The Supreme Court on Tuesday heard oral argument in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, a case that has been closely watched for its potential to narrow the circumstances in which a class action may be certified under Federal Rule of Civil Procedure 23 and a collective action for unpaid wages certified under the Fair Labor Standards Act (FLSA). We previously described this case in prior blog posts. One of us attended the argument, and the other closely reviewed the transcript (pdf). Our combined reaction: The anticipated decision in this case may focus on an FLSA issue and, if so, then it seems unlikely to mark a sea change in the rules governing Rule 23 class actions. Continue Reading Supreme Court Hears Argument in Tyson Foods v. Bouaphakeo—and a Blockbuster Class Certification Ruling Seems Less Likely
Today, the Supreme Court granted review in what may be a major decision on the standards for class certification, Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146.
The Supreme Court will decide before the end of this Term whether to hear any or all of four important cases that raise recurring questions of class action law that have sharply divided the lower courts. These cases address questions that we have blogged about before (e.g., here and here): whether a class full of uninjured members may be certified, and whether plaintiffs may rely on experts and statistics to gloss over individualized differences among class members in order to prove their class claims and damages. These questions strike at the heart of what it means to be a “class,” because class actions generally must be litigated using common evidence to show that each class member has been harmed.
A plaintiff hopes to represent a class to pursue two sets of wage-and-hour claims but runs into headwinds in the district court. First, one set of claims disappears because his legal theory doesn’t withstand a motion to dismiss. Then class certification is denied on what was left. After that, the defendant— invoking Rule 68 of the Federal Rules of Civil Procedure—offers to settle “any liability claimed in this action.” Under Rule 68, if the case goes to judgment and the plaintiff wins less than the offer, he would be liable for the defendant’s costs for any proceedings after the offer was made.
What is to be done? The plaintiff in Sultan v. Medtronic, Inc. thought that he could simply accept the offer of judgment and associated payment and then proceed as if he hadn’t done so. Forging ahead with an appeal of the partial dismissal and the denial of class certification, the plaintiff principally relied on a Ninth Circuit decision that permitted a settling plaintiff to appeal because the accepted offer lacked broad language addressing all claims—and in fact, during negotiations in that case, the parties had deleted an explicit reference to class claims.
Sometimes a settlement really is a settlement, however, and the Ninth Circuit held that this was one of those times. Rejecting the plaintiff’s arguments that the Rule 68 judgment did not moot the class claims because they were not specifically identified in its terms, the court held (in an unpublished opinion) that a settlement of “any liability claimed in this action” was enough to end the entire case. Along with my colleagues John Zaimes and Ruth Zadikany, I was counsel for Medtronic on this appeal.
There seem to be two prevailing conceptions of class actions. In one view, a class action is a way of determining many similar claims at once by evaluating common evidence that reliably establishes liability (and lays a ground work for efficiently calculating damages) for each class member. That is, the class device produces the same results as individual actions would, but more efficiently. In the other view—one we consider misguided—a “class” of plaintiffs complaining about similar conduct can have their claims determined through statistical sampling even if no common evidence will provide a common answer to common factual or legal questions. Instead, this theory holds, the results of mini-trials can simply be extrapolated to the entire class, even if individual results would vary widely.
Last week, the Ninth Circuit took a step deeper into the second camp in Jimenez v. Allstate Insurance Co. (pdf), delivering a ringing endorsement of statistical sampling as a way to establish liability as well as damages.
In Duran v. U.S. Bank N.A. (pdf), the California Supreme Court recently addressed an important question in the context of state-court class actions: Can plaintiffs invoke statistical sampling in an attempt to prove class-wide liability and overcome the presence of individual questions that ordinarily would defeat class certification?
The court’s answer to that question is a mixed bag for business. The court firmly rejected the haphazard approach to sampling used by the trial court in the lawsuit against U.S. Bank. But the court left open the troubling possibility that sampling might be used in support of class certification in the future. Continue Reading California Supreme Court Rejects Exceptionally Poor Sampling Method, But Leaves Open Many Questions About Sampling And Class Certification
The Supreme Court makes its biggest headlines when it wades into the biggest issues of the day. But the Supreme Court also maintains a substantial docket of seemingly small—but ultimately important—technical questions.
In recent years, the Court has been particularly interested in defining precisely when an hourly employee is on and off the clock. For example, earlier this term, the Court held in Sandifer v. United States Steel Corp. that employers need not compensate certain workers for time spent donning and doffing safety gear. The Court will answer a related question next term. Yesterday, the Court granted certiorari to decide whether end-of-shift security screenings to prevent theft are compensable time under the Fair Labor Standards Act, as amended by the Portal-to-Portal Act.
Although such screenings may take only a matter of minutes, when aggregated over the course of a two-year limitations period for numerous employees, the damages exposure can be substantial. That explains why a series of nationwide back-pay class actions have been filed in the wake of the Ninth Circuit’s decision that time spent in security screenings must be compensated.
The Supreme Court will now review that decision in Integrity Staffing Solutions, Inc. v. Busk, No. 13-433. The legal issue is whether security screenings are “integral and indispensable” to employees’ “principal activities” or merely “preliminary” or “postliminary” to those activities. Under the Ninth Circuit’s view, security screenings are compensable because the task is necessary to the employees’ work and done for the benefit of the employer. But the Second Circuit has described security procedures as “modern paradigms of the preliminary and postliminary activities described in the Portal-to-Portal Act.”
Integrity Staffing is likely to be among the first cases heard when the Court reconvenes after its summer recess. Until then, expect the wave of related class actions to continue.
Some observers of California wage-and-hour class actions contended that the Brinker v. Superior Court—a key decision we have discussed in the past—had sounded the death knell for class certification in those cases. of California wage and hour class actions. Not so fast, according to the California Courts of Appeal, which have, in four published opinions, reversed four separate trial court orders that had denied certification in wage and hour class action cases:
- Benton v. Telecom Network Specialists, 220 Cal. App. 4th 701 (Oct. 16, 2013);
- Jones v. Farmers Insurance Exchange, __ Cal. App. 4th __ (Nov. 26, 2013);
- Martinez et al. v. Joe’s Crab Shack Holdings, 2013 __ Cal. App. 4th __ (Dec. 4, 2013); and
- Williams v. Superior Court, __ Cal. App. 4th __ (Dec. 12, 2013).
This recent wave of decisions favoring certification confirms that the California appellate courts have a strong desire to keep these lawsuits afloat. We recently authored an article (PDF) published in the Los Angeles Daily Journal that discusses three of these decisions and addresses their implications for employers and practitioners alike.
Former interns used to get revenge against their employers by writing tell-all blog posts and memoirs. Now, they’re lending their names to plaintiffs’ lawyers, who then file wage-and-hour class or collective actions alleging that interns must be paid like hourly employees.
The unpaid internship is among the hottest areas in wage-and-hour litigation. Two of the more noteworthy cases—that so far have come out in opposite ways—are currently pending in the Southern District of New York: Glatt v. Fox Searchlight Pictures and Wang v. Hearst Corporation (pdf).
In Fox Searchlight, former interns from the film Black Swan alleged that they had been misclassified and should have been paid as “employees.” Judge William Pauley held that the interns were employees and, therefore, Fox Searchlight was liable for violating minimum wage and overtime laws. The court also granted the interns’ motion for class certification.
By contrast, in Wang v. Hearst Corp., Judge Harold Baer denied the plaintiffs’ motions for summary judgment and class certification. Judge Baer found that a genuine issue of fact existed as to whether the interns were employees and that a determination of liability would require individual analysis of what the interns did and what benefits they received.
Last month, the Second Circuit granted interlocutory review of both decisions. The Second Circuit’s ultimate rulings should provide employers with further clarity concerning the law surrounding internship programs.
In the meantime, one (presumably unintended) effect of such lawsuits is to scare employers into shuttering their internship programs altogether in order to avoid the risks and costs associated with potential litigation. For example, after being targeted by a wage-and-hour class action, Condé Nast—of The Devil Wears Prada fame—recently discontinued its coveted internship program, which was famously a stepping stone into the publishing, fashion, and entertainment worlds.
Companies that do choose to continue their internship programs should confirm that they have properly classified their employees in compliance with the Fair Labor Standards Act and applicable state laws. Some employers may assume that the classification (such as exempt, independent contractor, or unpaid intern) that they give to an employee is determinative. But it turns out that courts generally give little weight to an employer’s classification.
Where should employers look? In the context of determining whether a person may be properly considered to be an unpaid intern, the Department of Labor recommends (pdf) that courts consider:
- whether the internship is similar to training which would be given in an educational environment;
- whether the internship experience is for the benefit of the intern;
- whether the intern displaces employees;
- whether the employer that provides the training derives any immediate advantage from the activities of the intern;
- whether the intern is entitled to a job at the conclusion of the internship; and
- whether the employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Companies that have been threatened with (or are already facing) a wage-and-hour lawsuit on behalf of interns may try to use the case-by-case, individualized nature of the Department of Labor’s multi-factor balancing test to defeat certification of any putative class or collective action. Interns at the same company often have very different experiences, depending upon their duties and the employees who are supervising them. Those differences could derail class or collective treatment in a particular lawsuit.
Companies may also consider asking Congress to take an interest. It turns out that, under the relevant law and regulations, Congressional interns are excluded from the FLSA’s coverage (and so the government is spared similar class actions.) Many Hill interns have described their unpaid experiences as extraordinarily valuable; perhaps the same logic might apply in the business context.
A California appellate court weighed in last week with another effort to circumvent the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion. In Franco v. Arakelian Enterprises, Inc. (pdf), a panel of the Court of Appeal in Los Angeles affirmed an order refusing to enforce an employee’s agreement to arbitrate disputes with his employer, holding that Concepcion does not abrogate the California Supreme Court’s decision in Gentry v. Superior Court.
Gentry held that a court could refuse to enforce a provision requiring individual arbitration of a claim involving “unwaivable statutory rights”—which include all wage-and-hour claims—if the court determines that (1) the complaint alleged a systematic denial of overtime pay (as any class action complaint would), (2) a class action is “likely to be a significantly more effective practical means of vindicating the rights of the affected employees” than individual arbitration would be, and (3) disallowing a class action “will likely lead to a less comprehensive enforcement of overtime laws” for the allegedly affected employees (i.e., absent class members). That is, under Gentry, a court could refuse to enforce an agreement to arbitrate individually whenever it believes that the absent class members in a putative wage-and-hour class action would collectively be more likely to recover than they would be if each employee had to comply with her agreement and arbitrate any complaint she might have.
The panel concluded that Gentry was not preempted by Concepcion, which the panel took to apply only to categorical prohibitions on class actions. In reaching that conclusion, the panel relied heavily on plaintiff-friendly law review articles, and reasoned that the Supreme Court’s opinion earlier this year in Marmet summarily reversing an explicitly categorical exception to arbitration supported limiting the reach of Concepcion to similar categorical prohibitions.
The panel concluded that Gentry was not such a categorical prohibition. But it is difficult to see how Gentry—which purported to clarify the California Supreme Court’s earlier Discover Bank decision—imposes a less categorical rule than Discover Bank, which applied to consumer class actions alleging systematically deceptive conduct producing damages in amounts too small to make individual actions likely (and which was overruled by Concepcion). Gentry says, in essence, that individual arbitration cannot be compelled whenever the court concludes on balance that the class device will make it more likely that plaintiffs’ lawyers will bring more claims on behalf of a greater number of employees. It is hard to imagine any wage-and-hour class action in which the plaintiffs’ lawyers would not allege “systematic” violations of the wage-and-hour laws, or would not contend that class actions are “significantly more effective” than individual arbitration.