations is not tolled in FLSA actions for the putative class; second, once notice is issued and employees join in the action, there is the possibility in some cases that plaintiffs will join the lawsuit who have state law claims in states that provide for Rule 23 actions and in which the original plaintiffs did not work. Under the FLSA, the statute of limitations is not tolled until an employee affirmatively opts in a case. 9 This can result in different time periods for the plaintiffs claims depending on when their individual consent forms are filed in court. In contrast, in Rule 23 class actions, upon certification, the class members 7 E.g., Kalish v. High Tech. Inst., 2005 WL 1073645 (D. Minn. 2005); Katusch v. Premier Communications, 2007 Wl188480 (W.D. Mo. 2007). 8 Grayson v. K-Mart Corp., 79 f. 3d 1086, 1098 (11 th Cir. 1996); Igesias-Mendoza v. La Belle Farm, Inc., 239 F.R.D. 358, 361-62 (S.D.N.Y. 2007); Rodollico v. Unisys Corp. 199 F.R.D. 468 (E.D. N.Y. 2001). 9 29 U.S.C. 216(b). In situations in which the employer has delayed notice being sent to the employees or whether other justifications exist for doing so, the courts will toll the limitations period for FLSA claims during the opt in notice period. See, e.g. Partlow v. Jewish Orphans' Home of Southern California, Inc., 645 F.2d 757, 761 (9th Cir. 1981), abrogated on other grounds by Hoffmann-La Roche, Inc. v. Sperling, 493 U.S. 165, 110 S. Ct. 482, 107 L. Ed. 2d 480 (1989); Mowdy v. Beneto Bulk Transp., 2008 U.S. Dist. Lexis 26233 (N.D. Cal. 2008); Baden- Winterwood v. Life Time Fitness, 484 F.Supp. 2d 822 (S.D. Ohio 2007).

claims all relate back to the original filing date. Thus, there is a great deal more urgency in a section 16(b) FLSA action that the court provide notice to the putative class members and give them an opportunity to join the case in order to toll the limitations period. Since the standard in section 16(b) actions is quite lenient, typically the plaintiffs do not require (nor do they want) any discovery to meet their initial burden for certification. Generally, extensive discovery is not necessary at the notice stage. 10 Instead, if the plaintiffs allegations are supported by affidavits, that is usually sufficient for conditional certification. 11 Of course, to provide notice of the putative plaintiffs right to join the wage lawsuit, after conditional certification has occurred, the plaintiffs must obtain the names and addresses of each member of the putative class of employees. It is well-established that this request will be granted. 12 Discovery may be necessary to obtain the names and addresses of employees to whom notice will be sent. If the employer did not keep adequate records of present and former employee addresses, as required under 29 CFR 516.2(a) then plaintiffs can seek enhanced notice of the collective action, including in such different manners as placing the notice in employee paychecks, 10 Lynch v. US Auto. Ass n, 491 F. Supp. 2d 357, 368-69 (S.D.N.Y. 2007). 11 E.g., Dietrich v. Liberty Square, LLC, 230 F.R.D. 574 (N.D. Iowa 2005); Davis v. NovaStar Mortgage, Inc., 408 F.Supp. 2d 811 (W.D. Mo. 2005); Kane v. Gage Merchandising Services, Inc., 138 F.Supp. 2d 212 (D. Mass. 2001). 12 Hoffman-La Roche Inc v. Sperling, 493 U.S. 165, 170 (1989). See Titre v. S.W. Bach & Co., 2005 WL 1692508 (S.D. Fla. 2005); Hammond v. Lowe s Home Centers, Inc., 216 F.R.D. 666 (D.Kan. 2003); Bailey v. Ameriquest Mortgage Co., 2002 U.S. Dist. LEXIS 1362 (D.Minn. 2002).

, broadcasts in media outlets, postings and newspapers. 13 The danger for plaintiffs in allowing a defendant to conduct discovery in a 16(b) collective action prior to seeking initial certification is that the court may proceed directly to the second step of the 16(b) certification process i.e., make a final determination whether certification should be granted. For example, in Hinojos v. Home Depot, Inc., 14 the district court cited the extensive discovery that had been conducted in an off-the-clock FLSA lawsuit as the reason that the court was collapsing the first and second stages of 16(b) certification, and making a final determination as to whether the case should proceed as a collective action. The plaintiffs never had the opportunity to send a Sperling notice to the putative class. Thus, plaintiffs counsel should resist employer attempts at discovery prior to certification as a collective action. In addition to the purpose of the statute of limitations running on the putative class claims, one of the primary purposes of a section 16(b) action is judicial economy and efficiency, which is best served by other affected employees joining a wage action. Indeed, some of these employees may have complimentary state claims which are best litigated along with the FLSA claims. Further, additional plaintiffs in some more difficult to 13 See, Marroquin v. Canales, 236 F.R.D. 257, 262 n.19 (D.Md. 2006) (court approved plaintiffs Notice Plan which included expanded notice); Hodel v. Legacy Health Systems, 121 Lab. Cas. (CCH) para. 35,635 (D. Or. 1992) (plaintiffs were permitted to discover names and addresses of potential collective action members); Riojas v. Seal Produce, 82 F.R.D. 613, 617 (S.D. Tex. 1979). 14 2006 U.S. Dist. Lexis 95434 (D. Nev. 2006).See Basco v. Wal-Mart Stores, Inc.,2004 U.S. Dist. LEXIS 12441 (E.D. La. 2004)(citing substantial discovery that has occurred, including videotaped depositions of plaintiffs, as reason that court would evaluate certification motion under both the first and second steps at the same time).

prove cases, such as some off-the-clock cases involving unrecorded work time, may provide proof of the systemic nature of the violations and strengthen proof of a pattern and practice of unlawful wage and hour violations that have resulted from the employer s policies. B. Certification of Rule 23 State Class Actions Unlike section 16(b) FLSA actions, Rule 23 class actions do not involve a two step process. Rather, the plaintiffs engage in discovery on the certification question and then move for certification. Once the court grants certification, the class is rarely decertified. Much of the discovery that occurs after initial certification of a collective action and the discovery being conducted on whether a class should be certified is the same. This is because to avoid decertification on the FLSA claims, the plaintiffs will necessarily need to discover the breadth of the company s violations and whether a similar policy, plan or pattern and practice led to the violations. Of course, this is precisely the type of information that the plaintiffs will need to establish Rule 23 certification of their state law class claims. Thus, the discovery in each is complimentary at this stage of the case. Once the plaintiffs believe that sufficient discovery has been conducted for Rule 23 certification, they can then move for certification, and if the request for class certification is granted, the remaining discovery will proceed on the merits with respect to both the state law and FLSA claims. There is also a risk for plaintiffs who obtain section 16(b) FLSA notice before seeking Rule 23 class certification of state wage claims. Some courts

may refuse to certify the class action finding that the plaintiffs cannot prove that joinder is impractical if a large number of FLSA plaintiffs have voluntarily joined the case. 15 Nonetheless, most courts have determined that the state and federal wage laws have different intents with respect to whether employees rights can be vindicated through opt in or opt out mechanisms and will accord full deference to the intent of each statutory mechanism. 16 Some courts have postponed class certification until all discovery on the FLSA claims is complete on the theory that the court should not consider Rule 23 class certification until the court determines whether it will ultimately grant at the second stage and in response to a motion for decertification certification of the FLSA collective action. 17 This seems to be an unnecessary reason to delay class certification and an extremely inefficient way to proceed. The discovery will be largely similar with respect to the collective action and the class action claims and this could lead to repetitive depositions and discovery requests on similar topics. Moreover, this type of delay is contrary to the purposes of class actions to provide an expeditious and efficient method to proceed with respect to litigation of the plaintiffs class claims. 15 See Moeck v. Gray Supply Corp., 2006 U.S. Dist. LEXIS 511 (D.N.J. 2006)(limiting state class to FLSA opt-ins);bartleston v. Winnebago, 219 F.R.D. 629 (N.D. Iowa 2003)(same). 16 See, e.g., Sherrill v. Sutherland Global Services, Inc., 487 F.Supp. 2d 344 (W.D.N.Y. 2007); Kurihara v. Best Buy Co., Inc. 2007 Lexis 64224 (N.D.Cal. 2007); Scott v. Aetna Services, Inc., 210 F.R.D. 261 (D. Conn. 2002). 17 Marquez, 2007 U.S. Dist. Lexis 63301; Frank v. Gold n Plum Poultry, Inc., 2005 U.S. Dist. LEXIS 20441 (D. Minn. 2005).

II. Discovery Strategies Use of Representative Discovery Unlike Rule 23 class actions, FLSA collective actions may subject all of the opt in class members to discovery. Most courts have been resistant to this type of costly and burdensome discovery, and have required representative discovery to be conducted. Nonetheless, in FLSA cases discovery beyond the named plaintiffs may be allowed. Of course, this could result in the discovery of information that harms the opportunity for Rule 23 certification. In Rule 23 discovery, individualized discovery of class members who are not named is strongly disfavored 18 and is allowed only in extremely rare circumstances. Courts often refuse to permit discovery of absent class members because the potential burden on these members will discourage participation and artificially reduce the class size thus inappropriately contravening one of the reasons for class certification under Rule 23. 19 Courts have been receptive to limiting burdensome and oppressive discovery in FLSA actions, despite defendant s arguments that each opt-in is a party plaintiff. The primary considerations in doing so are the number of plaintiffs involved and the stage at which discovery is sought in the case. A. The Number of Plaintiffs Affect Court Determinations as to the Use of Representative Plaintiffs Courts are increasingly analogizing 216(b) collective actions to Rule 23 class cases for discovery purposes, especially if the collective action opt-ins are 18 E.g., Cox v. American Cast Iron Pipe Co., 784 F.2d 1546 (11 th Cir. 1986); Worlds of Wonder Securities Lit., 1992 WL 330481 (N.D. Cal. 1992). 19 E.g., Newberg on Class Actions, Vol. 5, 16.1 (4 th Ed. 2002).

numerous. The Supreme Court in Hoffman-La Roche v. Sperling, 20 emphasized 216(b) s advantage of lower individual costs to vindicate rights by the pooling of resources. This assists with the argument to limit discovery in 16(b) cases because Rule 23 discovery is typically confined to named plaintiffs in part to avoid using discovery as a stratagem to reduce the number of claimants. 21 Another reason to allow representative discovery in 16(b) FLSA actions is that it is now well established that the use of representative samples of plaintiffs for trial is generally condoned under the FLSA. 22 As an FLSA treatise comments, 20 493 U.S. 165, (1989). 21 H. Newberg, Newberg on Class Actions, 16.02 (3 rd Ed. 1992). See, e.g., Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 810 n. 2 (1985) ( an absent class action plaintiff is not required to do anything ); Mehl v. Canadian Pac. Railway, 216 F.R.D. 627, 631-32 (D.N.D. 2003)(denying defendants request to depose class members prior to class certification determination); Baldwin & Flynn v. Nat l Safety Assocs., 149 F.R.D. 598, 600-01 (N.D. Cal. 1993)(same). 22 Cases allowing representative discovery include: Belcher v. Shoney s, Inc., 30 F. Supp. 2d 1010, 1024 (M.D. Tenn. 1998) (use of representative sample of optin plaintiffs in managers exemption case)); Geer v. Challenge Fin. Investors Corp., 2007 WL 1341774 (D. Kan. May 4, 2007) (refusing to allow defendant to take depositions from all 272 opt-in plaintiffs); Barrus v. Dicks Sporting Goods, Inc., 465 F. Supp. 2d 224, 231-32 (W.D.N.Y. 2006)(limiting discover to representative sample); Smith v. Lowes home Ctrs., 236 F.R.D. 354, 356 (S.D. Ohio 2006) (limiting discover to a representative sample); Bradford v. Bed Bath & Beyond, 184 F. Sup. 2d 1342 (N.D. Ga. 2002) 184 F. Supp. 2d 1342 (discovery limited to 25 of 300 plaintiffs); Lusardi v. Xerox Corp., 118 F.R.D. 351, 354 (D.N.J. 1987) (parties used 51-person sample of class of over 1,300 plaintiffs); Brooks v. Farm Fresh, Inc., 759 F. Supp. 1185, 1187-88 (E.D. Va. 1991), rev s on other grounds sub nom. Shaffer v. Farm Fresh, Inc., 966 F.2d 142 (4 th Cir. 1992) (discover of opt-ins permitted but only to extent a party felt record was adequately developed to address whether or not class was similarly situated. ); McGrath v. City of Philadelphia, No. CIV A 92-4570, 1994 WL 45162, at *2 (E.D. Pa. 1994) (no discovery from opt-in plaintiffs); Adkins v. Mid-Am. Growers, Inc., 141 F.R.D. 466, 468 (N.D. Ill. 1992) (rejecting magistrate judge s order for individualized discover; Whether prior to class certification or after, discovery, except in the rarest of cases, should be conducted on a class wide level. ); Prentice v. Fund for Pub. Interest Research, Inc. WL 2729187, at *5 (N.D. Cal.

It is well settled that generally not all affected employees must testify in order to prove violations or to recoup back wages. Rather, in most cases, employees and the Secretary may rely on representative testimony. The Fair Labor Standards Act 1333 (Ellen C. Kearns, Ed. 1999). Defense counsel who resist efforts to limit discovery to representative plaintiffs will find that they carry a heavy burden in justifying it. District courts have considerable discretion in determining the scope of discovery and the evidence to be presented at trial under FRCP Rule 26(b), and FRE 403 and 611. Under FRCP Rule 26(B)(2)(III) the defendant s need for discovery and due process rights must be balanced against the probative value of discovery, the need for efficient case management, the amount in controversy, and the parties resources. With these considerations in mind, defense counsel s reasons for individualized discovery may be seen as little more than a defense tactic. For example, in Geer v. Challenge Financial Investors Corp., 23 the court admonished the defendant for seeking to depose all 256 plaintiffs without explaining why no alternative method might be more cost effective such as randomly selecting a smaller number of plaintiffs and then evaluating whether additional discovery is necessary. The court was particularly disturbed that the defendant had not shown any willingness to compromise with plaintiffs, which led the court to question defendant s true intention for its request to depose all of the plaintiffs. Sept. 18, 2007) ( Individualized discovery is rarely appropriate in FLSA collective actions ). 23 2007 U.S. Dist. Lexis 53572 (E.D. N.Y. 2007).

Similarly, in Smith v. Lowe s Home Centers, Inc., 24 an action brought under the FLSA and Ohio s Minimum Wage Act, the court denied the defendant s request for individualized discovery for the over 1500 plaintiffs. Instead, the court ordered that discovery be limited to a representative, manageable random sample. The court directed the parties to confer and formulate a sampling methodology for discovery purposes. For these reasons, many courts considering discovery requests directed at opt-in plaintiffs have refused to compel responses to discovery requests 25, and, more commonly, limited discovery of opt-ins to a representative sample. 26 24 236 F.R.D. 354 (S.D.Ohio 2006). 25 Morales-Arcadio v. Shannon Produce Farms, 2006 U.S. Dist. LEXIS 66595 at *11 (S.D. Ga. 2006) 26 See McGrath v. City of Philadelphia, 1994 U.S. Dist. LEXIS 1495 at *8 (E.D. Penn. 1994) ( It is well-established that individualized discovery is inappropriate in a [FLSA] class action lawsuit); Adkins v. Mid-America Growers Inc., 141 F.R.D. 466, 468-69 (N.D. Ill. 1992) (individualized discovery of all opt-in plaintiffs is inappropriate in a FLSA collective action, but representative testimony is permissible); Smith v. Lowe s Home Centers, Inc., 236 F.R.D. 354, 357-58 (S.D. Ohio 2006)(court denied defendant s request for individualized discovery of more than 1,500 opt-ins and instead ordered a representative sample); Bradford v. Bed, Bath & Beyond, 184 F. Supp.2d 1342, 1344 (N.D. Ga. 2002) (limited discovery to a representative sample of opt-ins); Geer v. Challenge Financial Investors Corp., 2007 U.S. Dist. LEXIS 33499, at *13 (D. Kan. May 4, 2007)(court admonished defendant for seeking depositions of all 256 opt-ins and its failure to compromise with plaintiffs); Krueger v. New York Telephone Co., 163 F.R.D. 446, 450 (S.D.N.Y. 1995)(discovery of opt-ins may be necessary for discovery of common issues, but cannot be undertaken for the purposes or effect of harassment of opt-in plaintiffs); Lusardi v. Xerox Corporation, 118 F.R.D. 351, 354 (D. N.J. 1987) (discovery permitted of 51 of 1,312 opt-ins); Takacs v. Hahn Auto Corp., 1999 U.S. Dist. LEXIS 22146, at *4-8 (S.D. Ohio 1999) (representative discovery of opt-ins permitted). But see Coldiron v. Pizza Hut, Inc., 2004 U.S. Dist. LEXIS 23610, *5-6 (C.D. Cal. 2004) (individualized discovery of opt-in plaintiffs allowed); Tum v. Barber Foods, Inc., 2002 U.S. Dist. LEXIS 297 (D. Me. 2002) (sanctioning plaintiffs for failing to respond to discovery directed at opt-ins).

Not surprisingly, courts have permitted discovery of all active opt-ins such as those who submitted affidavits supporting plaintiff s motion for notice in a collective action. See Luna v. DelMonte Fresh Produce Inc., 2007 U.S. Dist. LEXIS 36893 (N.D. Ga. May 18, 2007) (court permitted discovery for two already-active opt-ins). 27 In most cases, the parties may be able to resolve the issue of the use of representative plaintiffs on their own, and defense counsel may be motivated to do so not only due to cost issues, but also because if the plaintiffs win, defendant will ultimately be liable for the plaintiffs attorneys fees and costs incurred in responding to burdensome discovery. 28 27 The court in Luna also denied defendants motion to compel discovery responses from opt-ins prior to conditional certification of the 216(b) class, saying that the mandatory disclosure requirements of Rule 26(a)(1) of the FRCP only applied to parties. Id. at *14. 28 Some defense counsel refuse to agree to representative discovery arguing that they risk appearing to have conceded that the case is manageable for trial and that the plaintiffs are similarly situated.