Tag Archives: Employment

Court Denies Attempt to Recast ERISA Class Action as a Derivative Claim

View David Wright's Complete Bio at robinsonbradshaw.comAccording to the Company website, “Piggly Wiggly has been bringing home the bacon for millions of American families for over 100 years.” But a putative class of former employees of Piggly Wiggly filed a class action complaint in the District of South Carolina, asserting various claims under ERISA pertaining to the Company’s employee stock ownership plan. The claims include allegations pertaining to excessive compensation, “gross mismanagement,” concealing of financial losses from participants, and various “insider dealings.” Spires v. Schools, No. 2:16-616 (D.S.C. 2016). The scheme culminated, according to Plaintiffs, in the sale of substantially all assets to C&W Wholesale Grocers, Inc. The case was filed under Rule 23 as a class action, not under Rule 23.1 as a derivative action.

Eighteen months into the case, and after the district court had trimmed the complaint, Plaintiffs attempted to switch gears, moving to proceed without class certification and instead as a derivative action under ERISA Section 502(a). But Judge Gergel would have none of it in a decision rendered on November 17. After first observing that a benefit plan may not have standing under ERISA to assert claims for a breach of fiduciary duty, the Court held that “allowing a class action to proceed as a derivative action would unfairly shift to Defendants the burden of proving or disproving the adequacy of the named Plaintiffs as representatives” of the class. The Court observed that the “complaint has nearly one hundred references to ‘class,’ ‘class members’ and the ‘class period.’” According to the Court, plaintiffs did not “even attempt to show cause why, having chosen to file a class action, they nonetheless should be excused from ‘jump[ing] through the procedural hoops’ of prosecuting a class action.”

The case serves as a good reminder of the “stickiness” of filing under Rule 23. After you do that, it isn’t so easy to extricate yourself.

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Class Certified on Failure To Notify Employees of Impending Hospital Closure

View David Wright's Complete Bio at robinsonbradshaw.comFailure to give the requisite 60-days’ notice to a group of employees under the WARN Act seems like it implicates a quintessential common question for adjudication under Rule 23. But in Hutson v. CAH Acquisition Company 10, LLC, 1:15CV742 (M.D.N.C. Aug. 15, 2016), Defendant gamely tried to suggest that there were factual issues that must be resolved as to each plaintiff. Admittedly, the case was a bit more complicated than the typical WARN Act case – the closing of the employer’s facility was postponed, and there apparently was confusion about just what the employer explained to employees about the postponement. But Judge Osteen did not pause long in certifying the class, observing that “whether the [new] notice was timely and sufficient under the WARN Act or whether notice was in effect given at all, are questions of law and fact common to the class.” Judge Osteen similarly rejected defendant’s typicality argument, holding that the claims at issue all “arise out of the exact same conduct, and rest on the exact same legal theories as those of the proposed class.” The prospect of adjudicating 130 individual claims under the WARN Act – for the same closure event – seems daunting, and Judge Osteen’s decision on class certification was right down the middle of the fairway on this one.

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Supreme Court Rebuffs Predominance Challenge to “Donning and Doffing Class”

View David Wright's Complete Bio at robinsonbradshaw.comYesterday, the Supreme Court issued its opinion in Tyson Foods, Inc. v. Bouaphakeo, voting 6 – 2 to uphold a jury verdict in favor of employees in a donning and doffing action. The class of employees, certified under Iowa Wage and Hour law pursuant to Rule 23, and as a collective action under the Fair Labor Standards Act, worked in the kill, cut and retrim departments of a pork processing plant. They were required to use protective gear and complained that they weren’t paid for the time spent to put on and take off the necessary protection equipment. Because Tyson didn’t keep records regarding this “donning and doffing” time, the employees (a 3,344 member class) relied on a study performed by an industrial relations expert to prove the average time spent on that activity.

A jury found Tyson liable for failure to pay the employees and awarded damages of $2.9 million, significantly less than the amount provided for in the expert’s study. The Eighth Circuit, over a dissent, affirmed the verdict in a decision we previously commented on in this post.

By direct contrast to the Supreme Court’s 2011 decision in Dukes v. Wal-Mart Stores, Inc., the parties in Tyson did “not dispute that there are important questions common to all class members, the most significant of which is whether time spent donning and doffing the required protective gear is compensable work under the FLSA.” (Wal-Mart held that the absence of a common question doomed the class). But the difficulty arose from the fact that each person in the class needed to establish that the amount of time spent donnng and doffing, when added to his regular hours, amounted to more than 40 hours in a given week, so that overtime was owed. How can this be resolved, Tyson suggested, on a class-wide basis?

The key question, as Justice Kennedy framed it, was whether it could be inferred – based on the evidence – that “each employee donned and doffed for the same average time observed in the [expert’s] sample.” Six justices held that it could, and rejected the notion that so-called “representative evidence” was always impermissible to establish liability in favor of a class. Instead, the court determined that “in many cases, a representative sample is ‘the only practicable means to collect and present relevant data’ establishing a defendant’s liability.”

Distinguishing Wal-Mart, the Court emphasized that representative evidence could not be used as a “means to overcoming [the] absence of a common policy.” In Wal-Mart, the “employees were not similarly situated,” and the evidence submitted in favor of one employee’s claim was not probative of another’s. In Tyson, by contrast to Wal-Mart (where “the experiences of the employees . . . bore little relationship to one another”), each employee “worked in the same facility, did similar work and was paid under the same policy.”

The Court gave short shrift to the second question upon which it had accepted certiorari, namely whether a class may be certified if it contains “members who were not injured and have no legal right to any damages.” In its brief, Tyson had reframed its argument and, in the Court’s estimation, abandoned the argument from its petition. The Court acknowledged that “whether uninjured class members may recover is one of great importance,” but found it was not fairly presented in the case before it, principally because the “damages award has not yet been disbursed nor does the record indicate how it will be disbursed.” In a concurrence, Chief Justice Roberts – who observed that “hundreds of class members suffered no injury” – expressed skepticism that the District Court could devise any means to distribute the aggregate award only to injured class members.

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Court Certifies State Wage and Hour Claims Alongside FLSA Collective Claims

View David Wright's Complete Bio at RBH.com We have reported recently in this space on the certification of state wage and hour claims. Judge Gergel recently continued with this trend, certifying a class of Jamaican workers at the Kiawah Island Golf Resort who contend they weren’t paid enough by the Resort. See Moodie v. Kiawah Island Inn Co., LLC, No. 2:15-cv-1097 (D.S.C. Aug. 24, 2015). Defendants argued that the differences in class members were such that the court would have to certify six classes, but the Court rejected that notion, saying the argument stemmed from a “novel proposition that Plaintiffs must propose [a] separate class for every claim in the complaint.” Immediately following that, Judge Gergel gave a nod to “issue certification” in dicta, citing the language of Rule 23(c)(4) without wrestling with the difficulties looming in a surface analysis of that question, something which we have dealt with before here. The Court found that the legality of deductions made from the wages of the putative class was “central to the validity of each one of the claims,” and rejected the defense argument that a conflict arose by virtue of the representation of former employees by current employees. Citing Gunnells v. Healthplan Servs., Inc., Judge Gergel also rejected the argument that difficulties in determining damages resulted in a predominance problem for the class. In so holding, the Court did not grapple with the numerous cases post-Gunnells, including Comcast and its progeny that illustrate how individual damages issues can threaten the viability of class relief. In certifying the class, the Court paid particular attention to the difficulties associated with some 500 workers filing individual claims, noting that “class members are residents of a foreign country, likely to have limited financial resources, unfamiliar with the U.S. Court system, and have relatively small claims.”

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Fail-Safe Class Fails to Obtain Class Certification

View Amanda Pickens’ Complete Bio at RBH.comCourts have understandably been reluctant to certify a class consisting of “persons who are injured by the defendant” or “individuals to whom the defendant is liable,” i.e., a class definition that depends on the outcome of the case. Such a “fail-safe” class is unfair to defendants:  if defendants win the case, there is no class that is bound by the result because the class consists solely of victors.

A West Virginia judge recently denied a former Dollar General employee her bid for class certification, finding the proposed class was fail-safe and therefore improper. Stephanie N. Paulino filed a class action lawsuit against Dollar General in 2012, alleging the company violated the West Virginia Payment and Collection Act (“WPCA”) when it failed to pay her final wages within 72 hours of her termination. The putative class was defined as all former West Virginia Dollar General employees who were “involuntarily terminated” and who were “not paid their final wages within 72 hours of termination.”

According to Judge Groh, the putative class was an impermissible “fail-safe” class because membership depended on Dollar General’s ultimate liability to each employee under the WPCA. Members could either win their WPCA claims and join the class, or lose and be excluded from the class.

The Fourth Circuit hasn’t weighed in directly on the “fail-safe” class issue, but district courts, including in the District of South Carolina, have flatly prohibited such definitions. Melton v. Carolina Power & Light Co., 283 F.R.D. 280 (D.S.C. 2012)

The class also failed to meet Rule 23’s commonality, typicality, predominance, and superiority requirements. Judge Groh found that the Court would have to engage in an individualized analysis to determine whether a member could even qualify for the class. Specifically, the Court would have to determine, at minimum, three threshold questions: Did the former employee resign, or was he fired? When did Dollar General terminate the former employee (including both the time and the date)? When did Dollar General disburse the former employee’s final wages? The court held that these initial questions require a substantial, fact-intensive, individualized investigation.

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