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Litigation News

Appeals Courts Limit Scope of FLSA Collective Actions

William Howard Newman

Summary

  • Each collective action plaintiff must separately establish personal jurisdiction over the defendant employer.
  • This extends precedent in state law “mass actions” to federal collective actions.
  • Holdings should inform FLSA plaintiffs when choosing a forum and discourage shopping for favorable venues.
Appeals Courts Limit Scope of FLSA Collective Actions
Noel Hendrickson via Getty Images

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Two federal appellate courts have effectively limited the scope of collective actions under the Fair Labor Standards Act (FLSA) to employees who worked in the forum state unless the defendant happens to reside there. Both the U.S. Court of Appeals for the Sixth Circuit and the U.S. Court of Appeals for the Eighth Circuit extended the 2017 U.S. Supreme Court decision in Bristol-Myers Squibb Co. v. Superior Court of California regarding state law “mass actions” to the context of federal collective actions. In doing so, they held that even employees opting in to collective actions must separately establish personal jurisdiction to support their claims.

According to ABA Litigation Section leaders, these holdings should inform FLSA plaintiffs when choosing a forum and discourage shopping for favorable venues. But they believe these holdings may complicate FLSA enforcement with inefficiencies.

FLSA Procedural Rules for Certain Wage Claims

Congress enacted the FLSA in 1938 to, among other things, provide remedies for employees who seek unpaid wages. Recognizing the power imbalance between workers and employers, it allows prevailing employees to recover legal fees and to band together to litigate similar claims.

Although the statute does not permit class action lawsuits, it expressly provides a vehicle through which similarly situated plaintiffs may maintain claims in a “collective action.” The primary difference between these lawsuits and class actions is that they require individual plaintiffs to opt in to a collective instead of opting out of a class.

Despite this different procedure, federal courts historically applied the same personal jurisdiction analysis to class actions and FLSA collective actions. Under that standard, once one plaintiff properly asserts personal jurisdiction over a defendant, the entire class or collective does as well. But in 2017, Bristol-Myers inspired litigants to argue that a different standard was appropriate.

Bristol-Myers Inspires a Change to Group Claim Rules

Bristol-Myers was not a class action or a collective action. Instead, it concerned a California state court tort action brought by 600 individual plaintiffs who alleged injuries arising from the defendant’s pharmaceuticals. Not all the plaintiffs resided in the state, nor was the defendant subject to general jurisdiction there.

The defendant moved to dismiss the claims brought by non-California plaintiffs for lack of specific personal jurisdiction because its in-state conduct was connected only to the in-state plaintiffs’ claims but was irrelevant to the claims brought by the out-of-state plaintiffs.

A divided California Supreme Court affirmed the denial of that motion. It applied a “sliding scale” approach that more easily found specific jurisdiction when a defendant had substantial in-state contacts. And since the defendant had significant sales and development activities in California, the court held that a loose connection was sufficient between its in-state activity and the out-of-state plaintiffs’ claims. But three judges dissented because the defendant’s in-state activities did not cause the out-of-state plaintiffs’ injuries, and thus, they concluded the majority’s approach improperly blurred the line between general and specific jurisdiction.

The U.S. Supreme Court reversed the California Supreme Court’s “sliding scale” approach to specific jurisdiction, holding it violated the Fourteenth Amendment. It decided that specific jurisdiction in state court always requires a direct connection between the defendant’s in-state activities and the plaintiff’s injuries.

Differing Views on Personal Jurisdiction in Group Claims Emerge

After Bristol-Myers, there has been some dispute about whether the decision means that each member of a federal court class action needs to independently allege personal jurisdiction over the defendant. The U.S. Court of Appeals for the Seventh Circuit in Mussat v. IQVIA held that they do not, while the dissenting opinion from the U.S. Court of Appeals for the D.C. Circuit in Molock v. Whole Foods Market Group argued that they do.

The same dispute has arisen in the FLSA collective action context. Some courts, like the U.S. District Court for the Northern District of Ohio in Maclin v. Reliable Reports of Texas, have held that each opt-in member of a collective must separately establish personal jurisdiction over the defendant. And others, like the U.S. District Court for the Northern District of California in Swamy v. Title Source, held that they do not.

Circuit Courts Extend Bristol-Myers to Collective Actions

In August 2021, two circuit courts addressed the split among district courts about whether Bristol-Myers limits personal jurisdiction in collective actions. They both decided that it does.

In Canaday v. The Anthem Companies, the Sixth Circuit affirmed the dismissal of claims brought by nurses outside of Tennessee who opted in to an FLSA collective action against an Indiana-based employer in the U.S. District Court for the Western District of Tennessee. Even though Bristol-Myers concerned a mass lawsuit with many plaintiffs as opposed to an FLSA collective action, the court held that the two were similar enough for the same rules to apply. It noted that in both mass actions and collective actions, plaintiffs need to deliberately opt in and need to meet their own legal burdens to succeed.

Judge Bernice Donald on the Canaday panel dissented. She argued that the Sixth Circuit had already decided that Bristol-Myers did not apply to class actions, and so it likewise should not apply to FLSA collective actions. She reasoned that the FLSA deliberately provides for collective actions that allow plaintiffs to litigate against the defendant for the benefit of the collective, like a class action. And since only the named plaintiffs litigate the suit and serve process on the defendant, only they need to establish personal jurisdiction.

A day after the Canaday decision, the Eighth Circuit also applied Bristol-Myers to an FLSA collective action in Vallone v. The CJS Solutions Group. It did so by affirming the decision by the U.S. District Court for the District of Minnesota to limit the collective action against a Florida defendant to employees who traveled to or from Minnesota. Although it did not consider the differences between the mass action in Bristol-Myers and an FLSA collective action, it cited the Supreme Court decision for the principle that the plaintiffs needed to connect the defendant’s conduct in Minnesota to FLSA claims arising from conduct outside of Minnesota to establish personal jurisdiction.

Decision Discourages Forum Shopping

Several Litigation Section leaders agree that these decisions may guide plaintiffs in their forum choices. “There is quite possibly a trend toward limiting personal jurisdiction in order to restrict forum shopping,” suggests Jerry M. Cutler, New York, NY, cochair of the Section’s Employment & Labor Relations Law Committee. As a result, Cutler adds, “plaintiffs may be well-advised to file FLSA cases in the defendant’s home state unless or until a change is made in the federal law or rules of procedure.”

This trend may be incompatible with the FLSA’s purpose, according to Cassandra B. Robertson, Cleveland, OH, chair of the Appellate Subcommittee of the Section’s Civil Rights Litigation Committee. She notes that the law “expresses a clear policy choice in favor of deciding the matter as efficiently as possible.” Accordingly, she proposes that courts consider FLSA collective actions “as a single claim, even when brought by multiple plaintiffs in different states” and so avoid the need to limit collective membership on personal jurisdiction grounds.

There are “policy benefits for allowing cases to be resolved in one court,” agrees William E. Weinberger, Los Angeles, CA, cochair of the Section’s Corporate Counsel Committee. And while he notes that courts should respect the due process rights of the employer, he sees little impact to those rights in FLSA cases that involve a single employment policy that impacts employees throughout the country.

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