Saturday, March 8, 2008

Go To The Head Of The Class

An interesting decision was handed down recently by the United States District Court for the Eastern District of New York with respect to class action lawsuits involving wage claims under both Federal and State law.

In Guzman v. VLM, Inc., (E.D.N.Y., Case No. 07-CV-1126, Decided: March 2, 2008), the Plaintiffs (immigrant workers) were employed at a bakery located in Brooklyn, New York. They sued the employer for unpaid overtime under both the Fair Labor Standards Act (the “FLSA”) and New York Labor Law. Plaintiffs moved for class certification and Defendants cross-moved to dismiss. In granting class certification, the court exercised supplemental jurisdiction to permit certification under State law instead of under the FLSA. As a basic premise, supplemental jurisdiction permits a Federal court, in its discretion, to determine State law claims which are so related to the Federal claims that they form part of the same case or controversy.

By exercising supplemental jurisdiction, the Guzman court could determine the FLSA and New York Labor Law claims, thereby avoiding certain restrictions imposed by the FLSA. The main such restriction being the requirement that participants affirmatively “opt-in” to the class action. In contrast, the New York class action statute (CPLR § 903) provides that all persons are covered by a certified class action unless they specifically "opt out." Interestingly, Rule 23(c) of the Federal Rules of Civil Procedure (which was superseded in this instance by the class action provisions of the FLSA) is similar to the New York statute in that it does not require an “opt-in” for class participation.

The court found this “opt-out/opt-in” distinction to be important given that many members of the proposed class, primarily immigrant and/or undocumented workers, might be reluctant to “opt-in” because they feared retaliation. Further, the court determined that the use of supplemental jurisdiction was appropriate in the interests of judicial economy, convenience, and fairness since the State law and FLSA claims arose out of a common nucleus of operative facts. To this end, the court found that "the factual overlap between the federal claims and the state claims is virtually total," and stated that “there is no reason that FLSA’s collective action procedure is incompatible with maintaining a state law class action over the same conduct.”

In Guzman, the court took an exceedingly practical approach. Plainly, it would have been a waste of judicial resources to limit the case to the named Plaintiffs while a parallel case (seeking class action status) would likely have been commenced against Defendants in State court alleging virtually identical claims. Indeed, quite a legal morass could result if inconsistent determinations issued from the Federal and State courts based upon common factual circumstances.

While it remains to be seen as to whether Plaintiffs will prevail on the substance of their claims, the Guzman court implemented a logical and perfectly appropriate procedural methodology to achieve a pragmatic and legally defensible result.

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