Summary
applying the two-step approach
Summary of this case from Esry v. P.F. Chang's China Bistro, Inc.Opinion
Civil No. 04-1440 (JRT/JSM).
April 22, 2005
Paul J. Lukas and Donald H. Nichols, NICHOLS KASTER ANDERSON, Minneapolis, MN, for plaintiffs.
Joseph M. Sokolowski and Lindsay J. Zamzow, PARSINEN KAPLAN ROSBERG GOTLIEB, Minneapolis, MN, for defendant.
MEMORANDUM OPINION AND ORDER
Defendant High Tech Institute, Inc. is an "accredited national career college" that employs 400 to 600 instructors in seventeen schools in twelve states. The defendant's corporate office is in Phoenix, Arizona. The named plaintiffs, Kenneth Kalish and Jane Neal, are instructors at defendant's Minnesota school. Plaintiffs allege that they, and other similarly situated employees, are misclassified as exempt employees and were not compensated for hours worked in excess of forty hours per week (overtime) in violation of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 210, et. seq. Since the filing of this action, forty-three additional instructors from the Minnesota school, and one from defendant's Nevada school, have signed consent forms to join the litigation.
Plaintiffs request permission to proceed as a nationwide collective action pursuant to § 216(b) of the FLSA and to provide judicial notice of this lawsuit to the instructors at defendant's seventeen locations. Defendant requests that the Court cancel the alleged notice that the plaintiffs already sent to defendant's Minnesota instructors and rescind the consent forms obtained as a result of the alleged notice sent by the plaintiffs.
For the reasons discussed below, the Court grants plaintiffs' motion and denies defendant's motion.
I. PLAINTIFFS' MOTION FOR CONDITIONAL CLASS CERTIFICATION AND JUDICIAL NOTICE
The FLSA allows employees to bring a suit, known as a collective action, "for and in behalf of . . . themselves and other employees similarly situated." Id. § 216(b). Section 216(b) further provides that any party that seeks to join the suit must "opt-in" by filing a written consent with the court. Id. Plaintiffs request that the Court exercise its discretion to facilitate the issuance of opt-in notices by conditionally certifying the class and allowing the plaintiffs to send notices of the lawsuit to prospective plaintiffs. Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165 (1989) (holding that district courts have the discretion to implement § 216(b)).
In order to proceed as a collective action under the FLSA, the plaintiffs must show that the instructors employed at defendant's various locations are "similarly situated." 29 U.S.C. § 216(b). Section 216(b), however, "does not define the term `similarly situated,' and there is little circuit law on the subject." Thiessen v. Gen. Elec. Capital Corp., 267 F.3d 1095, 1102 (10th Cir. 2001). Courts, therefore, have developed a two-step process for determining whether plaintiffs are similarly situated for certification of a collective action under the FLSA. Id. at 1102-03; see also Koren v. Supervalu, Inc., 2003 WL 1572002, at *15 (D. Minn. Mar. 14, 2003). At the initial stage, courts determine whether the class should be conditionally certified for notification and discovery purposes. Such conditional certification requires "nothing more than substantial allegations that the putative class members were together the victims of a single decision, policy, or plan." Thiessen, 267 F.3d at 1102 (internal quotations omitted). The second step comes after discovery is completed, usually upon a motion to decertify the class. Id. at 1102-03. At this later stage, the court uses a stricter standard for determining whether the plaintiffs are similarly situated and reconsiders whether the trial should proceed collectively or if it should be severed. Id. at 1103; see also Ray v. Motel 6 Operating Ltd., 1996 WL 938231, at *2 (D. Minn. Mar. 18, 1996) ("[P]ermitting plaintiffs to issue class notice does not equal class certification. Authorizing class notice merely allows the plaintiffs to proceed as a class throughout discovery. The court can `decertify' the class following discovery when the court has more information to achieve a factual determination on the similarly situated question.")
Plaintiffs assert that this case is at the initial stage of the two-step process and, therefore, the Court should apply the more lenient standard for determining whether the prospective plaintiffs are similarly situated. Defendant, on the other hand, asserts that because significant discovery has occurred, this case is no longer in the initial stage and the Court should apply the more stringent standard of similarly situated. See, e.g., Ray, 1996 WL 938231, at *4 (applying the more stringent standard at the initial stage because "the facts before the Court are extensive [and] there is no need for discovery in order to reach a determination"); see also White v. Osmose, Inc., 204 F. Supp. 2d 1309, 1313 n. 2 (M.D. Ala. 2002) (stating that because the plaintiff conducted "extensive" discovery, "the court deems it necessary to carefully consider the submissions of the parties with respect to the class allegations"); Morisky v. Pub. Serv. Elec. Gas Co., 111 F. Supp. 2d 493, 497-98 (D.N.J. 2000) (applying the stricter standard because 141 potential plaintiffs had already filed consent forms to join the lawsuit and discovery was complete prior to the plaintiff filing a motion to certify the class).
The Court finds that, for the purposes of the similarly situated analysis, this case is at the initial stage. The only discovery that has taken place in this case has to do with the school in Minnesota. This is not equivalent to the "extensive" discovery discussed in the Ray and White cases. Nor have there been anywhere near the 141 consents filed in the Morisky case. Although it is true that this litigation has been pending for almost a year and the discovery deadline is two weeks away, these factors do not per se remove this case from the initial stage for purposes of the similarly situated analysis. The Court finds it much more significant that the plaintiffs have deposed only three employees of defendant, that those deponents were only from the corporate headquarters and from the Minnesota school, that this motion was filed only one month after completing those depositions, and that virtually no discovery has taken place with respect to defendant's sixteen other schools. Therefore, due to the relatively incomplete record before it, the Court will apply the less stringent standard for determining whether the prospective plaintiffs are similarly situated for the purposes of granting conditional class certification.
As stated earlier, at the initial stage, courts require "nothing more than substantial allegations that the putative class members were together the victims of a single decision, policy, or plan." Thiessen, 267 F.3d at 1102 (internal quotations omitted). Furthermore, courts should conditionally certify the class when the plaintiffs "have established a colorable basis for their claim that a class of similarly situated plaintiffs exist." Ray, 1996 WL 938231, at *2. "A colorable basis means that [the] plaintiff must come forward with something more than the mere averments in its complaint in support of its claim." Severtson v. Phillips Beverage Co., 141 F.R.D. 276, 278-79 (D. Minn. 1992). In addition, courts do not need "to make any findings of fact with respect to contradictory evidence presented by the parties [or] make any credibility determinations with respect to the evidence presented" at this initial stage. Id. at 279.
In support of their claim that the instructors at the seventeen schools are similarly situated, the plaintiffs assert that:
1) All instructors perform the same job, under the same job title and same job description;
2) The training and orientation materials for all instructors are prepared by the corporate office and used nationwide;
3) All instructors are subject to the same employee handbook, policies, and procedures;
4) All instructors use the same corporate mandated curriculum, syllabus, texts, handouts, quizzes, and tests;
5) All full-time instructors are subject to the same corporate-wide policy to categorize instructors as "exempt" employees and not pay them overtime compensation; and
6) Corporate headquarters maintains common human resources, legal, payroll, marketing, and admissions departments for all the schools.
Plaintiffs further argue that conditionally certifying a class is warranted because: 1) without notice, some plaintiff's claims are likely to be limited by the statute of limitations; 2) judicial economies will be achieved in this case by collective action at least through the discovery phase; and 3) due to the national scope of the litigation, plaintiffs cannot rely on "word of mouth" or the plaintiffs' independent efforts to provide adequate notice to prospective plaintiffs.
See Grayson v. K Mart Corp., 79 F.3d 1086, 1106 (11th Cir. 1996) (noting that the statute of limitations for Rule 23 class actions is tolled when the original class complaint is filed, but stating that the statute of limitations for § 216(b) collective action claims is not tolled until the individual plaintiff files a written consent to opt-in to the lawsuit).
Defendant, on the other hand, argues that it operates seventeen separate schools, with seventeen different school presidents, who make individual decisions about how the schools are run, what policies are implemented, and how instructors are compensated. For example, defendant asserts that:
1) Each school has its own directors and managers, for example, the Minnesota school has a director of local admissions, student services manager, office manager, director of general education, director of financial aid, and graduate placement manager;
2) All 400-600 instructors are compensated differently, with specific compensation decisions made at each school;
3) Each president has the discretion to provide additional compensation to instructors for additional work ( e.g. teaching extra sessions, tutoring, attending graduation, etc.);
4) Additional compensation in addition to an instructor's salary is tracked using a form that must be approved by the president of each school;
5) Each president decides what method will be used to compensate employees for additional activities ( e.g. flat fee, hourly rate, bonus); and
6) Each school does its own payroll and merely forwards it to headquarters for processing.
The main thrust of defendant's argument is that because each school president has the discretion to provide additional compensation for additional work done by an instructor, and can decide the method of payment for the additional work, every instructor is compensated differently. Therefore, argues defendant, instructors are not similarly situated, management of the case as a collective action would be extremely difficult, and calculation of damages as a class would be nearly impossible.
The degree and significance of the additional compensation paid to instructors is in dispute in this case. Plaintiffs allege that less than one percent of the pay periods include an additional payment for additional work. Defendant, however, asserts that virtually all instructors get additional payments and that, for some instructors, the additional payments comprise up to thirty percent of their annual compensation. At this stage, however, the Court need not resolve factual disputes. Severtson, 141 F.R.D. at 279. Instead, the Court need only find that plaintiffs have shown a "colorable basis," Ray, 1996 WL 938231, at *2, that the potential plaintiffs were "the victims of a single decision, policy, or plan," Thiessen, 267 F.3d at 1102. The Court finds that plaintiffs have come forward with enough evidence to show central control of employment decisions and implementation of policies, and that this constitutes a colorable basis to find that a class of similarly situated plaintiffs exists. See Severtson, 141 F.R.D. at 280. Although the individual presidents appear to make significant decisions about compensation, the Court is not convinced that those decisions are not, in fact, dictated in large part by corporate policy. The wide range of control corporate headquarters seems to wield over the curriculum and other school policies suggests that headquarters may also assert similar control over compensation decisions and polices.
Accordingly, the Court grants plaintiffs' motion and conditionally certifies the class for notice purposes.
II. DEFENDANT'S MOTION TO CANCEL NOTICE AND RESCIND CONSENT FORMS
As part of the discovery already conducted in this case, the defendant released to plaintiffs, pursuant to a protective order, a list of its instructors in Minnesota. Plaintiffs used the list to send letters to the Minnesota instructors notifying them of this action. Defendant argues that 1) the Minnesota instructors were not among those who could receive the information produced subject to the protective order; 2) plaintiffs used the list to send notice and a consent form to prospective plaintiffs without the required judicial involvement; and 3) plaintiffs' letter inaccurately referred to this litigation as a "nationwide lawsuit" and misinformed instructors that they were "eligible" to join. Defendant moves for the notices to be invalidated and the consent forms obtained to be rescinded.
Plaintiffs argue that they did not violate the protective order because the list of addresses was not marked confidential and was used only for purposes of this litigation. Plaintiffs further argue that they did not send "notice," but merely sent a constitutionally protected advertisement letter to potential plaintiffs and fact witnesses. The Court agrees. The letter clearly states that it is an advertisement and does not contain anywhere near the detail usually included in a judicial notice. Furthermore, especially in light of the Court's grant of conditional class certification, the Court finds that sending the letters to the Minnesota instructors did not violate the protective order. Therefore, the Court finds that the letters sent were not notice letters, and the consent forms obtained in response to the letters need not be rescinded.
ORDER
Based on the submissions and the entire file and proceedings herein, IT IS HEREBY ORDERED that:
1. Plaintiffs' Motion for Conditional Class Certification and Judicial Notice [Docket No. 41] is GRANTED.
2. Defendant's Motion to Cancel Notice and Rescind Consent Forms [Docket No. 49] is DENIED.
3. The parties are ordered to meet and confer concerning the proposed notice provided by the plaintiffs. If the parties are unable to agree on the notice, each are ordered to file their preferred notices, together with briefing not to exceed ten pages per side no later than May 11, 2005.