Fisherman Catch Pacific Seafood Group in Antitrust Suit

On January 31, 2012, an Oregon federal judge certified a class of commercial fishing vessels owners and fishermen who delivered whiting, groundfish, or shrimp to seafood processors from Ft. Bragg to the Canadian border.  The court denied the motion to certify a subclass of whiting fisherman who delivered whiting to onshore seafood processors because the subclass had fewer than 20 members and therefore did not satisfy the numerosity requirement.

The plaintiffs alleged that defendant Pacific Seafood Group exploited its market power as a wholesale buyer to pay commercial fisherman below market prices for whiting, groundfish, and shrimp.  Plaintiffs also alleged that Pacific Seafood conspired with defendant Ocean Gold Seafoods, another seafood processor, to suppress the prices paid to commercial fisherman for whiting.

A court cannot certify a class unless the plaintiff has demonstrated that the class meets all of the requirements outlined in Rule 23 of the Federal Rules of Civil Procedure.  This includes the typicality requirement, which means that the claims or defenses of the representative parties are typical of the claims or defenses of the class.  Here, plaintiffs relied on the “umbrella theory” of antitrust damages in order to satisfy the typicality requirement because plaintiffs did not sell to defendants.   Plaintiffs argued that they suffered antitrust damages because other seafood processors followed defendants’ lead on prices.  As the district court explained, under the umbrella theory a plaintiff contends that defendants’ price fixing conspiracy created a price umbrella under which non-conspiring competitors of defendants raised their prices to a level at or close to the prices fixed by the conspiring defendants.  The Ninth Circuit has rejected this theory in cases involving a multi-level distribution chain and reserved ruling on the single-level distribution alleged in this case.  The district court concluded that it would not “categorically reject the umbrella theory of damages” and concluded that plaintiffs had satisfied the typicality requirement.  Abbey Spanier will continue to monitor this case and will update its readers if the district court issues additional opinions about the “umbrella theory.”

Abbey Spanier Rodd & Abrams, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

Citibank “Personal Bankers” Win Conditional Class Certification in Nationwide FLSA Action

In a recently unsealed ruling, Winfield v. Citibank, U.S. District Judge John G. Koeltl granted conditional class certification, pursuant to Section 216(b) of the Fair Labor Standards Act (the “FLSA”), to a nationwide class of “personal bankers” who alleged that their employer Citibank failed to pay them the FLSA overtime rate.

The plaintiffs alleged that Citibank had a “dual-edged policy” concerning payment of overtime, essentially forcing the personal bankers to work overtime but not paying them for it. Essentially, Citibank required its personal bankers to choose between the lesser of two evils: the bankers alleged that Citibank strictly limited the number of overtime hours they could work, but then encouraged “Personal Bankers to work overtime by requiring them to meet strict sales quotas that could not reasonably be accomplished in a forty-hour work week.” As a result, personal bankers who worked over forty hours per week were not paid proper overtime rates under the FLSA. The personal bankers submitted evidence showing that Citibank had a disciplinary policy governing failures to meet quotas, and that the disciplinary policy was instituted on a nationwide basis.

Section 216(b) of the FLSA allows a group of employees who are “similarly situated” with respect to the FLSA violations they allege to band together and bring a collective action against their employer. The standard for determining whether employees are similarly situated requires only a minimal showing, and motions for collective action certification are usually made at a very early stage of the litigation.

In this action, Citibank opposed conditional certification on several grounds. Citibank argued that the personal bankers were not “similarly situated” because they had not alleged a common policy that violated the law: Citibank’s limitation on overtime hours was lawful. However, Judge Koeltl pointed out that a lawful policy may nonetheless be actionable if it is implemented in an unlawful way.

Here, the personal bankers had alleged that the limitation on overtime–lawful in and of itself–was actionable due to its combination with encouragement by Citibank branch managers to work overtime to meet sales quotas and the subsequent refusal to pay overtime. One plaintiff testified that “[My Branch Manager] said that I needed to do whatever it took to meet my goals. That Regional was not approving overtime, and that even if I work overtime, I was not allowed to put it on the sheet.” Other plaintiffs testified similarly. The court cited to multiple emails by Citibank managers showing that the “dual-edged policy” of setting high quotas and not paying overtime necessitated by those high quotas was not simply a rogue policy implemented by a few. In these emails, the managers acknowledged that pressure was coming from higher up in the organization. Some of the managers had told the personal bankers that the dual-edged policy was dictated to them by regional management.

Among other arguments, Citi moved to strike some of the personal bankers’ declarations and testimony as hearsay. In particular, Citibank argued that the statements concerning regional management’s dictation of policies was inadmissible at trial and therefore could not be used to support conditional certification. However, Judge Koeltl noted that courts frequently allow hearsay to support a motion for conditional certification due to the preliminary nature of such a motion. Judge Koeltl denied Citibank’s motion to strike without prejudice.

Judge Koeltl also joined a growing number of courts that have rejected application of Wal-Mart v. Dukes to motions for conditional certification under the FLSA. Judge Koeltl noted that Dukes was decided under the more stringent standards of Rule 23, rather than the minimal standards of FLSA Section 216(b) which require only that all employees be “similarly situated.” In Wal-Mart, the Supreme Court took issue with the allegations of a single employee who sought to represent a nationwide class of employees against whom Wal-Mart had allegedly discriminated. In Wal-Mart, the Supreme Court held that a plaintiff must show that his or her claims can be proven by reference to a common policy.
Judge Koeltl held that the plaintiffs’ testimony concerning statements from regional management, as well as the overtime and quota policies Citibank had in place, had sufficiently shown, for purposes of 216(b), that the plaintiffs were subject to a “common policy or plan that violated the law.”

Abbey Spanier Rodd & Abrams, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

Fifth Circuit rules against 24 Hour Fitness in arbitration case

The Fifth Circuit Court of Appeals upheld a decision that found that a mandatory arbitration clause used by 24 Hour Fitness was illusory because it allowed the company to make changes to the policy retroactively. The decision in Carey v. 24 Hour Fitness is a victory for employees who have been subjected to unfair arbitration agreements by their employers.

The plaintiff in Carey was a former sales representative who was employed by the fitness chain in Texas. He filed a class-action suit against the company in the Southern District of Texas on behalf of employees who were allegedly denied overtime pay in violation of the Fair Labor Standards Act.

24 Hour Fitness moved to stay the action and compel arbitration per a provision in the company’s Employee Handbook. The provision stated that “24 Hour Fitness has the right to revise, delete, and add to the” handbook by giving employees written notice. Judge Nancy Atlas rejected the company’s motion, holding that the agreement was unenforceable under state law.

On appeal, the Fifth Circuit affirmed the lower court’s decision. Citing the Supreme Court’s holding in CompuCredit v. Greenwood, the Fifth Circuit acknowledged that federal courts were expected to favor arbitration agreements under the Federal Arbitration Act (FAA). However, as the Supreme Court remarked in AT&T v. Concepcion, federal courts must still look to state contract law in order to determine whether an arbitration agreement existed.

The Fifth Circuit held that under Texas law arbitration agreements are invalid unless they specify that unilateral changes made by an employer will not have a retroactive effect against the employee. Because the 24 Hour Fitness agreement lacked such a restriction, the plaintiff was not bound by the agreement and could pursue his claims in district court.

The decision follows the Fifth Circuit’s holding in Morrison v. Amway in 2008, where the Court “refused to enforce an arbitration agreement that was capable of being retroactively modified.” The Carey court explained that “where one party to an arbitration agreement seeks to invoke arbitration to settle a dispute, if the other party can suddenly change the terms of the agreement to avoid arbitration, then the agreement was illusory from the outset.”

The Court distinguished its holding in Carey and Morrison from its decision in In re Halliburton, where an arbitration agreement was found to be enforceable even though it allowed for unilateral revisions. In that case, the agreement included a “savings clause” that provided that such revisions would not apply to disputes that were already underway.

The Fifth Circuit’s decision in Carey offers a silver lining for plaintiffs after the Supreme Court’s decisions in Concepcion and CompuCredit. Carey demonstrates how plaintiffs can successfully utilize state laws to defeat unfair arbitration agreements that might otherwise stand under the FAA. The California Court of Appeal reached a similar outcome in Sanchez v. Valencia Holding in November 2011, which found that the FAA did not apply to an arbitration agreement that was unconscionable under state law.

Nicholas Turner is a third year law student at New York Law School. He is a Notes & Comments editor of Law Review and a John Marshall Harlan Scholar. Mr. Turner came in second in the 2011 ABA Torts, Insurance, and Compensation Law Section Writing contest. He was a 2011 Review Editor of the school’s Global Human Rights Bulletin. Mr. Turner is proficient in French.

Abbey Spanier Rodd & Abrams, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.