L. Traywick Duffie
Strategies for Defending Against and Settling Wage/Hour Law Class Actions Under the FLSA
L. Traywick Duffie, Partner and Co-Head of the Labor & Employment Law Practice at Hunton & Williams LLP, began his presentation by noting that collective actions are more prevalent than they used to be, can be as expensive to defend as a typical class action under Rule 23, and can be just as disruptive to an organization as any class action.
According to Duffie, there are three or four basic distinctions between collective actions and class actions as are typical with a Title VII case. Collective actions, which are governed by Section 216 of the Fair Labor Standards Act, include wage & hour type cases and age discrimination in Employment Act cases. He also noted that it is not entirely clear whether Family and Medical Leave Act cases are also included. Collective actions are representative actions similar to Rule 23 class actions, but unlike Rule 23 cases, employees must affirmatively opt in to be bound by the decision.
Duffie stated that most courts follow the so-called ad hoc approach to collective actions. The issue of whether a case will be certified as a collective action occurs in two phases. The first phase, conditional certification, occurs very early on in the case. During this phase, the court decides whether to allow the plaintiff's counsel to notify all the potential employees that could be affected by the action and invite them to join the law suit. The second phase is final certification or decertification, which occurs at the end of discovery and typically results from a defense motion. During this phase, the court determines whether to allow these various claims of the opt-ins to proceed collectively in one action or to try them separately.
Duffie pointed out that the relatively strict standards under Rule 23, such as numerosity, typicality, etc., do not exist in 216 actions. The only standard in 216 cases is whether or not employees are similarly situated. And there, according to Duffie, the plaintiff's burden is very slight, at least according to the 11th Circuit. The case generally will be conditionally certified if plaintiff can show that there is a group of employees that was affected by a centralized decision or policy.
The more difficult burden is on the defense, when the case gets into the initial scheduling conference or planning conference, to come up with reasons to convince the court not to allow the plaintiff to send out 10,000 letters to its client's employees, inviting them to be a part of the lawsuit.
Duffie then discussed some practical considerations:
1. Early on, the day counsel is served, he or she should do the following: 1) look at the complaint and make a judgment as to the scope of liability at issue; 2) determine the merits of the case, since that will affect the defense strategy at the time the parties go into the first scheduling conference; and 3) develop primary and secondary containment theories – ways to narrow down the group of employees that are going to be invited to join this lawsuit.
Duffie stated that there is a lot that has to occur between service and the answer. Typically, the plaintiff's lawyer will have done several months of research, and he's going to be way ahead of the defense in terms of preparation on the case. In addition, he said that counsel will need help from IT to generate the computer runs that are going to enable the defense to get its arms around the case. Duffie said that, in most class actions, there will be a need to isolate various components in order to understand the case. And often times, these various components are going to be found in different data fields, which means that IT is going to be forced to conduct a merger of various data fields in order to provide defense counsel with the necessary statistical data to make this judgment.
Duffie cautioned that IT often has problems generating the necessary information. He suggested that on the day in-house counsel receives the complaint or soon thereafter, he or she should get together with the company's IT staff to start determining the types of computer runs that have to be made in order to determine how big the case really is.
2. Duffie advised that when counsel meets with HR, counsel should keep in mind that HR will be able to quickly pull centralized policies. But these exhibits will help the plaintiff, because the plaintiff is trying to show that his or her claims are the result of a centralized decision. The more difficult and time consuming aspect is going to be finding differences – how can one person be distinguished from another and this pay practice from that pay practice. Duffie stated that this information will require field research. He therefore advised counsel to get the HR department quickly engaged in field research so that when the case gets to discovery, HR can also produce exhibits demonstrating any differences which weigh against certification.
3. Duffie next pointed out that the defense of collective actions, particularly wage & hour cases, is more of an art form than an acquired skill. The list of exemptions is exhaustive. Because of the scope of collective actions, counsel needs to identify an expert – either a lawyer or consultant – early on, who can provide the defense with substantive knowledge so that counsel does not waive defenses when he answers the complaint. Duffie stated that since there will be potentially many different permutations of the complaint, counsel will have to have different sets of defenses for each of the various alternatives that he presents in his answer.
By way of illustration, Duffie noted a case that involved an exemption for executive secretaries. He said that he has used the mode of carrier exemption for airline workers and secretaries by showing that once a quarter, that person transported something in interstate commerce. Such a showing could be satisfied by a secretary driving her car to the bus station to pick up a package that the company had special ordered from out of state. He said that if counsel can show that that person transported goods in interstate commerce once a quarter, that person is exempt from the overtime provisions of the FLSA. According to Duffie, that is the kind of defense that counsel is not going to readily think about and why the defense needs someone steep in experience.
Duffie then touted the benefits of reading the Department of Labor's Field Operations Handbook "from cover to cover." He said that the book provides the perspective necessary to understand the regulations because it paints the picture that the regulations try to describe and illustrates the Wage and Hour Division's thinking on various issues. Although the publication is old, Duffie said "so is the thinking on the FLSA."
Duffie's final topic of discussion was confinement strategies. He started by asking counsel to think about how the judge is thinking. She knows that if she certifies the case, she will tie up his courtroom for months on end and she doesn't want to do that, according to Duffie. The judge is looking for a solution, so Duffie told counsel not to forget to offer her one, because the judge might just well take it.
For example, in an ADA class action, Duffie was successful in getting the judge to bifurcate discovery to see if the defense could win on one narrow issue of the case. The defense briefed the issue enough to give the judge the belief that they may be right. The defense's approach was to do some limited discovery, brief it, and if the defense prevailed, the case would be over without having gone through the massive discovery that is typically prevalent in such collective actions.
In other cases, Duffie has gone to the initial discovery conference and asked the judge – "before notice is sent out to 10,000 people, don't we need to have a better handle on what really is at issue, whether or not there is merit here?" The defense then suggests that a sample be conducted, whereby a few hundred notices are sent out and the parties see how the discovery proceeds. However, Duffie warned the parties to be prepared, when proposing a sampling, for the plaintiff's lawyer to say it would be prejudicial to his side because of the running of the Statute of Limitations. The judge may ask the defense to agree to a tolling statute so that no one loses the claims due to the sampling and running of the SOL. Duffie said that if the case has real merit, the defense probably does not want to agree to a tolling statute, but if the case does not have merit, the defense will probably want to agree to it.
Duffie concluded his presentation by discussing the issue of communications during the course of the litigation. Although traditional wisdom suggests that the last thing defense counsel wants to do is allow the plaintiff to freely communicate with its client's employees, Duffie said that this is not always the right way to approach things.
Duffie stressed the importance of not being bound by traditional wisdom in collective actions. He said that counsel must think outside of the box and remember that the judge is looking for a practical solution of how he is going to get through this case. Duffie said in conclusion: "It behooves you and your client if you can provide that creative and practical solution to that judge."Bob Quackenboss
Jury Trials and the Jury Trial Process
Bob Quackenboss, a Partner at Hunton & Williams LLP, began his presentation by citing a number of statistics regarding employment law suits. In 1990, there were fewer than 7000 employees filing employment suits. The Civil Rights Act of 1991, which made jury trials available, opened the door to extensive punitive damage awards. After 1996, there have been more than 20,000 employment suits filed every year. Mr. Quackenboss also noted that the number of suits decided by juries as opposed to judges is on the rise. He said that since the early 90s, there has been a tremendous incentive that didn't previously exist, for a plaintiff to get in front of a jury and roll the dice. By 1998, approximately 77 percent of the cases that went to trial were decided by juries. In 1990, only 35 percent went to juries.
In the area of damages, the median jury award in 2002 was $200,000 -- up significantly from just one year earlier, where the median damages award was $175,000. Damage awards have been steadily increasing since 1996, where the median award was $128,000. And, according to Quackenboss, the number of awards exceeding $10M has increased from 1.4 percent in 1990 to 10.6 percent in 1998 and it continues to rise every year. He said that the number of high dollar, high risk awards is therefore increasing significantly.
Mr. Quackenboss also put forth one unscientific statistic: at a meeting of the Georgia State Bar earlier this year, a Northern District of Georgia judge said that a large percentage of cases filed in Georgia are employment cases. In his opinion, the quality of counsel representing plaintiffs in employment cases is far below the quality of counsel representing defendants in such cases. Quackenboss said that these statistics reveal that the number of employment cases have been consistently increasing, as have the number of high dollar verdicts, and the plaintiffs' bar "hasn't even gotten the ‘A' team on the topic yet."
He said that these statistics bear out a changed climate for plaintiffs' attorneys who may be more willing to pursue employment cases. Many capable plaintiffs' firms and attorneys previously did not want to touch such cases, which are complicated from a legal issue perspective because the payoff did not justify the investment, and the upside is speculative. However, Quackenboss asserted this is becoming less the case and predicted that a greater percentage of plaintiffs' attorneys are finding employment lawsuits and jury trials attractive because the potential verdict upside is significant.
Quackenboss then started his discussion on how jury trials play out and what attorneys can do short term and long term that may help them avoid becoming a plaintiffs' verdict statistic.
Jury Trial Waivers. Quackenboss suggested that counsel consider including a jury trial waiver as part of an employment agreement. Although jury trial waivers are not enforceable in Georgia, he said that such waivers are enforceable in many states. Quackenboss said that such waivers need to be crafted in a particular way – they need to pass the muster of evidencing fair negotiation, no uneven leverage, and no disparity in bargaining power. However, he said that by and large, if they are effected properly, counsel can effectively get a plaintiff to waive his or her right to a jury trial, which is a positive development in most cases.
Quackenboss noted that jury trial waivers are different from and superior to a mandatory arbitration clause because while in most arbitration arrangements, the parties have waived their right to appeal, in the jury waiver context, the parties have not given up such rights. In a jury trial waiver, the defense has simply committed the plaintiff to go before a judge rather than a jury, while preserving all appeal rights.
Another issue that Quackenboss addressed is the concern that although arbitration agreements bar the plaintiff from becoming part of a class, jury trial waivers per se do not so preclude participation in a class. Quackenboss said that the relatively easy solution to this problem is to craft a waiver of class participation which is enforceable as well. He then underscored his belief that jury trial waivers are superior to mandatory arbitration clauses.
Summary jury trials. Quackenboss explained that summary jury trials take place on the eve of a very extensive and complicated trial, wherein the parties take a day and simply present to an advisory jury a summary of the evidence, which results in, essentially, a verdict. In most jurisdictions that recognize this procedure, this is considered part of the settlement process and therefore the results and what occurs during a summary jury trial is confidential as part of the settlement process. Quackenboss said that the summary jury trial is extremely helpful in the circumstance where the parties are willing to settle and counsel want to participate in the exercise. Such an option may be appealing where the parties face a long, protracted, expensive trial, and they are simply a little too far away from settlement. He said that it is a helpful way to spend a day, particularly in the case of a collective action, where there is a high potential for damages. He did not believe that a summary jury trial is a good solution nor cost-effective in a situation involving low single- plaintiff cases.
Quackenboss then asserted his belief that there are a number of benefits to a jury trial. If counsel decides from discovery that a case can be about the plaintiff rather than about the facts and the law, where a jury may be able to render a better verdict than a judge could provide a decision, counsel may want to opt for a jury -- particularly in the case where there are complex legal issues and it is a very close call. He advised counsel that if there are emotional and common sense arguments that would play better to a jury, counsel should consider going to the jury trial rather than a bench trial because the judge is obliged to tune out the emotional criteria and instead rule on what he or she believes is the letter of the law. That may not be a defendant's best chance in an employment case.
As an example, Quackenboss cited a non-competition case where the plaintiff's attorney asked for a bench trial. He said that the defense decided not to agree to a bench trial because there were very strong arguments that the client's employee was in violation of a very clear and enforceable non-compete. The defense made a very David vs. Goliath argument that appealed to a jury which would not have appealed to a judge. The defense argued that, in fact, the employee was doing no harm by violating the non-compete with his prior employer and ended up prevailing at trial. Although there may have been a technical violation, the jury found for the defense. However, Quackenboss was not certain that a judge would have found similarly, given the fact that there were strong arguments that the letter of the contract had been violated.
He cited another example of when opting for a jury trial may be a good strategic move. In a wage and hour case, the issue was whether the employee qualified for the professional exemption. Under the letter of the law, it was a very close call, and relatively unpredictable left to the resources that the judge and judge's law clerk has. But during the discovery process, Quackenboss and his team decided that the plaintiff in the case would not appeal to many soccer moms and soccer dads from an emotional and common sense perspective. The plaintiff, who was claiming overtime wages unpaid, appeared to be over reaching – he was paid handsomely, traveled first class, and stayed in first class hotels. Nonetheless, he might not have been a professional by definition. The plaintiff's attorney offered a bench trial, which would have been a simpler, less expensive alternative for that plaintiff's attorney. The defense declined, they went to the jury, and won a complete defense verdict. As Quackenboss suspected, the jury was offended by the facts in the case. A judge may not have been able to embrace those offensive facts the way that a jury can.
Quackenboss encouraged counsel to make common sense arguments to a jury. As an example, he cited the preamble of the Fair Labor Standards Act (FLSA), which states very clearly that the purpose of the Act is to protect people who cannot meet minimum standards of living. He said that when that section is read to a jury, all of a sudden, a plaintiff who lived a life of perks, who is "nickel and diming" his employer, becomes very easy to dismiss.
Before concluding his presentation, Quackenboss discussed a few strategic suggestions. He advised counsel to break the summary judgment "addiction" -- the habit of defense counsel to plan for summary judgment submissions at the close of discovery before the work-up for a trial. He said that the common rationale is that the cost of preparing for summary judgment is relatively the same or less than the cost of preparing for trial, or much less than the cost of preparing for trial. But, Quackenboss said that that rationale does not consider that more often than not, particularly in the employment context, counsel ends up doing both. He said that judges necessarily are going to be hesitant to grant summary judgment in its entirety and remove a case from the trial calendar. Also, that rationale does not consider the fact that it is quite easy for plaintiffs to raise a question of fact in rebuttal affidavits. Quackenboss thus suggested that attorneys should rethink the decision to file a summary judgment motion even when they believe they have strong legal arguments. According to him, in this way, the defense gains a significant advantage in that it has not alerted the plaintiffs and the plaintiffs' attorney to the defense strategy for its dispositive motion. Not all plaintiffs' attorneys are prepared for the defense's position that it intends to take the case before a jury, and persuade a jury and a judge, rather than conduct discovery for purposes of filing a summary judgment motion.