Opinion
Civil Action No. 04-2510-CM.
February 16, 2005
MEMORANDUM AND ORDER
Plaintiffs have filed this lawsuit against defendants seeking: (1) a collective action regarding claims for overtime wages under the Fair Labor Standards Act ("FLSA"); and (2) a Fed.R.Civ.P. Rule 23 class action seeking claims for alleged unpaid commissions under the Kansas Wage Payment Act (KWPA); and quantum meruit. Defendant National Bank of Kansas City (NBKC) contends that plaintiffs' class action allegations and state law claims do not derive from a common nucleus of operative fact, rendering supplemental jurisdiction over these claims improper. This matter is before the court on defendant National Bank of Kansas City's Motion to Dismiss for Lack of Subject Matter Jurisdiction (Doc. 12).
I. Facts
Plaintiffs filed their initial Complaint on October 14, 2004. In the Complaint, plaintiffs made collective action allegations with respect to a single claim for violation of the overtime provisions of the FLSA. On November 16, 2004, plaintiffs amended their Complaint. The First Amended Complaint sought to add five individual defendants and two additional state law claims, asserted as a Rule 23 class action. Count II purports to state a claim for unpaid commissions under the KWPA, § 44-312, et. seq. Count III purports to state a claim for quantum meruit. Plaintiffs allege in their First Amended Complaint that the court has supplemental jurisdiction over these claims.
Plaintiffs are current and former loan originators seeking to recover earned — but allegedly unpaid — wages from NBKC. Plaintiffs first claim that defendants' compensation practices violated the FLSA in that NBKC failed to keep required time records and failed to pay plaintiffs for the overtime hours they worked as loan originators. In addition, plaintiffs claim that defendant's compensation practices violated state law in that defendant failed to pay terminated loan originators for work done and commissions earned prior to the termination of their employment.
II. Standards
There is no dispute that this court has federal question jurisdiction over plaintiffs' FLSA claim. Once federal question jurisdiction exists, it is within the trial court's discretion to exercise supplemental jurisdiction over those state law claims that derive from a common nucleus of facts. Thatcher Enters. v. Cache County Corp., 902 F.2d 1472, 1477 (10th Cir. 1990). In other words, district courts have supplemental jurisdiction over all claims that are so related to the claims within the court's original jurisdiction that they form part of the same case or controversy. 28 U.S.C. § 1367(a). However, district courts are statutorily authorized to decline supplemental jurisdiction over a state law claim if (1) the claim raises a novel or complex issue of state law, (2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction, (3) the district court has dismissed all claims over which it has original jurisdiction, or (4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction. Id.
III. Discussion
The allegations in this case include both an FLSA claim with an opt-in class scheme and a state claim with a Rule 23 opt-out scheme. More specifically, the FLSA permits an aggrieved employee to bring suit against an offending employer "for and on behalf of himself . . . and other employees similarly situated." 29 U.S.C. § 216(b). The FLSA representative action differs from the Rule 23 class action in that, under the FLSA, "[n]o employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought." Id. Thus, FLSA class members must "opt-in" rather than "opt-out" from the class.
In contrast, to obtain class certification under plaintiffs' state law claims, Rule 23(a) requires plaintiffs to show that the class is too numerous to allow simple joinder; there are common questions of law or fact; the claims or defenses of the class representatives are typical of those of the class; and the class representatives will adequately protect the interests of the class. If plaintiffs meet this burden, the court "shall direct to the members of the class the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort." Fed.R.Civ.P. 23(c)(2). The notice produces an opt-out class, in which all individual members of the class are included in the resolution of the case and the resulting judgement, unless the court receives notice of exclusion.
In this case, plaintiffs seek a Rule 23 opt-out class for all individuals pursuing the state KWPA claims, and a section 216(b) opt-in class for all individuals pursuing the federal claims under the FLSA. As such, "Rule 23 and § 216(b) class actions are `mutually exclusive and irreconcilable,' and those who choose not to opt-in to an class action under § 216(b) are not bound by and may not benefit from the judgment." Lachapelle v. Owens-Illinois, Inc., 513 F.2d 286, 288-89 (5th Cir. 1975).
The court finds that there are compelling reasons for declining supplemental jurisdiction in this case pursuant to 28 U.S.C. § 1367(c)(a). As stated in Jackson v. City of San Antonio:
At best, the propriety of the Court's jurisdiction over the pendent plaintiffs who did not opt-out of the state claim but failed to opt-in to the FLSA claim is murky, given disparate treatment of the issue throughout the federal courts. In addition, the simultaneous management of the two "irreconcilable" procedures for class formation is unwieldy, would detract from the efficient resolution of the substantive dispute and, most importantly, is frowned upon by the Fifth Circuit.220 F.R.D. 55 (W.D. Tex. 2003) (citing Lachapelle, 513 F.2d at 288-89). This district also has expressed concern in exercising supplemental jurisdiction over state claims in a FLSA collective action. In Brown v. Money Tree Mortgage, Inc., 222 F.R.D. 676, 683 (D. Kan. 2004), Judge Lungstrum noted that certifying a class jointly under FLSA and Rule 23 "raises a variety of procedural considerations, including the threshold issue of whether the court should exercise supplemental jurisdiction over the putative Rule 23 class action on plaintiff's state law claims." Id.
The court in Brown required the parties to further brief the issue before rendering a decision.
In this case, plaintiffs seek to proceed with two distinct theories through two distinct procedural means: a state law class action and a federal FLSA action. Plaintiffs' FLSA claim, which includes as plaintiffs both current and former employees, will require proof regarding defendants' practice of recording the hours plaintiffs worked and whether defendants properly paid plaintiffs for all overtime hours worked. On the other hand, plaintiffs' KWPA claim includes as plaintiffs only former employees and will require proof regarding whether defendants properly paid commissions to these loan originators upon the termination of their employment. Accordingly, plaintiffs' state law claims under KWPA will require testimony and documentary evidence completely distinct from that required for the FLSA claims. See De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 312 (3rd Cir. 2003) (holding that district court abused its discretion in exercising supplemental jurisdiction over state fair wage claims which were not congruent with FLSA claims). Moreover, because plaintiffs' KWPA claim is prosecuted as a class action, it will likely include plaintiffs that are not included in the FLSA collective action, causing further jurisdictional problems.
The court concludes that remand of the state claims will most economically and fairly resolve the issues. The posture of this case weighs in favor of remand as the superior means to economy, convenience, fairness, and comity. IT IS THEREFORE ORDERED that defendant National Bank of Kansas City's Motion to Dismiss for Lack of Subject Matter Jurisdiction (Doc. 12) is granted. The court will retain jurisdiction over plaintiffs' FLSA claim under 28 U.S.C. § 1331, and sever and remand plaintiffs' state claims.