Third Circuit Rejects District Court’s Trial-Before-Certification Plan

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Years ago, employers argued unsuccessfully that plaintiffs should not be able to pursue so-called hybrid claims pursuing both Rule 23 opt-out classes and Fair Labor Standards Act (FLSA) opt-in collective claims at the same time. They noted that combining the two would create procedural anomalies and that doing so would make case resolution unwieldy. They lost that argument, but a recent case demonstrates that they were probably right.

In In re Citizens Bank, Case No. 19-3046 (3d Cir. Oct. 5, 2021), the plaintiffs brought suit based upon the theory that the defendant had an unofficial policy of requiring off-the-clock work for approximately 1,000 mortgage loan officers. They brought FLSA collective claims and Rule 23 state law claims under the law of Pennsylvania. Following notice, 350 individuals opted in to the FLSA collective (interestingly, this was roughly twice the percentage one would ordinarily see in these types of cases). The plaintiffs then brought additional Rule 23 state law claims, ultimately involving the laws of 10 different states.

Right off the bat, three problems stand out. First, it is difficult to establish a class claim based on unofficial policies, particularly one involving multiple states and locations. Relatedly, the structure of the case resulted in 10 separate class actions involving different states in the same case. Further, simple math (350 plaintiffs in 10 states) suggests that some would likely not meet numerosity requirements.

In any case, the litigation became a procedural quagmire, to say the very least. The District Court certified both the FLSA collective and the state law classes, but it stated few facts in support of the Rule 23 certification decision, resulting in an appeal to the Third Circuit. That court expressed what it called “serious doubts” about whether the evidence supported a class, but it remanded for further findings.

On remand, the district court bypassed that ruling by NOT ruling on Rule 23 certification but rather moving to try the FLSA claims. Under this plan, of course, if the defendant won, the putative class members who had not opted into the FLSA class would not be bound by the judgment; if it lost, they could likely take advantage of the result in pursuing their own or class claims. Recognizing the trap, the defendant raised numerous objections but eventually sought the unusual remedy of a writ of mandamus from the Third Circuit. That court immediately issued a stay.

Recognizing that a writ of mandamus was considered a “drastic remedy,” it still found relief appropriate. The court of appeals noted that the approach violated Rule 23’s admonition to resolve class certification at an early stage of the case. After reviewing the existing case law, it found that “[a]t all events, no Court of Appeals has approved foisting trial-before-certification on an unwilling Rule 23(b)(3) defendant.” It noted the problems inherent in such an approach and the likely impact it would have on future class or collective claims.

The Third Circuit granted mandamus review and stayed the case. In the interim, the district court judge went on senior status and requested that the case be reassigned to a new judge. The court of appeals left it to the parties and the newly assigned judge to work “to resolve this case fairly and expeditiously.”

The Citizens Bank case demonstrates that hybrid FLSA/Rule 23 claims can present stunningly difficult procedural issues, a problem that stems in part from the judicially created low standard under the FLSA for conditional certification. A district court may not, however, sidestep the rules in the name of case management.

The bottom line: Even in hybrid FLSA/Rule 23 claims, certification must be decided before trial on the merits.

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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