Truckers’ $2.35 Million Dollar Class Settlement Vacated Due to District Court’s Cursory Analysis

The U.S Court of Appeals for the Tenth Circuit recently vacated a Utah district court’s finding that a class of truckers satisfied Rule 23 for purposes of settling two wage-hour actions due to a cursory review below, setting aside a multi-million dollar settlement and remanding the case for further proceedings.

In 2016, two putative wage-hour class action cases were filed against trucking company C.R. England, which ultimately ended up in federal court in Utah, challenging the company’s practice of paying drivers only on a piece rate basis—per mile driven, despite spending substantial time engaged in non-driving tasks such as completing paperwork, performing pre- and post-trip inspections, and loading and unloading freight. By late 2016, the company reached a $2,350,000 class settlement to resolve the cases.

The parties submitted a proposed class settlement to the district court. Subsequently, a group of objectors opted out of the settlement, challenging the settlement’s fairness. In December 2016, Senior Judge Dee Benson in the District of Utah overruled the objector’s challenges and granted approval of the class settlement. The objectors appealed that decision to the Tenth Circuit.

A unanimous Tenth Circuit panel tossed out the class certification finding for settlement purposes, stating that the district court’s decision, which provided only a short discussion on the appropriateness of class certification, and was “incompatible with the district court’s obligation for thorough examination.” Citing circuit precedent, the Tenth Circuit emphasized that class actions “may only be certified…after a rigorous analysis, that the prerequisites of [Federal Rules of Civil Procedure] 23(a) [and 23(b)] have been satisfied.” Instead of carefully applying the requirements of Rule 23, “the district court left little analysis by which [the Tenth Circuit could] review its determination of the appropriateness of the proposed class.”

Ultimately, the panel concluded that “the district court fell short of its obligation to analyze, independently and rigorously, the proposed class suitability.” Thus, the Tenth Circuit vacated, affording the district court another opportunity “to more meaningfully explain its bases for class certification.”

 

Federal Judge Finds J.B. Hunt Compensation System Too Varied To Sustain Class Certification

J.B. Hunt Transport Inc., one of the largest transportation logistics companies in North America, recently prevailed on a motion to decertify a class of around 11,000 current and former truck drivers, just six weeks before trial.  The drivers alleged claims under California law for failure to pay the minimum hourly wage, unpaid wages at the agreed rate, meal and rest break violations, wage statement violations and waiting time penalties. The drivers claimed the company’s Activity-Based Pay (“ABP”) compensation system did not compensate them for various “nonproductive tasks” like pre- and post-trip inspections, paperwork, waiting times at the customer location, breakdowns, fueling and washing trucks, and waiting for assignments.  Under the ABP, drivers were paid a piece-rate formula under which they received mileage pay, pay for activities such as deliveries, and occasional pay for nonproductive time, such as hourly pay if they waited at a customer location for more than one-and-a-half hours.

J.B. Hunt provides two types of driving services for customers:  (1) “intermodal” – delivering freight to and from railways; and (2) Dedicated Contract Services (“DCS”) – freight deliveries for a particular customer on a regular basis.  A class was initially certified in 2009 based on the premise that the ABP applied to both intermodal and DCS drivers.   

However, just this past week, a federal court in the Central District of California found the company’s piece-rate compensation system was too varied to sustain class certification because it was not uniformly applied to all class members. Specifically, discovery reflected that not all drivers were paid under the ABP, but rather some drivers were paid straight hourly, daily, or weekly pay when driving for certain accounts.  The Court emphasized that the only way to glean which pay plan applied to the each class member was to examine each individual driver’s payroll records and activity logs, and such individual issues predominated and were not appropriate for class adjudication.

The Company also obtained partial summary judgment on plaintiffs’ claims for liquidated and statutory damages and meal break claims under California law.  As for the liquidated and statutory damages, the Court found J.B. Hunt did not act in bad faith because it reasonably believed the Federal Aviation Administration Authorization Act of 1994 preempted the meal break claims. Further, regarding those meal breaks, the named plaintiffs admitted they could take a meal break whenever they wanted, and the Court found the company was not required to “police” such breaks. The rest break claims, however, survived since the ABP formula did not separately list out the amount paid, if any, for rest breaks. This summary judgment ruling tempered a prior unfavorable summary judgment order where the District Court held the ABP pay plan violated California law to the extent it failed to separately pay for meal and rest breaks, and other nonproductive time (e.g., inspections, paperwork, fueling and washing trucks).

J.B. Hunt demonstrates that class certification can be defeated, particularly where employers can show that wage systems are not uniformly applied to all class members.

 

 

Jackson Lewis Class Action Trends Report Summer 2018

Below is a link to the latest issue of the Jackson Lewis Class Action Trends Report.  This report is published on a quarterly basis by our firm’s class action practice group in conjunction with Wolters Kluwer.  We hope you will find this issue to be informative and insightful.  Using our considerable experience in defending hundreds of class actions over the last few years alone, we have generated another comprehensive, informative and timely piece with practice insights and tactical tips to consider concerning employment law class actions.

Jackson Lewis Class Action Trends Report Summer 2018

Rule 23 Amendments Awaiting Congressional Review

The final amendments to the Federal Civil Rules of Procedure, including amendments to Rule 23 class actions, are waiting for approval from Congress. The primary changes to Rule 23 affect the class action notice and settlement processes. The amendments acknowledge advancements in technology and the popularity of social media, while formalizing procedural and substantive notice and approval requirements already being employed in some federal courts.

If approved, the amendments will become effective December 1, 2018.

Here’s what employers need to know:

Preliminary Approval: No longer is moving for preliminary approval a perfunctory task. The amendments to Rule 23(e) would place additional substantive requirements on parties moving for preliminary approval, requiring them to demonstrate the proposed settlement will likely be granted and the court will likely certify the class for purposes of settlement. Historically, federal courts had denied preliminary approval motions for failure to provide estimated class size, description of how the settlement funds would be distributed, and a draft notice. By requiring this information at the preliminary approval stage, the amendment makes mandatory what courts were already considering. While this amendment likely will result in more extensive early class discovery, it reduces the risk associated with a notice process that may never be approved.

Form of Notice: The amendments to Rule 23(b)(3) eliminate the requirement that class notice must be sent by first class mail, instead permitting delivery through “electronic means” such as emails and text message, which will likely be more cost effective. In permitting alternate means of notice, counsel remains obligated to consider the class members’ overall accessibility to email and social media. And, because inboxes are flooded with hundreds of daily emails, to maximize the deliverability rate, it is critical for a notice to be drafted and distributed in a manner that will not get filtered out. Employers should consider revising their electronic communication policies to ensure professional email accounts are not being used for non-work related purposes to minimize workplace disruption.

Settlement Approval: The amendments to Rule 23(e)(1) expand upon the idea that a settlement must be “fair, reasonable, and adequate” by setting core factors the parties must demonstrate in seeking approval. To standardize the final approval process, the amendments set the following criteria: whether “class representatives and class counsel have adequately represented the class”; whether the settlement was “negotiated at arm’s length”; whether the relief provided for the class is adequate (taking into account such factors as costs, risks, and effectiveness of the proposed method of distributing relief to the class, among others); and whether “class members are treated equitably relative to each other.”

Class-Member Objections: The amendments to Rule 23(e)(5) clarify what must be included in an objection, requiring the objector to state with specificity the basis for any objection and whether the objection is being made only by the objector, by a subset of the class, or by the entire class. These amendments may deter “serial objectors” with ulterior and personal financial motives from delaying settlement approval and distribution to injured class members.

Appeals: Amended Rule 23(f) would clarify that interlocutory appeals may be sought only after class certification is granted or denied, not from an order to give notice under Rule 23(e)(1). It would also expand the filing time for an interlocutory appeal to 45 days (from 14 days) if any party is the United States, a United States agency, or a United States officer.

Restaurant Industry Association Files Suit Challenging “80/20” Rule

The Restaurant Law Center, a public policy affiliate of the National Restaurant Association, has filed suit against the Department of Labor and its Wage and Hour Division, seeking to declare unlawful the DOL’s 2012 revision to its Field Operations Handbook, purporting to establish, through sub-regulatory guidance, the “80/20” tip credit rule or “20% Rule.” Restaurant Law Center v. U.S. Dept. of Labor, No. 18-cv-567 (W.D. Tex. July 6, 2018).

Click here to access our Wage and Hour blog and learn more about this lawsuit and potential future implications.

California May Lower the Standing Threshold in Data Breach Litigation

A key issue for any business facing class action litigation in response to a data breach is whether the plaintiffs, particularly consumers, will have standing to sue. Standing to sue in a data breach class action suit, largely turns on whether plaintiffs establish that they have suffered an “injury-in-fact” resulting from the data breach. Plaintiffs in data breach class actions are often not able to demonstrate that they have suffered financial or other actual damages resulting from a breach of their personal information. Instead, plaintiffs will allege that a heightened “risk of future harm” such as identity theft or fraudulent charges is enough to establish an “injury-in-fact”.

Click here for an article on our Workplace Privacy, Data Management & Security Report blog for an update regarding a new pending bill that, if passed, would allow consumers to sue a business in response to a data breach without any showing of harm at all.

Gig-Economy Delivery Couriers are Not Employees, New York Court Rules, Reverses Unemployment Board

A delivery courier fired by app-based Postmates is an independent contractor, not an employee entitled to unemployment insurance benefits, the Third Judicial Department of the New York Supreme Court has ruled. Matter of the Claim of Luis A. Vega, No. 525233 (June 21, 2018). The case is one of many disputes across the country over the status of workers in the gig economy.

Postmates Inc. is an app-based food delivery service known for its ability to deliver from hard-to-reach restaurants around Manhattan, Brooklyn, and Queens.

Luis Vega was a delivery courier for Postmates. Vega applied for unemployment insurance benefits after Postmates terminated its relationship with him based upon alleged negative consumer feedback or fraudulent activity. The Unemployment Appeal Board, reversing a decision by an Administrative Law Judge (ALJ), found that an employer-employee relationship existed between Postmates and Vega. Contesting the Board’s decision, Vega filed suit on behalf of himself and others similarly situated.

The court, by a 3-2 vote, reversed the Board. The case turned on how much control the company had over the delivery couriers. The court found the company did not exert enough control over Vega or those similarly situated to be held liable for unemployment insurance contributions.

The majority found significant that, in order to work as a courier for Postmates, claimant and others similarly situated “need only download Postmates’ application software platform and provide his or her name, telephone number, Social Security number and driver’s license number; there is no application and no interview.” Further, they “were not required to report to any supervisor,” “they unilaterally retain[ed] the unfettered discretion as to whether to ever log on to Postmates’ platform and actually work,” and were “free to work as much or little as he or she want[ed] — there is no set work schedule.”

The panel concluded, “[W]hile proof was submitted with respect to Postmates’ incidental control over the couriers, the fact that Postmates determines the fee to be charged, determines the rate to be paid, tracks the subject deliveries in real time and handles customer complaints … does not constitute substantial evidence of an employer-employee relationship.”

Jackson Lewis attorneys are available to answer inquiries regarding this case and other developments.

Class Action Stacking Is Not Permitted, U.S. Supreme Court Rules

Once class action certification has been denied, a putative class member may not start a new class action beyond the applicable statute of limitations, the U.S. Supreme Court has ruled, 9-0, in an opinion by Justice Ruth Bader Ginsburg. China Agritech, Inc. v. Resh, No. 17-432 (June 11, 2018). Justice Sonia Sotomayor filed an opinion concurring in the judgment.

In 1974, the Court held in American Pipe and Construction Co. v. Utah that “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action.” 414 U.S. 538, 554. Noting that “[t]he watchwords of American Pipe are efficiency and economy of litigation,” the Court concluded in China Agritech that “American Pipe does not permit the maintenance of a follow-on class action past expiration of the statute of limitations.” American Pipe equitable tolling rule does not apply to individual claimants banding together and filing a subsequent (“stacked”) class action.

You can read our analysis of the decision here: https://www.jacksonlewis.com/publication/class-action-stacking-not-permitted-us-supreme-court-rules

Is Silence Golden? Supreme Court to Rule on Silent Class Arbitration Waivers

The United States Supreme Court is taking another bite at the arbitration waiver apple.  In addition to its landmark decision in Epic Systems Corp. v. Lewis, where the Supreme Court held that class and collective action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act, the Supreme Court has granted cert to review the Ninth Circuit’s decision in Varela v. Lamp Plus, Inc. and will decide whether workers can arbitrate on a class-wide basis where the agreement in question is silent on class arbitration.

The arbitration clause in Varela is silent on the issue of whether the workers who signed it can pursue their claims through class arbitration.  The Ninth Circuit held that the agreement’s silence rendered it ambiguous on the issue, and thus the most reasonable reading of the broad contract language would allow employees to pursue their claims through class arbitration.

We will continue to monitor this case and provide you with updates.  While Epic Systems has provided employers with a roadmap for crafting future arbitration agreements, the decision in Varela will affect the rights of employees and employers alike who have already entered into arbitration agreements that are silent on class arbitration.

Supreme Court: Class Action Waivers in Employment Arbitration Agreements Do Not Violate Federal Labor Law

Class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (FAA), the U.S. Supreme Court has held in a much-anticipated decision in three critical cases. Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP et al. v. Morris et al., No. 16-300; National Labor Relations Board v. Murphy Oil USA, Inc., et al., No. 16-307 (May 21, 2018).

The Supreme Court’s decision resolves the circuit split on whether class or collective action waivers contained in employment arbitration agreements violate the National Labor Relations Act (NLRA). In a 5-4 decision authored by Justice Neil Gorsuch, the Court held that the FAA states that arbitration agreements providing for individualized proceedings are enforceable and neither the FAA nor the NLRA require otherwise. Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas, and Samuel Alito joined in that decision.

You can read our analysis of the decision here: https://www.jacksonlewis.com/publication/supreme-court-class-action-waivers-employment-arbitration-agreements-do-not-violate-federal-labor-law

 

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