Court Opinion

ID: 9403783
Source: CourtListenerOpinion
Date Created: 2023-06-21 18:00:48.385106+00
Date Added: 2024-06-11T17:20:09.355311
License: Public Domain

Case: 22-40411     Document: 00516794285         Page: 1    Date Filed: 06/21/2023

           United States Court of Appeals
                for the Fifth Circuit
                                                                       United States Court of Appeals
                                                                                Fifth Circuit

                                ____________                                  FILED
                                                                          June 21, 2023
                                  No. 22-40411                           Lyle W. Cayce
                                ____________                                  Clerk

   Valerie Loy, On Behalf of Herself and All Others Similarly Situated;
   ReAnna McNames; Nancy Garcia; Sophia Silva; Mardel
   Hollie Weger; Cara Bradford; Ryan Degerstrom;
   Angela La Manna; Jameson Lee; Eyvonnia McCrary-
   Yaylor; Sheena McLaurin; Lanita Meadows; Mattie L.
   Rogers; Debra Smith; Ricardo Macias; Mary Picardi;
   Leigh A. Strolis; Veronica Zubowski; Keri Johnson;
   Julie Hildebrandt; Robert Scott; David Brent Little;
   Kathryn Campbell,

                                                           Plaintiffs—Appellees,

                                      versus

   Rehab Synergies, L.L.C.,

                                           Defendant—Appellant.
                  ______________________________

                  Appeal from the United States District Court
                      for the Southern District of Texas
                             USDC No. 7:18-CV-4
                  ______________________________

   Before Ho, Oldham, and Douglas, Circuit Judges.
   Dana M. Douglas, Circuit Judge:
          Valerie Loy (“Loy”) brought a Fair Labor Standards Act (“FLSA”)
   suit against Rehab Synergies alleging violations of the federal overtime law.
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   The district court, over Rehab Synergies’ objection, allowed the case to
   proceed as a collective action and a jury found Rehab Synergies liable. On
   appeal, Rehab Synergies contends that the district court abused its discretion
   by allowing the case to proceed as a collective action. We AFFIRM.
                                           I.
                                          A.
           Rehab Synergies operates 44 facilities throughout Texas that provide
   speech, physical, and occupational therapy services. Four regional directors
   and 44 facility directors (“directors of rehab” or “DORs”) have
   responsibility for these facilities, with each regional director overseeing 10 to
   13 facilities, each headed by a DOR. At any given time, Rehab Synergies has
   between 400 and 600 therapists and assistants working at its facilities. The
   size of each facility, the number of therapists that work at each facility, and
   the number of patients served at each facility varies.
           The 22 plaintiffs (“Plaintiffs”) in this case worked in five different job
   positions—speech language pathologist (“SLP”), physical therapist
   (“PT”), physical therapist assistant (“PTA”), occupational therapist
   (“OT”), and certified occupational therapist assistant (“COTA”)—at 20
   Rehab Synergies’ facilities serving a variety of patients with different
   conditions, including patients with dementia and patients recovering from
   strokes, accidents, and surgeries. Plaintiffs reported to a total of 22 different
   DORs.
           Regardless of job title and facility, all Plaintiffs were subject to
   productivity requirements. Rehab Synergies calculated each therapist’s
   productivity by dividing the amount of his or her billable time by the total
   hours he or she was clocked in. In general, billable time was time spent on
   patient care, while non-billable time was time spent performing other tasks
   when a patient was not present. Plaintiffs used a computer program to clock

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   in and track their time. Plaintiffs’ productivity requirements ranged from
   88% to 100%. Rehab Synergies had a companywide goal of 90% productivity.
   To achieve 90% productivity, a therapist needed to record 54 minutes of
   billable time for every hour on-the-clock, leaving the equivalent of just six
   minutes per hour to complete non-billable tasks.
          Plaintiffs had access to a number of “efficiency measures,” however,
   that could help boost their productivity, including: (1) multi-tasking by
   performing certain non-billable tasks while also performing a billable task;
   (2) “layering modalities,” meaning providing therapy to more than one
   patient at the same time or providing more than one type of therapy to a
   patient at the same time; and (3) supervising student interns, whose
   productive time would then be included in the supervising therapist’s
   productive time. Nevertheless, Plaintiffs had trouble meeting productivity
   requirements. Plaintiffs claimed that they did non-billable work “off-the-
   clock” to boost their productivity and as a result worked unpaid overtime.
   Some Plaintiffs claimed that their DOR expressly told them to change their
   time entries to increase their productivity, while others claimed that their
   DOR implied that they should do so. Some Plaintiffs claimed they explicitly
   told their DOR that they were working off-the-clock, while others claimed
   that their DOR was aware of off-the-clock work even though it was not
   explicitly discussed.
                                        B.
          In January 2018, Loy filed a lawsuit against Rehab Synergies alleging
   violations of the FLSA’s overtime provisions and seeking to pursue a
   collective action. Loy, an SLP who worked at two of Rehab Synergies’
   locations from March 2014 through August 2016, alleged that she and other
   therapists often worked more than 40 hours a week without getting paid for
   overtime due to “onerous productivity requirements” set by Rehab

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   Synergies, and further, alleged that Rehab Synergies knew of and “expressly
   encouraged” its employees to work “off the clock” in violation of the FLSA.
           After limited discovery, the district court granted Loy’s opposed
   motion to conditionally certify a collective action and authorized the sending
   of notice to approximately 1,000 eligible opt-in plaintiffs comprising “all
   therapists . . . who have been employed by Defendant at any time since
   March 8, 2015 at any of Defendant’s skilled nursing facilities in the state of
   Texas.” After additional discovery, Rehab Synergies moved to decertify the
   collective. The district court denied the motion, concluding that Plaintiffs
   were similarly situated. 1
           Of approximately 1,000 potentially eligible plaintiffs, about 50 joined
   the collective action. By the time of trial, the number of plaintiffs had
   dropped to 22. During the trial, Rehab Synergies renewed its motion for
   decertification both at the close of Plaintiffs’ evidence and the close of its own
   case. Both motions were denied. The jury returned a verdict in favor of
   Plaintiffs. As requested by Rehab Synergies, the jury made individual liability
   findings as to whether each Plaintiff proved that he or she performed unpaid
   work that Rehab Synergies knew or had reason to know was occurring and
   individual findings as to the amount of unpaid work performed by each
   Plaintiff. The jury also found that Rehab Synergies had willfully violated the
   FLSA.

           _____________________
           1
              Although the district court “conditionally certified” the collective action and
   allowed notice to be sent pursuant to the two-step Lusardi approach—which, at the time,
   had been permitted but not explicitly endorsed by this court—by the time Rehab Synergies
   filed its motion for decertification this court in Swales had rejected Lusardi’s “conditional
   certification” step. Swales v. KLLM Transp. Servs., L.L.C., 985 F.3d 430, 441 (5th Cir.
   2021) (citing Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987)). In evaluating the
   motion for decertification, the district court applied the standards in Swales.

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                                          II.
          This court reviews a district court’s decision to allow an FLSA case
   to proceed as a collective action for abuse of discretion. Swales v. KLLM
   Transp. Servs., L.L.C., 985 F.3d 430, 439 (5th Cir. 2021) (citing Steele v.
   Leasing Enters., Ltd., 826 F.3d 237, 248 (5th Cir. 2016)). “A district court
   abuses its discretion if it bases its decision on an erroneous view of the law or
   on a clearly erroneous assessment of the evidence.” Hesling v. CSX Transp.,
   Inc., 396 F.3d 632, 638 (5th Cir. 2005). Whether the district court applied
   the correct legal standards is reviewed de novo; its factual findings are subject
   to deferential clear-error review; and its ultimate decision to allow the case
   to proceed as a collective action is reviewed for abuse of discretion. See
   Swales, 985 F.3d at 439.
                                         III.
          Before addressing the merits, we briefly address and dispose of
   Plaintiffs’ contentions that we lack jurisdiction. First, Plaintiffs claim that
   Rehab Synergies did not preserve its collective action challenge for appellate
   review because it did not raise it in a post-verdict motion in the trial court.
   The caselaw cited by Plaintiffs in support is inapposite. While our precedent
   requires sufficiency-of-the-evidence challenges to be raised in a post-verdict
   motion as a prerequisite to appellate review, McLendon v. Big Lots Stores, Inc.,
   749 F.3d 373, 374 (5th Cir. 2014), errors in the trial court “duly objected to,
   dealing with matters other than the sufficiency of the evidence . . . may be
   raised on appeal” without first being presented to the trial court in a post-
   verdict motion. 9B Arthur R. Miller, Federal Practice and
   Procedure § 2540 (3d ed. 2022). Rehab Synergies “duly objected to” the
   district court’s collective action decision three times during the proceedings
   and thus properly preserved the issue for appeal.

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          Second, Plaintiffs assert that this appeal is moot because the district
   court did not allow Plaintiffs to rely on representative proof, but instead
   required all 22 plaintiffs to testify and had the jury make separate findings of
   liability for each plaintiff, such that the Seventh Amendment would preclude
   reexamination of the jury’s findings even if there were new, individual trials.
   Plaintiffs do not, however, cite a case that supports their position, and we are
   aware of none. “A case becomes moot only when it is impossible for a court
   to grant any effectual relief whatever to the prevailing party.” Knox v. Serv.
   Emps. Int’l Union, Local 1000, 567 U.S. 298, 307 (2012) (cleaned up). Here,
   if we determine that the district court abused its discretion in allowing the
   case to proceed as a collective action, we could grant “effectual relief” by
   vacating and remanding for individual trials. This case is not moot.
                                         IV.
          Turning to the merits, an FLSA case may be brought “by any one or
   more employees for and in behalf of himself or themselves and other
   employees similarly situated.” 29 U.S.C. § 216(b). “A collective action
   allows [FLSA] plaintiffs the advantage of lower individual costs to vindicate
   rights by the pooling of resources. The judicial system benefits by efficient
   resolution in one proceeding of common issues of law and fact arising from
   the same alleged [unlawful] activity.” Hoffmann-La Roche Inc. v. Sperling,
   493 U.S. 165, 170 (1989); Sandoz v. Cingular Wireless LLC, 553 F.3d 913, 919
   (5th Cir. 2008) (“Congress’ purpose in authorizing § 216(b) class actions
   was to avoid multiple lawsuits where numerous employees have allegedly
   been harmed by a claimed violation or violations of the FLSA by a particular
   employer.”) (quoting Prickett v. DeKalb Cnty., 349 F.3d 1294, 1297 (11th Cir.
   2003)).
          In Swales, we explained that, when managing a putative FLSA
   collective action, “a district court should identify, at the outset of the case,

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   what facts and legal considerations will be material to determining whether a
   group of ‘employees’ is ‘similarly situated.’ And then it should authorize
   preliminary discovery accordingly.” Swales, 985 F.3d at 441. To decide
   whether a group of employees is similarly situated, the district court must
   consider “whether merits questions can be answered collectively.” Id. at
   442.   “After considering all available evidence, the district court may
   conclude that the Plaintiffs and Opt-ins are too diverse a group to be
   ‘similarly situated’ for purposes of answering” the relevant legal questions
   on the merits. Id. at 443. If answering the merits questions “requires a highly
   individualized inquiry into each potential opt-in’s circumstances,” then the
   employees are likely not similarly situated. Id. at 442. It is the plaintiffs’
   burden to establish that they are similarly situated. Id. at 443.
          Pre-Swales, district courts following the Lusardi approach considered
   three factors when deciding whether employees were “similarly situated”:
   “(1) [the] disparate factual and employment settings of the individual
   plaintiffs; (2) the various defenses available to [the] defendant which appear
   to be individual to each plaintiff; [and] (3) fairness and procedural
   considerations.” Id. at 437 (quoting Thiessen v. Gen. Elec. Cap. Corp., 267
   F.3d 1095, 1103 (10th Cir. 2001)) (alterations in original); Roussell v. Brinker
   Int’l, Inc., 441 F. App’x 222, 226 (5th Cir. 2011). While Swales rejected
   Lusardi’s two-step method of “conditional certification” and notice
   followed by a motion to decertify, courts may still find it useful to consider
   the Lusardi factors to help inform or guide the similarly situated analysis
   given the similarities between Swales and Lusardi’s second step. See, e.g.,
   Badon v. Berry’s Reliable Res., LLC, No. 2:19-CV-12317, 2021 WL 933033, at
   *3 (E.D. La. Mar. 11, 2021). That said, use of these factors is not mandatory,
   as there is no one-size-fits-all analysis or mechanical test to apply: “The
   bottom line is that the district court has broad, litigation-management

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   discretion,” “cabined by the FLSA’s ‘similarly situated’ requirement.”
   Swales, 985 F.3d at 443.
          Rehab Synergies contends that the district court abused its discretion
   in two ways. First, Rehab Synergies argues that the district court committed
   an error of law by misidentifying the “central merits issue.” Second, Rehab
   Synergies asserts that the district court abused its discretion because all three
   Lusardi factors weigh against a determination that Plaintiffs were similarly
   situated. As explained below, we disagree.
                                          A.
          Rehab Synergies asserts that the district court committed legal error
   when analyzing whether Plaintiffs were similarly situated by misidentifying
   the “merits question” as whether Plaintiffs were subject to a common
   productivity requirement instead of whether Rehab Synergies knew or
   should have known that Plaintiffs were working overtime. We review de novo
   whether the district court applied the correct legal standards. Swales, 985
   F.3d at 439.
          To recover unpaid overtime under the FLSA, an employee “must
   show that he was ‘employed’ . . . during the periods of time for which he
   claims unpaid overtime,” which requires a showing that the employer “had
   knowledge, actual or constructive, that he was working.” Newton v. City of
   Henderson, 47 F.3d 746, 748 (5th Cir. 1995) (citation omitted). Constructive
   knowledge exists if an employer “exercising reasonable diligence would
   acquire knowledge of this fact.” Brennan v. Gen. Motors Acceptance Corp., 482
   F.2d 825, 827 (5th Cir. 1973). “An employer who is armed with [knowledge
   that an employee is working overtime] cannot stand idly by and allow an
   employee to perform overtime work without proper compensation, even if
   the employee does not make a claim for the overtime compensation.”
   Newton, 47 F.3d at 748 (quoting Forrester v. Roth’s I.G.A. Foodliner, Inc., 646

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   F.2d 413, 414 (9th Cir. 1981)) (alteration in original); see also 29 U.S.C.
   § 203(g) (“‘Employ’ includes to suffer or permit to work”); 29 C.F.R.
   § 785.11 (“Work not requested but suffered or permitted is work time”).
   However, “if the ‘employee fails to notify the employer or deliberately
   prevents the employer from acquiring knowledge of the overtime work, the
   employer’s failure to pay for the overtime hours is not a violation[.]’”
   Newton, 47 F.3d at 748 (quoting Forrester, 646 F.2d at 414).
          After a thorough review of the district court’s orders, we conclude
   that there was no legal error. The district court appropriately considered
   “whether merits questions [could] be answered collectively.” Swales, 985
   F.3d at 442. In its order denying Rehab Synergies’ motion to decertify, the
   district court addressed both the legal requirement of employer knowledge
   and Plaintiffs’ evidence on the issue when determining whether Plaintiffs
   were similarly situated.
          Rehab Synergies cites Chambers v. Sears Roebuck and Co. for the
   proposition that an employer’s use of productivity measures does not
   demonstrate its actual or constructive knowledge of employees’ off-the-clock
   work to meet those measures. 428 F. App’x 400, 420 (5th Cir. 2011). But
   the present case is clearly distinguishable from Chambers, where the plaintiffs
   relied only on the fact that the “stated purpose” of the company’s
   productivity requirement was to increase efficiency as circumstantial
   evidence of constructive knowledge of off-the-clock work while “fail[ing] to
   cite to any direct evidence that Sears had actual or constructive knowledge
   that they were performing these tasks outside of the working day.” Id. Here,
   by contrast, the district court did not rely solely on the existence of a
   productivity requirement to determine that Plaintiffs were similarly situated,
   but also evidence of employer knowledge of off-the-clock work in violation of
   the FLSA.

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                                          B.
          Next, Rehab Synergies asserts that the district court abused its
   discretion in concluding that Plaintiffs were similarly situated. As the parties
   structure their arguments in terms of the Lusardi factors, for ease of analysis,
   we consider each factor in turn.
                  i. Disparate factual and employment settings
          According to Rehab Synergies, the district court erroneously accepted
   Plaintiffs’ assertion of a common productivity requirement, which could only
   be met by working off-the-clock, while ignoring factual differences in each
   plaintiff’s work situation which undermined a finding of similarity. Rehab
   Synergies asserts that there was no common productivity goal. Instead, it
   points to varying productivity requirements applicable to different plaintiffs,
   ranging from 88% to 100%. Additionally, Rehab Synergies argues that the
   district court erred by disregarding universally applicable company policies
   requiring FLSA compliance and prohibiting off-the-clock work.             After
   reviewing the record, we conclude that the district court’s factual findings
   were not clearly erroneous.
          Plaintiffs all testified that they were subject to productivity
   requirements. Additionally, members of Rehab Synergies’ management
   testified to productivity requirements of at least 90% across all facilities.
   Plaintiffs did not need to be subject to identical productivity requirements to
   be similarly situated. Nor are company policies requiring FLSA compliance
   and prohibiting off-the-clock work dispositive given the evidence that Rehab
   Synergies also had an unwritten policy or practice of off-the-clock work.
          In Roussell v. Brinker International—a collective action by servers at
   various Chili’s Restaurants challenging an unlawful practice of coercing
   tipped employees to share tips with tip-ineligible employees—the employer
   contended that the plaintiffs were not similarly situated because there was

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   “no ‘single, uniform, nationwide policy or practice of coerced tip-sharing,’”
   but only acts of “rogue manager[s].” 441 F. App’x at 226. We disagreed and
   affirmed the district court’s certification because “[a]lthough there was no
   corporate policy mandating tip-sharing, the district court found the
   deposition testimony indicative of a pattern.” Id. “This conclusion was not
   an abuse of discretion,” we said, because the evidence showed that “[a]ll
   [plaintiffs] were subjected to some form of managerial coercion in tipping,”
   despite differences in their individual employment settings and the lack of a
   formal corporate policy mandating unlawful tip-sharing. Id. Likewise, here,
   the district court’s factual finding that Plaintiffs were all subject to Rehab
   Synergies’ unwritten policy or practice of off-the-clock work was not clearly
   erroneous, and its conclusion that they were similarly situated not an abuse
   of discretion.
          Rehab Synergies also argues that, even if Plaintiffs were subject to
   similar productivity requirements, they were still not “similarly situated”
   because whether the company had actual or constructive knowledge that they
   were working overtime could not be answered collectively due to their
   disparate employment settings. Rehab Synergies is correct that Plaintiffs
   worked in five different positions at 20 different facilities, reported to 22
   different directors during the relevant period, and testified to differing
   interactions with their directors regarding productivity requirements and off-
   the-clock work. Even with these differences, however, there was evidence
   that Rehab Synergies had knowledge of Plaintiffs’ off-the-clock work.
   “There is need for care in evaluating distinctions among employees, but
   those distinctions must make a difference relevant to the legal issues
   presented.” Id. at 226–27. Here, the evidence supported the conclusion that
   Plaintiffs were all subject to Rehab Synergies’ practice or pattern of
   knowingly countenancing or expressly encouraging off-the-clock work. The

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   district court did not abuse its discretion in concluding that they were
   similarly situated.
                                ii. Individualized defenses
           Next, Rehab Synergies contends that it had two “individualized
   defenses” that were not appropriate for collective treatment: (1) Plaintiffs’
   differing access to and use of various efficiency measures to boost
   productivity; and (2) Plaintiffs’ differing achievement of productivity goals.
   Nothing about the collective action mechanism prevented Rehab Synergies
   from presenting evidence of its defenses, especially considering that
   Plaintiffs were not permitted to rely on representative proof and instead were
   required to testify individually. Indeed, there was testimony at trial as to both
   defenses, including testimony elicited from Rehab Synergies on cross-
   examination. 2 This supports the conclusion that it was not an abuse of
   discretion for the district court to allow the case to proceed as a collective
   action. Furthermore, while Rehab Synergies emphasizes factual differences
   between individual Plaintiffs, it has not shown that the district court’s
   determination that its defenses applied to Plaintiffs’ common claims was
   erroneous.
                     iii. Fairness and procedural considerations
           Last, Rehab Synergies argues that the trial itself demonstrated that it
   was an abuse of discretion to permit the case to proceed as a collective action.
   Rehab Synergies focuses on (1) the district court requiring all 22 Plaintiffs to
   testify (either live or by deposition) and requiring the jury to make individual
   findings as to each Plaintiff, which it claims resulted in 22 “mini-trials” and

           _____________________
           2
             In their brief, Plaintiffs suggest that the jury appears to have “at least partially
   credited the individualized defenses” because it did not award any Plaintiff the full amount
   of unpaid overtime requested, nor apply an across-the-board reduction to each Plaintiff.

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   revealed the district court’s “tacit recognition” that Plaintiffs were not
   similarly situated; and (2) the district court allowing Plaintiffs’ counsel to
   argue to the jury in closing that it should draw an adverse inference from
   Rehab Synergies’ failure to call the director of each facility to testify to rebut
   each Plaintiff. In short, Rehab Synergies argues that the trial resulted in a
   “disparity” where Plaintiffs were able to testify individually and
   simultaneously take advantage of the benefits of a collective action, while
   arguing to the jury that Rehab Synergies needed to put on proof of its
   defenses as to each Plaintiff by calling all individual facility directors to
   testify. We disagree.
          First, it is not improper for a district court to limit representative
   testimony or require individual testimony. We approved of a similar practice
   in Roussell. See 441 F. App’x at 227 (“We would give Brinker’s arguments
   more credence if this case had proceeded on a truly representative basis.
   Instead, all 55 plaintiffs presented individualized evidence through testimony
   to the jury or deposition excerpts to the court.”). Moreover, it was Rehab
   Synergies that successfully moved the district court—over Plaintiffs’
   objection—to require the jury to make individual findings of liability.
          Second, Plaintiffs’ adverse-inference argument does not suggest a
   “disparity” as a result of the case proceeding as a collective action; rather,
   the record shows that any “disparity” had other causes. Pre-trial, Rehab
   Synergies filed a motion in limine to preclude any adverse inference
   arguments if Plaintiffs were allowed to try the case on representative proof
   and Rehab Synergies was not allowed to call each individual Plaintiff as a
   witness or was otherwise limited in the number of rebuttal witnesses. Here,
   however, the district court instead required every Plaintiff to testify at trial.
   When Rehab Synergies attempted to include all its facility directors on its
   witness list for trial, even though it had failed to disclose all of them in its
   initial or supplemental Rule 26 disclosures, the district court granted

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   Plaintiffs’ motion to limit Rehab Synergies to calling timely-disclosed
   witnesses. Finally, Rehab Synergies’ request at trial for a jury instruction
   prohibiting the drawing of an adverse inference based on the failure to call a
   witness was denied, presumably because the case had not proceeded on
   representative proof. From the foregoing, we conclude that the district
   court’s decision to allow the case to proceed as a collective action did not
   result in a lack of fairness or procedurally prevent Rehab Synergies from
   defending the case. 3
                                              V.
           In sum, after reviewing the briefs, the record, and the relevant law, we
   conclude that the district court applied the correct legal standards and that
   its factual findings were not clearly erroneous. Because the Plaintiffs were
   similarly situated, it would have been inconsistent with the FLSA to require
   22 separate trials absent countervailing due process concerns that are simply
   not present here. See Sandoz, 553 F.3d at 919. The district court did not
   abuse its discretion in allowing the case to proceed as a collective action.
           AFFIRMED.

           _____________________
           3
              While asserting that the district court’s rulings limiting its witness list and
   permitting an adverse inference argument resulted in unfairness, Rehab Synergies did not
   move for a new trial on either basis and has not appealed the district court’s evidentiary
   ruling or jury instructions.

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