Opinion ID: 614183
Heading Depth: 2
Heading Rank: 1

Heading: Supplemental Jurisdiction Over Plaintiffs' State Law Class Claims

Text: Before turning to the question of whether Rule 23 class certification was proper, we first must examine whether the District Court properly exercised supplemental jurisdiction over Plaintiffs' parallel state law class claims. We review a district court's exercise of supplemental jurisdiction for abuse of discretion. See Valley Disposal, Inc. v. Central Vermont Solid Waste Mgmt. Dist., 31 F.3d 89, 103 (2d Cir.1994) (A district court may, in its discretion, exercise supplemental jurisdiction.). The FLSA was designed to protect workers and ensure that they are not subjected to working conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being. 29 U.S.C. § 202(a) (2006). New York similarly enacted minimum wage standards to remedy the practice of persons working at wages insufficient to provide adequate maintenance for themselves and their families, N.Y. Lab. Law § 650 (McKinney 2002), and it created standards regarding tipping in order to ensure that service employees receive all monies given as gratuities to them. See Samiento v. World Yacht Inc., 10 N.Y.3d 70, 79 n. 4, 854 N.Y.S.2d 83, 883 N.E.2d 990 (2008). Victims of wage and hour violations therefore often have parallel claims under both the FLSA and the New York Labor Law (NYLL). Under the FLSA, a plaintiff may bring a collective action for his or her FLSA claims. Collective actions under the FLSA are actions that allow employees to sue on behalf of themselves and other employees who are similarly situated. 29 U.S.C. § 216(b) (2006). The FLSA requires, however, that an employee affirmatively consent to join a collective action in order to assert a claim. Id. (An action to recover the liability prescribed in either of the preceding sentences may be maintained against any employer (including a public agency) in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. No 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.). Thus, an employee fearful of retaliation or of being blackballed in his or her industry may choose not to assert his or her FLSA rights. Damassia v. Duane Reade, Inc., 250 F.R.D. 152, 163 (S.D.N.Y. 2008) (Indeed, it may be that in the wage claim context, the opt-out nature of a class action is a valuable feature lacking in an FLSA collective action, insofar as many employees will be reluctant to participate in the action due to fears of retaliation. (internal citations omitted)); Scott v. Aetna Services, 210 F.R.D. 261, 267 (D.Conn. 2002) (noting the evidence that potential class members failed to join the FLSA class action because they feared reprisal). See generally Sanft v. Winnebago Indus., Inc., 214 F.R.D. 514, 524 (N.D.Iowa 2003) (compiling cases holding Rule 23's numerosity requirement satisfied because, where some class members are still employed by the defendant, concern regarding employer retaliation or reprisal renders individual joinder less practicable). The NYLL, on the other hand, does not have a provision for collective actions. Instead, plaintiffs may pursue a traditional opt-out class action through class certification for their state law claims. A class action under the NYLL allows employees to recover lost wages without the risks attendant to asserting affirmatively an FLSA claim. See, e.g., Damassia, 250 F.R.D. at 152. Because FLSA and NYLL claims usually revolve around the same set of facts, plaintiffs frequently bring both types of claims together in a single action using the procedural mechanisms available under 29 U.S.C. § 216(b) to pursue the FLSA claims as a collective action and under Rule 23 to pursue the NYLL claims as a class action under the district court's supplemental jurisdiction. This is what has occurred in this case. At issue before us is whether the District Court properly exercised supplemental jurisdiction over Plaintiffs' NYLL claims such that the Plaintiffs may proceed simultaneously with both their class action and collective action in federal court. Park Avenue contends that it was an abuse of the District Court's discretion to exercise supplemental jurisdiction, arguing that Congress's intent in requiring that employees affirmatively opt-in to FLSA collective actions is undermined when employees bring a lawsuit alleging both a FLSA collective action and a Rule 23 class action (i.e., an opt-out class action) alleging state labor law claims. Park Avenue asserts that the inherent conflict between the two types of actions stems from the fact that the number of employees in the opt-out class will likely be much larger than the number in the opt-in collective action. Park Avenue claims that the dual actions are impractical, unfair, and offensive to the structure of the FLSA because those employees who do not opt-in to the FLSA collective action could very well have their FLSA cause of action extinguished as their FLSA claims will be adjudicated by the dual (state) action. We disagree. A district court's exercise of supplemental jurisdiction is governed by 28 U.S.C. § 1367 (section 1367). Subsection (a) of section 1367 provides: (a) Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.... 28 U.S.C. § 1367(a) (2006). For purposes of section 1367(a), claims form part of the same case or controversy if they derive from a common nucleus of operative fact. Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 308 (2d Cir.2004) (internal quotation marks omitted). Here, the NYLL and FLSA actions clearly derive from such a common nucleus of operative facts since they arise out of the same compensation policies and practices of Park Avenue. See, e.g., Treglia v. Town of Manlius, 313 F.3d 713, 723 (2d Cir.2002) (exercise of supplemental jurisdiction was proper where plaintiff's state and federal claims arose out of approximately the same set of events). Where section 1367(a) is satisfied, the discretion to decline supplemental jurisdiction is available only if founded upon an enumerated category of subsection 1367(c). Itar-Tass Russian News Agency v. Russian Kurier, Inc., 140 F.3d 442, 448 (2d Cir.1998) (emphasis supplied). In addition, we have stated that where at least one of the subsection 1367(c) factors is applicable, a district court should not decline to exercise supplemental jurisdiction unless it also determines that doing so would not promote the values articulated in [ United Mine Workers of America v. ] Gibbs, [383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966) ]: economy, convenience, fairness, and comity. Jones v. Ford Motor Credit Co., 358 F.3d 205, 214 (2d Cir.2004). Subsection (c) of § 1367 provides: (c) The district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) 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. 28 U.S.C. § 1367(c) (2006). In providing that a district court `may' decline to exercise such jurisdiction, [section 1367(c) ] is permissive rather than mandatory. Valencia ex rel. Franco v. Lee, 316 F.3d 299, 305 (2d Cir.2003) (citing Marcus v. AT&T Corp., 138 F.3d 46, 57 (2d Cir.1998); Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1187 (2d Cir.1996)). As the Supreme Court stated in discussing § 1367's predecessor judicial doctrine of pendent jurisdiction, however, this is traditionally `a doctrine of discretion, not of plaintiff's right.' Kolari v. New York-Presbyterian Hosp., 455 F.3d 118, 122 (2d Cir.2006) (quoting United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966)). Subsection (c) of § 1367 `confirms the discretionary nature of supplemental jurisdiction by enumerating the circumstances in which district courts can refuse its exercise.' Id. (quoting City of Chicago v. Int'l Coll. of Surgeons, 522 U.S. 156, 173, 118 S.Ct. 523, 139 L.Ed.2d 525 (1997)). Having concluded that the NYLL and FLSA claims form part of the same case or controversy, our analysis proceeds to section 1367(c), where the critical inquiry becomes whether one or more of the section 1367(c) factors is applicable, in which case the exercise of supplemental jurisdiction could be an abuse of discretion. First, as to section 1367(c)(1), Plaintiffs' NYLL claims based on spread-of-hours pay and purported illegal deductions from tips do not appear to raise a novel or complex issue of [s]tate law. Rather, the spread of hours claim will likely hinge on factual findings of (1) whether class members had workdays lasting more than ten hours and (2) whether Park Avenue paid class members an extra hour's pay at the New York minimum wage when their workdays lasted more than ten hours. See N.Y. Comp.Codes R. & Regs. tit. 12, § 137-1.7 (2010). Plaintiffs' claim for illegal deductions from tips is also straightforward. That claim will turn on whether servers were required to share or pool tips with (1) agents of their employer (such as the Plaintiffs' manager) and/or with (2) employees who were not waiters, busboys, or similar employees (such as expediters, silver polishers, dishwashers, and coffee makers who allegedly provided no direct customer service). See N.Y. Labor Law § 196-d (McKinney 2009); see also N.Y. Comp.Codes R. & Regs. tit. 12, § 146-2.14(e) (2011) ([Tipe]ligible employees must perform, or assist in performing, personal service to patrons at a level that is a principal and regular part of their duties and is not merely occasional or incidental.). Accordingly, we conclude that Plaintiffs' claims do not raise complicated or novel issues of state law for purposes of § 1367(c)(1). Section 1367(c)(2) requires that a state law claim substantially predominate over a federal claim before a district court has discretion to refuse supplemental jurisdiction. See Itar-Tass Russian News Agency, 140 F.3d at 448. In adjudicating the federal claims, the District Court likely will determine whether the Plaintiffs were tip-eligible under the FLSA. Because the FLSA and the NYLL use a similar standard for making such a determination, and because each set of claims arise from the same set of operative facts, a determination as to the FLSA claims may decide the Plaintiffs' NYLL claim as well. See 29 U.S.C. § 203(m) (2006); New York Labor Law § 196-d (McKinney 2009). Moreover, we agree with our sister circuits that the fact that there are more class members in the state law class action than those in the FLSA collective action should not lead a court to the conclusion that a state claim `substantially predominates' over the FLSA action, as section 1367(c) uses that phrase. Ervin v. OS Rest. Servs., Inc., 632 F.3d 971, 980 (7th Cir.2011). Predomination under section 1367 generally goes to the type of claim, not the number of parties involved. Id. (quoting De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 311 (3rd Cir.2003)); see also Ervin, 632 F.3d at 981 ([T]he disparity between the number of FLSA plaintiffs and the number of state-law plaintiffs is not enough to affect the supplemental jurisdiction analysis. In the majority of cases, it would undermine the efficiency rationale of supplemental jurisdiction if two separate forums were required to adjudicate precisely the same issues because there was a different number of plaintiffs participating in each claim.); accord Wang v. Chinese Daily News, Inc., 623 F.3d 743, 761-62 (9th Cir.2010) (Although the number of claimants and amount of potential damages in the [state law] claim may have been higher ... `[p]redomination under section 1367(c)(2) relates to the type of claim and here the state law claims essentially replicate the FLSA claims they plainly do not predominate.' (emphasis and alteration in original)). Indeed, any addition of plaintiffs in the certified state law class action does not change the factual determinations and claims made with regard to Park Avenue's practices. Accordingly, we conclude that the Plaintiffs' state law claims do not substantially predominate over their federal claims, over which the District Court has original jurisdiction, for purposes of § 1367(c)(2). Third, section 1367(c)(3) is not applicable here because the District Court did not dismiss any claims over which it had original jurisdiction. Fourth, as to whether there is a compelling reason under section 1367(c)(4) for the District Court to decline supplemental jurisdiction over the NYLL claims, Park Avenue argues that class certification should have been denied because of [an] inherent conflict between opt-in collective actions under FLSA and opt-out class actions under NYLL. We reject this argument for several reasons. First, nothing in the language of the FLSA prevents the exercise of supplemental jurisdiction over Plaintiffs' state law wage claims. Section 216(b) of the FLSA provides that [a]ny employer who violates the provisions of section 206 or section 207 of this title shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages. Any employer who violates the provisions of section 215(a)(3) of this title shall be liable for such legal or equitable relief as may be appropriate to effectuate the purposes of section 215(a)(3) of this title, including without limitation employment, reinstatement, promotion, and the payment of wages lost and an additional equal amount as liquidated damages. An action to recover the liability prescribed in either of the preceding sentences may be maintained against any employer (including a public agency) in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. No 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. 29 U.S.C. § 216(b) (2006). This section explicitly authorizes employees, on behalf of themselves and those similarly situated, to bring, under the FLSA, minimum wage, overtime, and anti-retaliation claims. Section 216(b) also provides that the FLSA consent requirement applies only to wage claims brought under the substantive provisions of the FLSA and does not apply to wage claims generally. Damassia, 250 F.R.D. at 162. Accordingly, we do not read the plain language of § 216(b) as restraining any remedies available to employees under state law or as affecting a federal court's ability to obtain supplemental jurisdiction over state employment actions. See Ervin, 632 F.3d at 979 ([T]he opt-in procedures in the FLSA do not operate to limitexpressly or impliedlya district court's supplemental jurisdiction to only those state-law claims that also involve opt-in procedures.). Second, the FLSA's savings clause makes clear that states may enact wage laws that are more protective than those that are provided in the act: No provision of this chapter or of any order thereunder shall excuse noncompliance with any Federal or State law or municipal ordinance establishing a minimum wage higher than the minimum wage established under this chapter.... 29 U.S.C. § 218(a) (2006). We have held that this clause demonstrates Congress' intent to allow state wage laws to co-exist with the FLSA by permitting explicitly, for example, states to mandate greater overtime benefits than the FLSA. See Overnite Transp. Co. v. Tianti, 926 F.2d 220, 221-22 (2d Cir.1991) (rejecting the argument that the FLSA preempts state wage laws); see also Ervin, 632 F.3d at 977 (same); Williamson v. Gen. Dynamics Corp., 208 F.3d 1144, 1151 (9th Cir.2000) (stating that section 18(a) indicates that the FLSA is not the exclusive remedy for wage payment claims). Further, interpreting the above provisions of the FLSA to bar employees' access to federal courts to seek class-wide remedies for alleged substandard working conditions detrimental to [their] ... health, efficiency, and general well-being, 29 U.S.C. § 202(a) (2006), would be inconsistent with the stated purpose of the FLSA. Third, the legislative history surrounding the FLSA's opt-in provision also provides no support for precluding joint prosecution of FLSA and state law wage claims in the same federal action. Originally, § 216(b) permitted an employee to bring a collective class action on behalf of similarly situated employees but did not expressly require unnamed plaintiffs to opt-in to the action. See Fair Labor Standards Act of 1938, 52 Stat. 1060, 1069 (1938). Then, in 1947 Congress added the opt-in provision through passage of the Portal-to-Portal Act (the Portal Act). See Portal Act, § 1, 61 Stat. 84, 84-85 (1947). The Portal Act made clear that the opt-in requirement shall be applicable only with respect to actions commenced under the [FSLA] of 1938. Id. § 5(b), 61 Stat. at 87. However, the Portal Act contains no suggestion of any intent to prevent class certification or any prohibition of the exercise of supplemental jurisdiction over state wage law class claims. See Regulating the Recovery of Portal-to-Portal Pay, and for Other Purposes, H.R.Rep. No. 80-71 (1947); Exempting Employers from Liability for Portal-to-Portal Wages in Certain Cases, S. Rep.No. 80-48 (1947); Portal-to-Portal Act of 1947, H.R. Conf. Rep. No. 80-326 (1947). We do not view Congress's creation of the opt-in provision for FLSA collective actions as a choice against, or a rejection of, Rule 23's opt-out process for state law class actions. See Ervin, 632 F.3d at 977 (There is ample evidence that a combined action is consistent with the regime Congress has established in the FLSA.). Finally, our sister circuits in the Seventh, Ninth, and District of Columbia Circuits all have determined that supplemental jurisdiction is appropriate over state labor law class claims in an action where the court has federal question jurisdiction over FLSA claims in a collective action. See Ervin, 632 F.3d at 973-74, 978 (looking to the plain language of the FLSA and concluding that (1) there is no categorical rule against certifying a Rule 23(b)(3) state-law class action in a proceeding that also includes a collective action brought under the FLSA; and (2) if these actions were to proceed separatelythe FLSA in federal court and the state-law class action in state courtan entirely different and potentially worse problem of confusion would arise, with uncoordinated notices from separate courts peppering the employees.); Wang, 623 F.3d at 761 (concluding that it was within the district court's discretion to exercise supplemental jurisdiction over the [state law class claim because] ... [t]he [state] claim does not pose novel questions of state law akin to those present in De Asencio ); see also Lindsay v. Gov't Employees Ins. Co., 448 F.3d 416, 424-25 (D.C.Cir.2006) (holding that the opt-in collective action provision of FLSA did not expressly prohibit the exercise of supplemental jurisdiction over the New York Minimum Wage Act claims of opt-out class members and, therefore, that the district court could exercise supplemental jurisdiction over the New York Minimum Wage Act claims of class members). Accordingly, we agree with the Seventh Circuit that while there may in some cases be exceptional circumstances or compelling reasons for declining jurisdiction, the `conflict' between the opt-in procedure under the FLSA and the opt-out procedure under Rule 23 is not a proper reason to decline jurisdiction under section 1367(c)(4). Ervin, 632 F.3d at 980. The only circuit court decision declining supplemental jurisdiction over state labor law class claims in an action where the court has federal question jurisdiction over FLSA claims was the Third Circuit's decision in De Asencio v. Tyson Foods, Inc., 342 F.3d 301 (2003). In De Asencio, employees at chicken-processing plants brought a representative action in the district court alleging that their employer violated minimum wage and overtime provisions of the FLSA as well as the Pennsylvania Wage Payment and Collection Law (WPCL). See id. at 304. The district court granted class certification to the employees for their state labor law (WPCL) claims. See id. at 305. On appeal, the Third Circuit held that although the district court did not abuse its discretion by ruling that FLSA and WPCL actions arose from same controversy and shared a common nucleus of operative facts, 28 U.S.C. § 1367(a), the district court should not have exercised supplemental jurisdiction over the WPCL claim, which presented novel and complex questions of state law and which substantially predominated over the FLSA claim within the meaning of 28 U.S.C. § 1367(c)(1), (c)(2) (2006). See De Asencio, 342 F.3d at 309 (Generally, a district court will find substantial predomination where a state claim constitutes the real body of a case, to which the federal claim is only an appendageonly where permitting litigation of all claims in the district court can accurately be described as allowing a federal tail to wag what is in substance a state dog. (internal quotation marks omitted)). Specifically, the Third Circuit explained that certain issues of state law presented in the WPCL action also weigh heavily, tilting the balance against the exercise of supplemental jurisdiction. Pennsylvania courts have not addressed two novel and complex questions of state law squarely presented here: whether a WPCL action may rest on an implied employment contract that relies on alleged oral representations by Tyson managers; and whether the WPCL pertains to at will, non-collective bargaining employees. The need to resolve these issues, which are better left to the Pennsylvania state courts, weighs in favor of declining supplemental jurisdiction. 28 U.S.C. § 1367(c)(1). De Asencio, 342 F.3d at 311. We conclude that De Asencio is distinguishable from this case and the other circuit cases that have dealt with the dual action question in that De Asencio involved a complex question of state law rendering supplemental jurisdiction inappropriate under section 1367(c)(1). Its rationale was premised on a case-specific analysis of supplemental jurisdiction rather than on a general prohibition of exercising supplemental jurisdiction over state labor law class claims in an FLSA action. [8] Accordingly,  De Asencio represents only a fact-specific application of well-established rules, not a rigid rule about the use of supplemental jurisdiction in cases combining an FLSA count with a state-law class action. Ervin, 632 F.3d at 981; see also Wang, 623 F.3d at 761-62 (distinguishing the facts of De Asencio ). Accordingly, we find no abuse of discretion in the District Court's decision to exercise supplemental jurisdiction over the NYLL claims in this case. See Ervin, 632 F.3d at 980 ([W]hile there may in some cases be exceptional circumstances or compelling reasons for declining jurisdiction, the `conflict' between the opt-in procedure under the FLSA and the opt-out procedure under Rule 23 is not a proper reason to decline jurisdiction under section 1367(c)(4).). [9]