In all the tsuris for class action lawyers from the U.S. Supreme Court’s 2011 ruling in Wal-Mart v. Dukes, one category of collective litigation continues to boom: overtime claims brought under the Fair Labor Standards Act. That’s because wage-and-hour cases aren’t really class actions but rather representative actions. Under the process established in a 1987 New Jersey ruling called Lusardi v. Xerox and followed by most federal trial judges overseeing FLSA cases, courts certify a conditional class based on allegations of a representative employee. Other employees who are similarly situated are then notified of the action and offered the opportunity to opt into the case. After discovery, the defendant gets a crack at decertifying the class by showing that employees aren’t actually situated similarly. By convention, the language of federal class actions applies to certification and decertification in wage-and-hour cases. But most judges don’t subject the suits to the strict Federal Rules of Civil Procedure for class actions, so the Supreme Court’s tightening of those rules in the Dukes case hasn’t been of much help to wage-and-hour defendants.
This week, the 5th Circuit Court of Appeals made sure that will remain the state of play in its district courts. In a one-line per curiam order, a three-judge appellate panel denied Wells Fargo’s petition for a writ of mandamus that would have overturned U.S District Judge Gray Miller’s conditional certification of an opt-in class of up to 15,000 home mortgage consultants. The appellate panel – Senior Judge Patrick Higginbotham and Judges Priscilla Owen and Leslie Southwick - unfortunately offered no explanation of its reasoning, which is disappointing in a case that attracted a lot of amicus attention from both sides, including briefs from the U.S. Chamber of Commerce and the Securities Industry and Financial Markets Association (for Wells Fargo) and the Department of Labor and Equal Employment Opportunity (for the plaintiffs).
Wells and its amici pleaded with the 5th Circuit to acknowledge that the lenient conditional certification process in FLSA cases is at odds with the bedrock Dukes directive that class actions involve common questions and common solutions. “Plainly, the two-step procedure has it backwards,” the bank’s lawyers at Littler Mendelson wrote in their mandamus brief. “It first conditionally certifies the class, permitting the joinder of additional parties, and only much later does it consider facts already in the record that demonstrate the futility of representative litigation.” The 11th-hour decertification process offers no relief for defendants, the bank argued, pointing to only 24 reported decertification decisions in 2011, when 2,500 FLSA collective actions were filed. Unless the 5th Circuit imposes the Rule 23 standard for class certification, Wells argued, FLSA defendants will continue to face undue pressure to settle de facto class actions without the benefit of protections the Supreme Court established in Dukes.
The bank conceded that the statute and case law don’t really specify a definition for similarly situated employees nor a procedure for identifying them, but argued that there’s no exception for FLSA cases in the federal rules governing class actions, so those rules should apply.
The class, represented by appellate counsel from Yetter Coleman, countered that Wells Fargo’s argument missed the point of providing notice to similarly situated employees. If those employees don’t opt into the case, the class brief said, they’d be subject to the statute of limitations because collective actions, unlike class actions, don’t toll the statute. The LaborDepartment’s amicus brief argued flatly that the federal rules governing class actions simply don’t apply to FLSA collective cases, and only a few courts (and no appellate panels) have concluded otherwise.