The Seventh Circuit Affirms That The District Court Bit Off More Than It Could Chew By Affirming Decertification In Collective Action

by BakerHostetler

Hollywood certainly believes that it’s often easier to reach back into the well than to spend time creating something new. (See, e.g., any movie series that has more than one sequel.) Sometimes, we here at the Employment Class Action Blog are no different. Take, for example, this week’s Seventh Circuit decision in Espenscheid v. DirectSat, LLC, Case No. 1943 (Feb. 4, 2013). We have already blogged about this case twice before, the first time when the lower court decertified the collective action class on the eve of trial back in 2011, and then again when the Court of Appeals upheld the plaintiffs contention that settlement agreement did not prevent them from appealing the decertification.

And now, barring the Supreme Court granting certiorari, the saga of the 2341 unhappy technicians has finally reached an end. And, unfortunately, that end is an unhappy one for the plaintiffs as the Court of Appeals has upheld the decertification.

The court’s decision is straightforward: the underlying lawsuit alleges that management compelled the technicians to do work for which they were allegedly not compensated at all, and also to work overtime without being paid. The district court initially conditionally certified the case, but then decertified it because it determined that the case would have been unmanageable for trial. The Seventh Circuit notes that had plaintiffs simply been seeking “just injunctive or declaratory relief,” the trial could have progressed, because “the only issue would have been whether DirectSat had acted unlawfully.” Plaintiffs, however, only sought damages. “And to determine damages, would, it turns out, require 2341 separate evidentiary hearings….” As a result, the Seventh Circuit upheld the decertification.

What is paramount for both plaintiffs and defendants going forward, however, was the court’s determination that plaintiffs could not avoid decertification by presenting testimony from 42 “representative” members of the class to determine damages. The court refused to believe that the experiences of 42 class members for the purpose of calculating damages could be successfully extrapolated to the other 2341 technicians. Finally, the court does note that the plaintiffs could have sought (in the court’s view) a promising alternative by complaining to the Department of Labor, which could then obtain in a suit under the Fair Labor Standards Act the same monetary relief for the class members that they could have claimed if such a suit were feasible.  Alas, hindsight is 20/20.

The Espensheid decision may prove increasingly important if other courts accept its view. First, the court largely rejected the “sampling” arguments made by plaintiffs in many wage and hour cases, and may result in fewer class or collective actions reaching trial. Second, the court’s analysis seems to downplay differences between the standards for certification under section 16(b) of the FLSA and Rule 23 of the Federal Rules of Civil Procedure, thus inviting more arguments based on the Supreme Court’s 2011 decision in Wal-Mart Stores v. Dukes. Lastly, the opinion appears to suggest the court’s view that a more appropriate vehicle for such cases in the future is resort to the United States Department of Labor rather than class or collective litigation.

The Bottom Line: The Seventh Circuit’s decision deals a significant, perhaps fatal blow to the concept of employing  sampling approach for collective (and potentially class) actions and suggests that the U.S. Department of Labor might be a better venue for such claims in the future.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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