3rd Circuit Holds FLSA Class Certification Not Inextricably Intertwined with FRCP Rule 23 Class Certification

On December 31, 2018, the Third Circuit filed an opinion holding that pendent appellate jurisdiction was not appropriate to review a Fair Labor Standards Act class certification because an order granting certification under the Federal Rules of Civil Procedure Rule 23 was not “inextricably intertwined” with an order granting final collective action certification under FLSA.  This was a question of first impression in the Third Circuit.  The Court also decided that in this specific case the district court had not performed the appropriate rigorous review to determine if class certification under Rule 23 was appropriate.

The plaintiffs in this case were Mortgage Loan Officers working for the defendant bank.  Under one of the Bank’s policies, loan officers were required to report all hours worked, including overtime.  A separate Bank policy required that the loan officers obtain prior supervisor approval for any hours worked in excess of 40 hours per week.  The loan officers, however, argued that there was a “policy-to-violate-the-policy”:  that the company required them to work in excess of 40 hours per week while discouraging them from actually reporting those overtime hours, including discipline if they reported overtime without having it preapproved.

The loan officers filed a class action complaint alleging that the Bank’s maintenance of the unofficial policy or practice of requiring work in excess of 40 hours per week violated FLSA and Pennsylvania law.  The loan officers also moved for conditional certification of a collective action under FLSA, which the district court granted, and filed a motion for a class certification under Rule 23.  The district court denied the Bank’s motion for summary judgment, certified the loan officers’ off-the-clock claims under Rule 23, and denied the Bank’s motion for decertification of the FLSA collective action.

The Bank challenged the district court’s Rule 23 class certification arguing that the district court failed to properly define the class or class claims as mandated by Rule 23.  To properly define the class or class claims, a court order granting class certification must include a readily discernible, clear, and precise statement of the parameters defining the class or classes to be certified, and a readily discernible, clear, and complete list of claims, issues, or defenses to be treated on a class basis.  The Third Circuit held that the class certification order failed to meet this standard because it merely stated that the loan officers’ state law subclasses were for the listed states and cross-referenced the first amended complaint, without defining the specific subclasses or stating which provision of Rule 23 governed the various claims.

The Court also found that, based on the district court’s analysis, it could not make a determination as to whether the evidence presented was sufficient to satisfy Rule 23’s commonality and preponderance requirements since the district court merely cited the loan officers’ “substantial evidence” without specifying evidence it was relying on to determine there was an unofficial policy regarding overtime pay.  Further, the Court found that the reports in evidence did not provide any discussion regarding how the loan officers showed that the Bank had actual or constructive knowledge of the purported policy.  As a result, the Court remanded the case with instructions that the district court conduct a rigorous examination of the factual and legal allegations in the case to determine whether class certification under Rule 23 was appropriate.

The Bank also challenged the district court’s non-final FLSA certification order under the doctrine of pendent appellate jurisdiction.  This doctrine allows an appellate court to use its discretion to exercise jurisdiction over issues that are not independently appealable but that are intertwined with issues over which there is proper and independent jurisdiction.  The Court explained that this doctrine is restricted to two circumstances: (1) “inextricably intertwined” orders or (2) “review of [a] non-appealable order where it is necessary to ensure meaningful review of [an] appealable order.”

Relying on a Second Circuit opinion, the Third Circuit concluded that Rule 23 certification is not “inextricably intertwined” with an FLSA collective action certification so as to permit exercise of pendent appellate jurisdiction over the FLSA certification. The Court explained that it did not find class certification under Rule 23 and FLSA collective action certification to be sufficiently similar since Congress clearly chose not to adopt the Rule 23 “commonality” or “predominance” standards, but instead chose the “similarly situated” standard for the FLSA class certification.  Under the FLSA “similarly situated” standard, a court must find that the collective plaintiffs are “similarly situated” in order to grant class certification.  Though, the Third Circuit acknowledged that some of the factors and evidence necessary to satisfy the prerequisites of Rule 23 and the FLSA “similarly situated” standard may overlap, it found that a mere nexus between the two standards is not sufficient to justify a decision to assume pendent appellate jurisdiction.

The full text of the opinion may be found here.