Hybrid FLSA Collective Actions and Hour Class Actions

Presenting a live 90‐minute webinar with interactive Q&A

Hybrid FLSA Collective Actions and Hybrid FLSA Collective Actions and State Wage and Hour Class ActionsNavigating Procedural and Substantive Challenges in Pursuing or Defending Dual‐Filed Claims

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

TUESDAY, JUNE 11, 2013

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, ChicagoNoah A. Finkel, Partner, Seyfarth Shaw, Chicago

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Hybrid FLSA Collective Actions d S W d H Cland State Wage and Hour Class

ActionsJune 11, 2013 Webinar

Patrick G. BradyPatrick G. BradyEpstein Becker & Green, [email protected]

Introduction• “Hybrid” actions: FLSA collective actions and Rule 23 state wage‐hour class actions

• FLSA collective actions:FLSA collective actions:– Opt‐in– “Conditional” certification“ l l d”– “Similarly situated”

• Rule 23 state wage‐hour class actions:– Opt‐outOpt out– Numerosity, commonality, typicality, adequacy and superiority

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Program Outline

• Recent trends and case law developments• Considerations for litigating hybrid cases:Considerations for litigating hybrid cases:

– Removal and JurisdictionClass certification– Class certification

– Settlement

Q&A• Q&A

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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) BurchB BBRUCKNER BURCH PLLC

8 Greenway Plaza, Suite 1500Houston, Texas 77046

Telephone: 713.877.8788

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[email protected]

Trends in Hybrid Collective Actions

“Among FLSA cases, the most complex type isAmong 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)2013 WL 1803736 (S.D.N.Y. Apr. 29, 2013)

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Types of Hybrid Actions

FLSA collective action combined with: FLSA collective action combined with:

1. State law equivalentsq• 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)

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claims (e.g., FLSA plus ERISA, FLSA plus RICO)

Ross v. RBS Citizens, N.A.

7th Circuit affirmed certification of both an off-the-clock class and a misclassification class, in the same case;

Supreme Court GVR’d in light of Comcast Corp. v Behrendv. Behrend.

Parties announced settlement May 31, 2013y ,

No longer precedent, but may be persuasive

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Wang v. Chinese Daily News, Inc.

Court originally certified under FRCP 23(b)(2) and g y ( )( )23(b)(3)

9th Ci it ffi d tifi ti d FRCP 23(b)(2) 9th Circuit 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.

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u es

Espenscheid v. DirectSat USA, LLC

Hybrid class/collective actions are “common and y… permissible”

Suggests standards for “second stage” collective certification and Rule 23 certification are similar (conflicts with Second Third Sixth Tenth and(conflicts with Second, Third, Sixth, Tenth, and Eleventh Circuits).

Decertification of collective action & Rule 23 class affirmed based on lack of representative evidence

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evidence.

Defending Hybrid Wage‐Hour A i A D f P iActions: A Defense Perspective on

Removal and JurisdictionPatrick G. BradyEpstein Becker & Green, [email protected]

Removal to Federal Court• 28 U.S.C. § 1441(a) – a defendant may remove any civil action for which federal courts have i i l j i di ioriginal jurisdiction

– 28 U.S.C. § 1331 – original jurisdiction by virtue of a federal question e g the FLSA claima federal question, e.g., the FLSA claim

• 28 U.S.C. § 1446(b)– each defendant has 30 days from its own date ofeach defendant has 30 days from its own date of service to file a notice of removal

– all defendants must consent to removal

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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

i hi h i i l l l j i di i f h di iwithin the original or supplemental jurisdiction of the district court

– Requires that, upon removal, “the district court shall sever from the action all claims [not within the original or supplemental [ g ppjurisdiction 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, 2012state law, on or after January 6, 2012

• Thus, either original or supplemental jurisdiction is required to avoid remand of state wage‐hour claims

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S l t l J i di ti O St tSupplemental Jurisdiction Over State 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 hasthat 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))y , , ( ))

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S “C C t ”Same “Case or Controversy”

• Shahriar v. Smith & Wollensky Restaurant Group, Inc., 659 F 3d 234 (2d Cir 2011)659 F.3d 234 (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 971 (7th• Ervin v. OS Restaurant Services, Inc., 632 F.3d 971 (7th

Cir. 2011)– “same case or controversy” requirement is satisfied where

state‐law claims are closely related to an FLSA collectivestate 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”

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Di t i t C t M D li T E iDistrict 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 lstate law

– The court has dismissed all claims over which it has original jurisdictionhas original jurisdiction

– Other “exceptional” circumstances where “compelling reasons” for declining jurisdiction existcompelling reasons for declining jurisdiction exist

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St t W H Cl i “S b t ti llState Wage‐Hour Claim “Substantially 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 lawE l fi b i d ll i i ifi i d h– Employees first obtained collective action certification under the FLSA, then moved for, and obtained, Rule 23 class certification of the state law claims

– Tyson appealed the Rule 23 certification, challenging the y pp g gemployees’ use of Rule 23 opt‐out provisions where an FLSA opt‐in 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 notThe 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

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– “[A] court must examine the scope of the state and federal issues, the terms of proof required by each type of claim, theissues, 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.”

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• Lindsay v. Gov’t Employees Ins. Co., 448 F 3d 416 (D C Ci 2006) “P d i i ”F.3d 416 (D.C. Cir. 2006) – “Predomination” relates to the type of claim and where the

l l i i ll li hstate law claims essentially replicate the FLSA claims, the state law claims “plainly do

d i ”not predominate”

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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 place of businessp p p

• “Complete” diversity– Matter in controversy exceeds the sum or value of $75,000

• Claims may not be aggregated to achieve the jurisdictional minimum• Exxon Mobil Corp. v. Allapattah Services, Inc., et al., 545 U.S. 546Exxon Mobil Corp. v. Allapattah Services, Inc., et al., 545 U.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 U S C § 1441(b) – a civil action otherwise removable solely on the• 28 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

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O i i l i di i O S Cl iOriginal Jurisdiction 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:original jurisdiction over any civil action:– (a) In which the matter in controversy exceeds the sum or value of $5 million; and

l f d d l l b d• Claims of individual 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

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• 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 and included in the Complaint a p y pstipulation 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 thresholdfell 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 certifiedwas certified

– “[F]ederal jurisdiction cannot be based on contingent future events.”

• Thus, stipulation by a class‐action plaintiff, prior to certification Thus, stipulation by a class action plaintiff, prior to certificationof 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

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Declining CAFA Jurisdiction• Permissive – 28 U.S.C. § 1332(d)(3)

District courts “may” decline the exercise of CAFAjurisdiction over a class action in which greater thanjurisdiction 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 uponthe action was originally filed, and upon consideration of various factors, including:

• Whether the claims asserted involve matters of national or interstate interestor 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

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• Mandatory – 28 U.S.C. § 1332(d)(4)District courts “shall” decline to exercise CAFA jurisdiction over:j

• 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 awhose 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 class action has been filed asserting the same or similar factualother class action has been filed asserting the same or similar factual 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 defendantsWhere 2/3 or more of the class members, and the primary defendants,

are citizens of the state in which the action was originally filed

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Be Careful What You Wish For: Defense Position onBe 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

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Defending Hybrid Wage-HourWage Hour Actions: A Defense P ti OPerspective On Certification and SettlementNoah A. FinkelSeyfarth Shaw [email protected]

When to Oppose Hybrid Certification

• From the employer’s perspective: the earlier,From the employer s perspective: the earlier, the better• Removing class allegations could limit the g g

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”

Copyright 2012 Seyfarth Shaw LLP30 |

When to Oppose Hybrid Certification

• The usual case prevents three possibleThe usual case prevents three possible chances:• At the pleading stage on a motion to dismissp g g• 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


How to Oppose Hybrid Certification: Arguments for a Motion to DismissArguments for a Motion to Dismiss

• Impermissible supplemental jurisdictionImpermissible 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 p y p gis in substance a state dog.”)

• But now CAFA usually provides supplemental j risdictionjurisdiction

• Plaintiff may file separate case in state court in responsep



• FLSA preemption of state law overtime orFLSA 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 workbrought 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 (4th Cir. 2007)

( t t l l i f ti t d b th(state common law claims for overtime are preempted by the FLSA’s exclusive enforcement scheme)



• Violation of the Rules Enabling ActViolation 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)2766991 (N.D. Ohio Aug. 27, 2007)

• Theory has been rejected by other courts



• Inherent incompatibilityp y• 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 requirementbehind the FLSAs opt-in requirement

• Many appellate courts recently have rejected the argument and have held that a plaintiff “may” pursue the two concurrentlythe two concurrently• Busk v. Integrity Staffing Solutions, Inc., No. 11-16892 (9th Cir. April

12, 2013)• Knepper v Rite Aid Corp (675 F 3d 249 (3d Cir 2012)• Knepper v. Rite Aid Corp. (675 F.3d 249 (3d Cir. 2012)• Ervin v. OS Rest. Servs., 632 F.3d 971 (7th 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)Lindsay v. Gov t Emps. Ins. Co., 448 F.3d 416 (D.C. Cir. 2006)



• No plausible ability to achieve class certificationNo 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 thatallegations 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)y)


How to Oppose Hybrid Certification: Arguments Opposing Class CertificationArguments Opposing Class Certification

• Just because appellate courts recently areJust 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 jcontroversy.”

• Normally, this should be difficult to do, especially post-Comcast BehrendComcast v. Behrend.



• Usually, Plaintiff already will have sent out a notice to y, ymembers of the putative class advising them of their right to opt-in• Opting in requires minimal burden• 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• Another notice could be confusing• Possible exceptions:

• evidence of retaliation?• lack of legal knowledge?



• No Numerosity under Rule 23(a)(1)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 joinderpracticable forms of joinder• Lenient standard• No charge• Simple form



• Lack of Manageability or StandingLack 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 23posing 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 claims Seethere may be no standing to assert out of state claims. See Smith v. Pizza Hut Inc., No. 09-cv-01632 (D. Colo. July 14, 2011).



• No Predominance under Rule 23(b)(3)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


How to Oppose Hybrid Certification: Preemptive Motion to Deny CertificationPreemptive Motion to Deny Certification

• Vinole v.Countrywide Home Loans, Inc., 571Vinole v.Countrywide Home Loans, Inc., 571 F.3d 935 (9th 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 apracticable time after a person sues or is sued as a class representative.”

• Typically, plaintiff must have been given an fopportunity to conduct discovery before ruling on a

motion• But the no-superiority/no numerosity arguments mayBut the no superiority/no numerosity arguments may

need little discoveryCopyright 2012 Seyfarth Shaw LLP42 |

Settlement Strategies in Hybrid Cases: A Defense PerspectiveDefense 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 feesRed ces strain on the b siness• Reduces strain on the business

• No post-decertification individual cases to defenddefend• But may have follow-on lawsuits

• No risk of publicity from rulingsNo risk of publicity from rulings• But likely publicity of settlement from court-approval process



• Given this, the vast majority of wage-hourGiven 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?

A d h t t ?• And on what terms?



• The strong likelihood of settlement needs to beThe 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• But such a settlement is not possible if the Rule 23

claims have been dismissed without prejudice


Settlement Strategies in Hybrid Cases: A Defense PerspectiveA Defense Perspective• The earlier the mediation:

• the lower the investment made by the employer and its counsel

• the lower the investment made by Plaintiffs’ counsely• Early mediation results in higher “profit margin” for Plaintiffs’ counsel

• the less likely Plaintiffs’ counsel will have discovered bad facts or additional claimsbad 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

©2012 Seyfarth Shaw LLP46 |

y p p y

Settlement Strategies in Hybrid Cases: A Defense Perspective (Key Terms)A Defense Perspective (Key Terms)

• Where possible, include Rule 23 mechanismp ,• 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 payoutFees 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 )

©2012 Seyfarth Shaw LLP47 |

employer side payroll taxes when possible, etc.)

Hybrid FLSA Collective Actions and Hour Class Actions

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