Second Circuit to weigh in on future of class actions

Posted on: September 11th, 2013 by Steve Larson
Share

Blog Wage and HourThe Second Circuit’s recent decision to hear an appeal from workers who claim a trial judge misapplied the U.S. Supreme Court’s Comcast ruling when it rejected their bid for class certification gives the appeals court a chance to raise the bar for wage-and-hour plaintiffs and add to a body of recent rulings that limit workers’ ability to pursue class actions.  The Second Circuit allowed Applebee’s workers to challenge a lower court ruling in their wage-and-hour suit against T.L. Cannon Corp., the owner and operator of the restaurant chain. According to the district court ruling, the high court’s March 27 Comcast decision foreclosed class certification because the plaintiffs hadn’t offered a model for measuring damages on a class-wide basis. 

The workers argue that U.S. District Judge Thomas J. McAvoy’s ruling that class certification was precluded in any case where damages would need to be calculated individually misinterpreted the Comcast decision. This sweeping rule could fundamentally alter class litigation, they told the Second Circuit.  Judge McAvoy’s decision — issued two days after Comcast — misreads the Supreme Court decision in a way that threatens not only wage class actions, but would-be class actions outside the employment context, as well, said Scott Michelman, an attorney with advocacy group Public Citizen who represents the workers. 

“If the district court is right, then the scope of class action litigation for workers who are owed wages will be drastically curtailed,” Michelman said. “We’re hoping the Second Circuit will take a broader, more practical view of the class action device.”

The Second Circuit will be among the first circuit courts to tackle the 5-4 Comcast decision directly in an employment class action. The ruling came down in an antitrust suit over the alleged monopolization of the Philadelphia cable market. 

Just days after issuing it, the Supreme Court ordered the Seventh Circuit to reconsider whether workers in an overtime suit against RBS Citizens deserved class certification in light of Comcast.  That case was then settled. 

Then in May, the Ninth Circuit addressed Comcast in a ruling that said a lower court had been wrong not to certify a proposed class of Medline Industries Inc. employees in their wage-and-hour suit because of the potential need to calculate individual damages for each class member.  The panel drew a distinction between the Medline and Comcast cases. In Comcast, the high court decertified a class of 2 million cable television subscribers because the class used a damages model that “did not isolate damages resulting from any one theory of antitrust impact.”

But the Medline case was different, however, the judges said, because the plaintiffs’ individual damages would be calculated based on the same alleged wrongdoing by Medline, if they could prove it.

More broadly, the Second Circuit’s decision to hear the worker’s challenge comes against the backdrop of a series of rulings that have strengthened employers’ ability to avoid facing wage-and-hour class actions.

The August 15 decision granting the Applebee’s workers’ motion for leave to appeal came just days after the Second Circuit sided with Citigroup, Inc. and Ernst & Young, ruling that arbitration agreements barring class and collective litigation had to be enforced against Fair Labor Standards Act plaintiffs.

Those cases — along with a Title VII case against Goldman Sachs — made up a trio of closely watched Second Circuit appeals that turned on whether workers could waive their rights to bring class-claims under employment laws. The employers prevailed at the Second Circuit in all three cases.