Free Order on Motion for Miscellaneous Relief - District Court of Arizona - Arizona

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

In re Allstate Insurance Company ) Fair Labor Standards Litigation ) )

MDL No. 1541 All Cases

ORDER re: FACILITATION OF NOTICE Pending before the Court is the plaintiffs' Motion to Facilitate Notice (doc. #40). Having considered the parties' memoranda in light of the relevant record and the oral argument of counsel, the Court finds that the plaintiffs' motion should be granted to the extent set forth herein. The various named plaintiffs, all of whom are current or former adjusters for Allstate Insurance Company's Property Casualty Claim Service Organization (PCCSO), have filed collective actions against Allstate for violations of the overtime pay provisions of the Fair Labor Standards Act (FLSA).1 The FLSA provides in part that a collective action seeking legal and equitable relief to remedy unpaid overtime compensation may be brought against an employer violating the FLSA "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.

For purposes of this motion, the Court refers to all defendants as "Allstate".

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§ 216(b). In order to facilitate this "opt-in" process, district courts have the discretionary authority in "appropriate cases" to authorize the named plaintiffs to notify potential plaintiffs, Hoffmann-LaRoche Inc. v. Sperling, 493 U.S. 165, 169, 110 S.Ct. 482, 486 (1989), and to set a deadline for plaintiffs to join the collective action by filing consents to sue. Id., 493 U.S. at 172, 110 S.Ct. at 487. Since the FLSA does not set forth how a district court should make the determination of whether to facilitate notice in § 216(b) collective action, and In the absence of Supreme Court and Ninth Circuit guidance as to the appropriate methodology to use, the Court accepts the two-step process explicitly adopted or implicitly recognized by the majority of other federal courts that have dealt with the issue. Under this methodology, the first step involves the determination, using a lenient standard, of whether a representative class should be conditionally certified for notice purposes; if a conditional certification is approved, the putative class members are given notice and the opportunity to opt-in and the action proceeds as a representative action throughout the discovery period. The second step, which is usually precipitated by a request by the defendants to "decertify" the conditional class after all of the opt-in consents have been received and discovery has been completed, involves a factual determination, using a stricter standard, regarding the propriety and scope of the class by assessing such factors as the disparate factual and employment settings, the various defenses available to the defendants that are individual to each plaintiff, and fairness and procedural considerations. If the determination at the second step is that the plaintiffs are not similarly situated, the collective action is decertified, the opt-in plaintiffs are dismissed without prejudice, and the named plaintiffs proceed with their individual claims. See Thiessen v. General Electric Capital Corp., 267 F.3d 1095, 1102-03 (10th Cir. 2001), cert. denied, 536 U.S. 934 (2002); Mooney v. Aramco Services Co., 54 F.3d 1207, 1213-14 (5th Cir. 1995); Leuthold v. Destination America, Inc., 224 F.R.D. 462, 467 (N.D.Cal. 2004).
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The initial issue before the Court is whether the Court should resolve the plaintiffs' motion using the first or the second step of the process. Allstate argues that the stricter second step determination should be made now inasmuch as extensive discovery has been done on the relevant issues; the plaintiffs argue that sufficient discovery has not been undertaken. While the Court cannot determine from the record before it precisely how much or what type of discovery has been done in the member cases relevant to the resolution of this motion, it is clear that the amount of evidence now available to the Court surpasses that normally associated with the initial step determination.2 It is also clear, however, that the discovery relevant to the resolution of the member cases is still far from completed. This latter point is important because courts that have used the second step analysis to resolve motions to facilitate notice have generally done so because discovery had been completed or at least substantially completed. See e.g., Morisky v. Public Service Electric & Gas Co., 111 F.Supp.2d 493, 49798 (D.N.J. 2000) (Court resolved motion to certify § 216(b) class using the stricter standard of the second step because discovery was completed well before the motion was filed and over 100 potential plaintiffs had already opted-in.) The Court concludes that the more appropriate procedure at this time would be to resolve the plaintiffs' motion using the more lenient first step analysis notwithstanding that extensive discovery has been done because it appears that
The Court notes that its understanding of the issue of the amount and type of discovery done to date has been impeded by the fact that the parties essentially glossed over that issue in their memoranda. Furthermore, the parties do not make clear how much of the relevant discovery done to date has even been submitted to the Court. Although it is not in any way dispositive of the Court's determination of the plaintiffs' pending motion, the Court further notes that it cannot accept the plaintiffs' reasoning that the Court should focus on the state of discovery at the time the original motion to facilitate notice was filed in the Rosa member case on October 1, 2002. That motion was denied without prejudice by the Court subsequent to the MDL consolidation of the member cases and what is now pending is the parties' joint motion, which was not filed until July 12, 2004. At the very least, the Court should look to the overall state of discovery as of the date the motion was refiled, and that amount of discovery is much greater than that referenced by the plaintiffs' in their memoranda.
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a complete factual record has not yet been developed, and because applying the first step analysis will not unduly prejudice Allstate.3 See e.g., Leuthold v. Destination America, Inc., 224 F.R.D. at 667-68 (Court concluded that the more lenient first step analysis was appropriate notwithstanding that the parties had filed "an impressive pile of declarations and deposition excerpts" because (1) it was unclear whether a complete factual record had been developed and presented to the court, (2) it was unclear how many of the proposed class would eventually opt-in and the information concerning the number and type of opt-ins was important because it could affect the court's second-step inquiry regarding the disparate factual and employment situations of the opt-ins, as well as fairness and procedural issues, and (3) the potential prejudice to plaintiffs of bypassing the first step was significant in that the lack of formal solicitation could deprive potential plaintiffs of an opportunity to join the suit, whereas the consequences to the defendants of beginning with the first step were not unduly burdensome.) See also, Chase v. AIMCO Properties, L.P., 374 F.Supp.2d 196, 201 (D.D.C. 2005) (Court granted facilitation motion using the first step standard notwithstanding that extensive discovery had been done, which included the deposition of all named plaintiffs and the defendant's Rule 30(b)(6) witnesses and several rounds of written discovery, and notwithstanding that the record as it then stood did not support a collective action on either of the plaintiff's legal theories, because there was little prejudice to the defendants in allowing notice to be issued to putative class members and allowing the opt-in process to be undertaken was consistent with the policy choice Congress made in creating the FLSA collective action.) The second issue that the Court must resolve is whether the plaintiffs have

The Court, for example, has no pertinent information about the more than 600 people the plaintiffs state have already opted-in.

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met their burden of establishing that they and the proposed class they wish to represent are "similarly situated." In the absence of any governing precedence from either the Supreme Court or Ninth Circuit to the contrary, the Court accepts that at this initial stage determination the plaintiffs need present nothing more than "substantial allegations that the putative class members were together the victims of a single decision, policy, or plan" violating the FLSA. Thiessen v. General Electric Capital Corp., 267 F.3d at 1102. See also, Hoffmann v. Sbarro, Inc., 982 F.Supp. 249, 261 (S.D.N.Y. 1997) ("[C]ourts have held that plaintiffs can meet this burden by making a modest factual showing sufficient to demonstrate that they and potential plaintiffs together were victims of a common policy or plan that violated the law."); Gambo v. Lucent Technologies, Inc., 2005 WL 352485, at *4 (N.D.Ill. Dec. 22, 2005) ("Under the first step, the Court assesses whether Plaintiff has made a modest factual showing sufficient to demonstrate that the Plaintiff and other putative plaintiffs together were potentially victims of a common policy or plan that violated FLSA. The 'modest factual showing' requirement is not a stringent standard; a plaintiff need only demonstrate a factual nexus that binds potential members of a collective action together.") (Internal citation omitted). In their motion, the plaintiffs request that the Court order notice and an opportunity to opt-in for individuals employed by Allstate, outside of the State of California, at any time since October 1, 1999 who had one of eight specified job titles.4 The plaintiffs argue that they have met their minimal initial burden, through

The job titles specified by the plaintiffs are: claim adjuster, senior claim adjuster, staff claim adjuster, senior staff claim adjuster, staff claim analyst, claim service adjuster, senior claim service adjuster, and staff claim adjuster. The plaintiffs also want a separate subclass of those employed by Allstate since January 1, 2000 who are or were employed by Encompass Insurance Co. as appraisers, claim representatives, claims specialists, and claims consultants. Allstate states that the plaintiffs' proposed class includes some 13,000 current and former adjusters. Subsequently to the filing of the plaintiffs' motion, Allstate reclassified its auto physical damage- related adjusters as non-exempt employees for FLSA purposes. The reclassification became effective on January 1, 2005.

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their complaint allegations, their submitted evidence, which consists in part of deposition testimony of Christine Sullivan, an Allstate vice-president assigned to P-CCSO, and declarations and/or affidavits from named plaintiffs, and the fact that they have over 600 opt-ins, because they have make some showing that the adjusters to whom they wish to give notice all perform the same basic job duties, that these adjusters were not exempt administrators, that they were all subject to company-wide claims handling procedures instituted by Allstate's Claims Core Process Redesign program, that they did not exercise independent judgment and discretion, that they have all worked overtime, and that none of them have received overtime payment by virtue of Allstate's designation of its adjusters as exempt. Whatever the ultimate merits of the plaintiffs' claims, the Court concludes that facilitated notice is appropriate here because the plaintiffs' allegations and evidence show that the factual nexus between their situation and the situations of other Allstate adjusters is at least minimally sufficient enough to satisfy the lenient "similarly situated" requirement at this initial stage of the litigation. Although Allstate has set forth some compelling arguments as to why the plaintiffs' proposed class members are not, and cannot be, similarly situated for purposes of the FLSA, the Court is unpersuaded by those arguments at this time as they are essentially merits-directed arguments involving the factors used at the much more rigorous second stage inquiry to determine if the "notice" class should be decertified.5 The Court joins those other courts that have refused to consider
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Allstate, for example, summarizes its argument by stating in part that

[a]n analysis of the relevant factors demonstrates that collective action is inappropriate in this case. The undisputed evidence demonstrates that significant variations exist with regard to job classifications, job duties, authority limits, geographic location, and supervision. Additionally, Allstate intends to raise specific affirmative defenses as to the exemption and statute of limitations with regard to most, or all, of the adjusters that Plaintiffs seek to include in the (continued...)

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the individualized nature of factual inquiries at the initial notice stage in FLSA cases on the basis that the evaluation of defendants' individual fact-specific concerns, however well-founded, is not appropriate until the second stage analysis.6 See e.g., Leuthold v. Destination America, Inc., 224 F.R.D. at 468 (Court, in finding that notice should be given because the allegations in the complaint and the affidavits of the lead plaintiffs, wherein they described their job duties, asserted that they often worked more than 40 hours per week without overtime pay and claimed that their experiences were common to the whole proposed class, were sufficient to meet the plaintiffs' lenient first stage burden, stated that "Defendants' arguments in their opposition brief focus more on the more stringent second tier analysis and raise issues that may be more appropriately addressed on a motion for decertification after notice is given to the proposed class."); Dietrich v. Liberty Square, L.L.C., 230 F.R.D. 574, 578-79 (N.D.Iowa 2005) (Court granted notice facilitation motion using a first stage analysis because the complaint allegations and the plaintiffs' two supporting affidavits satisfied the plaintiffs' initial minimal burden, noting that the defendants' valid concerns, which included arguments that their defense would require disparate individual evidence concerning each class member, were more appropriately considered for the later decertification stage after more discovery
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(...continued) proposed class. Finally, the enormous scope of this suit, both in terms of the number of potential class members (approximately 13,000), as well as the geographic reach (virtually every state in the country except California and New Jersey), argue against the manageability of the proposed class.

The Court is also unpersuaded by Allstate's contention that the plaintiffs' showing is insufficient to meet their burden under even the more lenient first step given that the plaintiffs' declarations are based on a lack of personal knowledge regarding what procedures other types of adjusters follow. While the plaintiffs' affidavits and declarations certainly contain hearsay statements, Allstate has not cited to any case law establishing that evidence offered in support of a § 216(b) motion to facilitate notice must meet Rule 56 standards of admissibility. The Court agrees with those cases allowing more relaxed evidentiary rules concerning declarations and affidavits supporting such a motion. See e.g., Aguayo v. Oldenkamp Trucking, 2005 WL 2436477, at *4 (E.D.Cal. Oct. 3, 2005).

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had been taken.); Brown v. Money Tree Mortgage, Inc., 222 F.R.D. 676, 682 (D.Kan. 2004) (Court, in conditionally certifying a FLSA class using a first stage analysis based on the complaint's detailed allegations and the plaintiffs' affidavits, rejected the defendant's argument that certification was improper due to legal and factual issues unique to each employee because the time for examining the individual plaintiffs' disparate factual and employment settings and the various defenses available to the defendant was at the second stage analysis after the close of discovery.); Gambo v. Lucent Technologies, 2005 WL 3542485, at *4 ("The possibility of a fact-intensive inquiry into whether all members of the eventual putative opt-in class are in fact similarly-situated does not preclude authorizing notice, although the need for such an analysis might weigh against or defeat certification of an actual class (or influence the form of any eventual certified class) at the second stage."); Bosley v. Chubb Corp., 2005 WL 1334565, at *4 (E.D.Pa. June 3, 2005) ("Defendants submit three ... Declarations in support of their contention that the proposed class members did not perform the same duties as the named plaintiffs. While this evidence may be significant after discovery, and during step two of the process, at this [first] stage, it does not compel us to deny preliminary certification."); Kalish v. High Tech Institute, Inc., 2005 WL1073645, at *2 (D.Minn. Apr. 22, 2005) (Court, in conditionally certifying a class for notice purposes using a first stage analysis because the plaintiffs had established a colorable claim that a class of similarly situated plaintiffs existed, noted that "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.") The third issue before the Court is the scope of the class to be noticed. A FLSA action for overtime pay must be commenced within two years after the cause of action accrues, unless the action is based on a willful violation of FLSA,

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in which case it must be commenced within three years of accrual.7 29 U.S.C. § 255(a). Since the filing of a FLSA complaint does not toll the statute of limitations for all claims that are brought under a FLSA collective action certification, a FLSA collective action is commenced as to an opt-in plaintiff as of the date that person's written consent to join is filed with the court.8 29 U.S.C. § 256(b); see Partlow v. Jewish Orphans' Home of Southern California, Inc., 645 F.2d 757, 760 (9th Cir. 1981) ("It is true that the FLSA statute of limitations continues to run [for an opt-in plaintiff] until a valid consent is filed."), overruled on other grounds by Hoffman-La Roche, Inc. v. Sperling, 493 U.S. 165, 110 S.Ct. 482 (1989). A separate claim for a violation of the FLSA accrues each time a non-exempt employee receives a paycheck that improperly excludes overtime pay. Knight v. Columbus, 19 F.3d 579, 581-82 (11th Cir.), cert. denied, 513 U.S. 929 (1994); Cook v. United States, 855 F.2d 848, 851 (Fed.Cir. 1988); Archer v. Sullivan County, Tenn., 1997 WL 720406 (6th Cir. 1997); see also, Biggs v. Wilson, 1 F.3d 1537, 1540 (9th Cir. 1993), cert. denied, 510 U.S. 1081 (1994). In their motion (but not in their reply), the plaintiffs very briefly argue that the facilitated notice should be sent to all Allstate adjusters with the described job titles who were employed on or after October 1, 1999, i.e., three years prior to the date the first motion to facilitate notice was filed in a member case (the Rosa case)9; the plaintiffs also argue that the Court should equitably toll the limitations period as of October 1, 2002, the date the Rosa motion to facilitate notice was
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The Court notes that all of the member cases include a willfulness allegation.

A FLSA action is commenced as to a named plaintiff either on the date the complaint is filed, if the named plaintiff also filed as of that date a written consent to become a plaintiff, and if the consent is not contemporaneously filed, then as of the date the written consent is filed with the court. 29 U.S.C. § 256(a). The motion to facilitate notice in the Rosa case was nominally fully briefed as of January 21, 2003, and the motion to facilitate notice in the Gaglione case was filed on March 17, 2003 and was nominally fully briefed as of September 2, 2004. Both motions were still pending when the cases were transferred to the MDL action in November 2003.
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filed. The basis for the equitable tolling request is that potential plaintiffs should not have their claims time-barred due to their inability to opt-in as a result of judicial delays in ruling on the issue of whether a facilitated notice should be sent out. The Court accepts that there are circumstances in which a limitations period may properly be equitably tolled due to a court-imposed delay over which the plaintiffs had no control, and that this is such a case. See e.g., Owens v. Bethlehem Mines Corp., 630 F.Supp. 309, 312-13 (S.D.W.Vir. 1986) (Court concluded that limitations period should be equitably tolled for two plaintiffs because they would have timely opted-in had the court not taken 17½ months to rule on the class certification issue and because the defendant was not prejudiced since it already knew of the two plaintiffs' claims.); Sperling v. Hoffman-La Roche, Inc., 118 F.R.D. 392, 411 (D.N.J. 1988), aff'd 862 F.2d 439 (3rd Cir. 1988), aff'd 493 U.S. 165, 110 S.Ct. 482 (1989) (Court noted that the plaintiffs had presented a "factually compelling" case for equitable tolling because it took the court 27 months to resolve the motion to facilitate notice, the delay would have rendered the facilitated notice moot if the limitations period were not tolled because limitations period had expired in the meantime, and because the defendants long had timely notice of the plaintiffs' claims and of their efforts to find more class members.) While the Court notes that numerous courts have, in FLSA cases involving willfulness allegations, merely commenced the notice period on a date three years prior to the entry of the order granting facilitated notice, see e.g.,Patton v. Thomson Corp., 364 F.Supp.2d 263, 268 (E.D.N.Y. 2005); Salinas-Rodriguez v. Alpha Services, L.L.C., 2005 WL 3557178, at *4 (S.D.Miss. Dec. 27, 2005); Pivonka v. Bd. of County Comm'rs of Johnson County, Kansas, 2005 WL 1799208, at *1 (D.Kan. July 27, 2005); Vaicaitiene v. Partners in Care, Inc., 2005 WL 1593053, at *7 (S.D.N.Y. July 6, 2005); Camp v. The Progressive Corp., 2002
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WL 31496661, at *6 (E.D.La. Nov. 18, 2002); Wertheim v. State of Arizona, 1993 WL 603552, at 5 (D.Az. Sept. 30, 2003), the Court, in recognition of its longdelayed ruling and in order to provide the widest-possible class of potential optins with facilitated notice, will accept the plaintiffs' requested class commencement date of October 1, 1999. The Court wishes to make clear, however, that it is not in any way ruling at this time that the October 1, 1999 date is the one that will govern if this remains a collective action after the Court makes the second stage certification determination. Any questions regarding the applicability of the statute of limitations to individual opt-ins will be decided by the Court at a later date.10 See Sperling v. Hoffman-La Roche, Inc., 118 F.R.D. at 411. Therefore, IT IS ORDERED that the Plaintiff's Motion to Facilitate Notice (doc. #40) is granted to the extent that the collective class proposed by the plaintiffs is conditionally certified pursuant to 29 U.S.C. § 216(b) for purposes of notice and discovery only and that the plaintiffs may notify potential plaintiffs within that class using a form to be approved by the Court. IT IS FURTHER ORDERED that the parties, after the consultation of their counsel, shall jointly submit proposed Notice and Consent forms to the Court no later than March 3, 2006. The parties' joint submission shall address the appropriate deadline for the filing of consents by the putative class members, and

Given that the basis in this case for equitable tolling is the judicial delay in resolving the facilitated notice issue, the Court notes that the plaintiffs have not provided any real justification as to why the date the first motion to facilitate notice was filed should govern the commencement of the class period, as opposed, for example, to some date based on when the judicial resolution of the motion should ideally have been entered. The Court further notes that another problem with the October 1, 1999 date, and one unmentioned by the parties, is the fact that the Motion of Plaintiff Rosa for Transfer for Coordinated and Consolidated Complaint Pretrial Proceedings, filed April 2, 2003, stated that "[t]he Rosa action has an equitable tolling agreement stipulated to by the parties and approved by the magistrate which tolls the statute of limitations effective October 1, 2000."

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any issues concerning the timing or manner of the defendants' production to the plaintiffs of the names and addresses of the putative class members.11 DATED this 6th day of February, 2006.

The Court expects counsel to make all reasonable efforts to present jointly approved notice and consent forms to the Court. If the parties, after the sincere efforts of their counsel, cannot jointly agree on certain parts of the language of the proposed notice and consent forms, each side shall present their respective positions in their joint submission. The parties may stipulate to changing the parameters of the class proposed by the plaintiffs in their motion.

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