Tuesday, October 4, 2011, 12:41 PM

A Touch of Class?

Yesterday the Supreme Court vacated a Ninth Circuit decision, Chinese Daily News, Inc. v. Wang, dealing with the formidable procedural problems created when an FLSA collective action - in which no one can participate as a plaintiff or "class" member without affirmatively opting in,in writing - with claims under state law which also seek class treatment. The state claims (or, occasionally, ones advanced under other federal laws without the special FLSA procedural requirements)would be governed by traditional class action standards, which involve the certification of a class and the exclusion of individuals who are "similarly situated" only if they opt out. Some courts see no problem with this apparent inconsistency, while others attempt to reach a case-by-case balance. One such examination is found in last week's D.C. Circuit opinion in Shahriar v. Smith & Wollensky Restaurant Group, and another in the January 18 Seventh Circuit opinion in Ervin v. OS Restaurant Services (where the court said that the employer's attorneys had been unable to identify any "concrete examples of confusion" produced by the different standards).

The Wang case resulted in a $7.7 million judgment to employees of the Chinese-language World Journal arising out of allegations that the newspaper required off-the-clock work and denied employees meal breaks and itemizations of their pay. A jury awarded $2.5 million, and after that the judgment ballooned due to liquidated damages, penalties and interest. In the process, the Journal secured opt-out authorizations from nearly 3/4 of the group (as well as some whom weren't within the defined class at all). Much of this activity was attributed to employer intimidation, the appeals court found.

The Supreme Court's order, issued on the first day of the new term, sent the case back to the Ninth Circuit for reconsideration inlight of Wal-Mart v. Dukes, the decision earlier this year which invalidated nationwide class action treatment of gender discrimination claims agaist the nation's largest retailer. The Ninth Circuit - which had also decided the Dukes case - must now re-evaluate its analysis to see if a different result is in order. In the meantime, expect more litigation to clarify this important procedural problem, and more uncertainty in the interim.

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