July 20, 2010
BLANCA GUADALUPE LOPEZ, DIOMEDES TAPIA, VIRGINIA ORTIZ, LEONOR RAMIREZ, JUAN JOSE MORENO, LORENZO VASQUEZ, CRISTINA CORONA, ARTURO AGUILAR, JAIME HERRERA AND AMAILIA ALVAREZ, ERASMO MECALCO, MAXIMO HERNANDEZ, AND LILIBETH SANDOVAL, INDIVIDUALLY AND AS REPRESENTATIVES OF THE EMPLOYEES, PLAINTIFFS-APPELLANTS,
5 DE MAYO BAKERY, INC., 5 DE MAYO MEXICAN II RESTAURANT, INC., RAYMUNDO TORRES, AND ERBA APARICIO, DEFENDANTS-RESPONDENTS, AND MIGUEL GARCIA, DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-2350-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 2, 2010
Before Judges Fuentes, Gilroy and Simonelli.
In this action, brought pursuant to the Fair Labor Standards Act (FLSA), 29 U.S.C.A. §§ 201-219, and the New Jersey Wage and Hour Law (NJWHL), N.J.S.A. 34:11-4.1 to -67, plaintiffs appeal from the October 9, 2007 Law Division order denying their motion for class certification pursuant to Rule 4:32-1 for the NJWHL claim; the November 27, 2007, order denying their motion for reconsideration; and the May 9, 2008 order denying without prejudice the motion of plaintiff Virginia Ortiz (Ortiz) for an award of attorneys' fees and costs. We dismiss the appeal of the May 9, 2008 order as moot, and we affirm in all other respects.
Plaintiffs are immigrant workers who were employed by defendants on an hourly basis in such positions as waiters and waitresses, busboys, cooks, bakers, kitchen workers, cleaning staff and delivery persons. They claimed that defendants paid them less than minimum wage for the hours they worked. One of the plaintiffs reported defendants to the New Jersey Department of Labor (DOL), whose Division of Wage and Hour Compliance subsequently determined that defendants had violated the NJWHL.
Plaintiffs filed their initial complaint in August 2004, individually and as representatives of other employees, alleging violations of the FLSA and NJWHL, and tortious and fraudulent conversion of their and the other employees' salaries. (Pa1-9)
In an amended complaint, plaintiffs added claims for defendants' violation of N.J.S.A. 2C:20-20; the New Jersey Racketeer Influenced and Corrupt Organizations Act, N.J.S.A. 2C:41-1 to -6.2; 18 U.S.C.A. § 1589 and § 1590; and intentional and negligent infliction of emotional distress. Plaintiffs claimed, in part, that defendants failed to (1) pay prevailing minimum wages; (2) pay time and one-half of the regular hourly wages for hours worked in excess of forty per week; (3) maintain records of the amount of hours worked; (4) maintain records of the amount of wages paid; (5) accurately report the amount of wages paid; and (6) establish a tip pool arrangement within the meaning of FLSA and the NJWHL. Plaintiffs also alleged that defendants repeatedly deducted monies from salaries for reasons not authorized by N.J.S.A. 34:11-4.1; filed false reports of wages with the Internal Revenue Service, New Jersey Department of Treasury and the DOL; engaged in human trafficking; and threatened and intimidated plaintiffs and other employees. Plaintiffs sought damages for unpaid minimum wages and one and one-half times their regular hourly wage for each hour of work over 40 hours less any amounts actually paid and for improper deductions from their salaries, compensatory damages for pain, humiliation and emotional and economic distress, punitive and treble damages, pre-judgment interest, and attorneys' fees and costs.
On September 4, 2007, plaintiffs filed a motion pursuant to Rule 4:32-1(b)(3) for class certification as to the NJWHL claim. On October 9, 2007, the trial judge entered an order denying class certification pursuant to that rule but certifying the action as a FLSA collective action. The judge noted that the court could not consider both a FLSA collective action and a state class action under Rule 4:32-1. Ultimately, however, the judge denied the motion for lack of commonality and predominance of individual issues, finding as follows:
First of all, the main, important reason is that the rule we're dealing with is [Rule] 4:32-1, [which] as I said requires a twofold analysis with respect to the class action. First, let's start with [Rule] 4:32-1, subparagraph (b), subparagraph (1), et cetera. I am dealing with wage earners. I am dealing with wage earners however within the class that may be separately treated. For example, as I understand it, some may be cooks, people who deal with cleaning, chefs, things of that nature that are based on an hourly basis, and they are treated differently by way of compensation than waiters and waitresses under the appropriate statutes. So the class that we are dealing with is all employees. It's too encompassing, and so those people who represent, purport to represent everybody factually we cannot make that determination in a class action suit. So I think initially that there is no common[ality] within all of the individual members of the purported class.
The judge also concluded that because the complaint was originally filed on August 9, 2004, and a trial had been previously scheduled, it was "too late" to certify the class in October 2007. The judge further concluded that certifying the class would require a re-opening of discovery as to the amount of each plaintiff's damages.
Plaintiffs filed a motion for reconsideration. In a written opinion rendered November 27, 2007, the judge concluded that plaintiffs violated Rule 4:32-2(a) by their delay in bringing the motion three years after the filing of the initial complaint and after the discovery end date and a scheduled trial date. The judge also concluded that the questions of law or facts common to the members of the class did not predominate over questions affecting only individual members. R. 4:32-1(b)(3). He found that (1) although the class would consist of persons who were hourly wage earners, some of the plaintiffs were waiters and waitresses who are treated differently on the hourly wage status because of the availability of tips; (2) the allegation of defendants' failure to establish a tip pool arrangement applied only to those individuals considered "wait staff;" (3) the allegations of conversion were unique to an individual and not the general class; (4) the violation of N.J.S.A. 2C:20-20 predominately involved claims by individuals; and (5) the emotional distress claims were all individual claims not common to the members of the proposed class. The judge entered an order on November 27, 2009 denying the motion.
In the interim, on December 31, 2007, Ortiz accepted defendants' offer of judgment in the amount of $6,500. She filed a motion for entry of judgment in that amount and for attorneys' fees and costs, which the judge denied without prejudice. We denied Ortiz's motion for leave to appeal. Subsequently, the judge entered judgment in Ortiz's favor for $6,500 nunc pro tunc to March 28, 2008.
On October 9, 2008, the judge entered a default judgment against defendants. On December 4, 2008, the judge entered judgment in favor of the remaining plaintiffs in amounts ranging from $8,915.36 to $76,670.76, plus attorneys' fees of $753,807.60 and costs of $35,664.30.
On appeal, appellants contend that in denying their motion for class certification pursuant to Rule 4:32-1, the trial judge erred (1) in holding that he lacked jurisdiction over conjoined FLSA and NJWHL claims; (2) in finding that plaintiffs failed to meet the commonality requirement of Rule 4:32-1(a)(2) because the proposed class includes both tipped and non-tipped hourly employees; (3) in finding that individual issues predominate over issues common to the class; and (4) in finding that it was too late to grant class certification. Plaintiffs also contend that the judge erred by refusing to award attorneys' fees and costs to Ortiz when she accepted defendants' offer of judgment.
We review a trial court's decision to grant or deny class certification under an abuse of discretion standard. Iliadis v. Wal-Mart Stores, Inc., 387 N.J. Super. 405, 422 (App. Div. 2006), overruled on other grounds, 191 N.J. 88 (2007). "Class certification decisions rest in the sound discretion of the trial court." Muise v. GPU, Inc., 371 N.J. Super. 13, 31 (App. Div. 2004).
We turn first to the question of whether the judge erred in finding that a FLSA action cannot coexist with a state class action. In reaching his decision, the judge relied on two unpublished federal district court opinions in which the plaintiffs alleged both FLSA and state claims, Herring v. Hewitt Associates, Inc., Civ. No. 06-267 (GEB), 2006 U.S. Dist. LEXIS 56189, at *5 (D.N.J. August 11, 2006); Moeck v. Gray Supply Corp., No. 03-1950 (WGB), 2006 U.S. Dist. LEXIS 511, at *15-*16 (D.N.J. January 5, 2006).*fn1 Both decisions found FLSA actions incompatible with class actions under state law, because FLSA collective actions are governed by 29 U.S.C.A. § 216(b), which requires plaintiffs to "opt-in" to the action, whereas Rule 23, the federal version of Rule 4:32-1, requires that plaintiffs "opt-out" if they do not wish to participate in the action. Herring, supra, 2006 U.S. Dist. LEXIS 56189, at *5; Moeck, supra, 2006 U.S. Dist. LEXIS 511 at 815-016.
However, in DeAsencio v. Tyson Foods, Inc., 342 F. 3d 301, 311-12 (3d Cir. 2003), the Third Circuit Court of Appeals held that the question of whether a federal court, under its supplemental jurisdiction, can simultaneously consider an "optin" FLSA collective action and an "opt-out" state class action is not just a matter of similarity or numbers. Rather, "a court must examine the scope of the state and federal issues, the terms of proof required by each type of claim, the comprehensiveness of the remedies, and the ability to dismiss the state claims without prejudice to determine whether the state claim constitutes the real body of the case." Id. at 312.
Because plaintiffs here brought this action in state court, the judge was not required to perform the extensive supplemental jurisdiction analysis under DeAsencio. For the same reason, the judge was not precluded by supplemental jurisdiction from considering a simultaneous FLSA collective and a state class action. Accordingly, it was error not to certify the class for this reason.
Nonetheless, we find this constitutes harmless error. The basis for the FLSA collective action is found in 29 U.S.C.A. § 216(b), which states that an employee who brings a FLSA claim for overtime compensation violations may bring the claim on behalf of "other employees similarly situated." Because the FLSA does not define the term "similarly situated," the federal district courts use a two-step analysis in determining whether to certify an FLSA collective action. Morisky v. Pub. Serv. Elec. & Gas Co., 111 F. Supp. 2d 493, 497 (D.N.J. 2000).
The first step occurs at an early stage in the proceedings when the court determines whether notice should be provided to other potential plaintiffs, and utilizes a lenient standard that often leads to conditional certification. Ibid. In order to satisfy this step, the courts "have required 'nothing more than substantial allegations that the putative class members were together the victims of a single decision, policy, or plan infected by discrimination.'" Ibid. (quoting Brooks v. Bellsouth Telecomms., Inc., 164 F.R.D. 561, 568 (N.D. Ala. 1995)). The second step occurs after discovery and before trial. Ibid. At that point, the court reexamines the "similarly situated" question in light of the accumulated evidence and may decide to certify the class prior to trial. Ibid.
The "similarly situated" requirement for a FLSA collective action is broader than the requirements of a state class action. Thus, given the fact that the judge in this case allowed both the FLSA and NJWHA claims to proceed, his decision to deny certification of the state class action constituted harmless error. Those employees who received notice of the FLSA claim could then decide to also individually assert an NJWHL claim, thus providing them the opportunity to prosecute both claims.
We also find no error in the judge's conclusion that plaintiffs failed to satisfy the requirements of Rule 4:32-1(a) and (b).
Class actions were created as a matter of equity so that courts could hear cases where joinder in accordance with the standard procedural rules would not be possible. Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 103 (2007). In basic terms, it enables courts to "authorize 'a representative with typical claims to sue on behalf of, and stand in judgment for,' a group of similarly-situated litigants." Id. (quoting Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 1.1 at 2 (4th ed. 2002)). In deciding whether or not to certify a class, courts "'accord plaintiffs every favorable view' of the complaint and record." Iliadis, supra, 191 N.J. at 96 (quoting Riley v. New Rapids Carpet Ctr., 61 N.J. 218, 223 (1972)).
A class should be certified "unless it is clearly infeasible." Riley, supra, 61 N.J. at 225. This is due, in part, to the fact that class actions serve to advance practical purposes, such as "judicial economy, cost-effectiveness, convenience, consistent treatment of class members, protection of defendants from inconsistent obligations, and allocation of litigation costs among numerous, similarly-situated litigants." Iliadis, supra, 191 N.J. at 104. Class actions can also be a method of "equaliz[ing] adversaries," as in situations where the individual claims are too small to warrant litigation. Ibid.
The prerequisites to class certification include:
(1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
If the prerequisites of Rule 4:32-1(a) are met, a class action may be maintained if the following requirements are also met:
(1) the prosecution of separate actions by or against individual members of the class would create a risk either of:
(A) inconsistent of varying adjudications with respect to individual members of the class that would establish incompatible standards of conduct for the party opposing the class, or
(B) adjudication with respect to individual members of the class that would as a practical matter be dispositive of the interests of the other members not parties to the adjudication or substantially impair or impede their ability to protect their interests; or
(2) the party opposing the class had acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or
(3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The factors pertinent to the findings include:
(A) the interest of members of the class in individually controlling the prosecution or defense of separate actions;
(B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class;
(C) the desirability or undesirability in concentrating the litigation of the claims in the particular forum; and
(D) the difficulties likely to be encountered in the management of a class action.
Applying these rules here, plaintiffs first had to demonstrate that the proposed class was "so numerous that joinder of all members is impracticable." R. 4:32-1(a)(1). They have failed to do so. Although they contend that a class of hourly employees exists, they admit that the majority of those potential class members are likely unaware of a violation of their rights, and cannot be located. See Iliadis, supra, 191 N.J. at 95 (proposed class consisted of approximately 72,000 employees); Delgozzo v. William Kenny, Jr., 266 N.J. Super. 169, 184 (App. Div. 1993) (potential class includes about 35,000 purchasers); In re Cadillac V8-6-4 Class Action, 93 N.J. 412, 425 (1983) ("class of approximately 7,500 plaintiffs is sufficiently numerous so that joinder is not a satisfactory alternative").
Even if plaintiffs had satisfied the numerosity requirement, they have not established there are "questions of law or fact common to the class." R. 4:32-1(a)(2). Although plaintiffs' FLSA and NJWHL overtime compensation claims were common to all members of the class, their tortious conversion and N.J.S.A. 2C:20-20 and emotional distress claims were, as the judge correctly found, distinctly individual in nature and not common to the members of the proposed class.
Plaintiffs also failed to establish that "the claims or defenses of the representative parties are typical of the claims of the class[,]" or that "the representative parties will fairly and adequately protect the interests of the class." R. 4:32-1(a)(3) and (4). Although plaintiffs intended for the class to include all hourly employees, a portion of those employees worked for tips, a fact the judge found would play a significant role in analyzing each class members' FLSA and NJWHL claims. Also, among the non-tipped employees, additional variations in job type existed which could require significant individual attention with respect to claims and defenses. The same is true of some defenses defendants raised with respect to the FLSA and NJWHL claims.
Plaintiffs also failed to satisfy the additional requirement that "questions of law or fact common to the members of the class predominate over any questions affecting only individual members." R. 4:32-1(b)(3). "A conclusion on the issue of predominance requires an evaluation of the legal issues and the proof needed to establish them. . . . [T]he goal is to save time and money for the parties and the public and to promote consistent decisions for people with similar claims." In re Cadillac, supra, 93 N.J. at 430. In the event "a 'common nucleus of operative facts' is present, predominance may be found. . . . [T]he basic question is whether the potential class, including absent members, seeks 'to remedy a common legal grievance.'" Id. at 431 (citations omitted).
In Iliadis, supra, the plaintiffs, former hourly Wal-Mart employees, sought to clarify a class of similarly situated former and current employees amounting to approximately 72,000 individuals. 191 N.J. at 95. The trial court denied class certification due to manageability, finding "that plaintiffs failed to satisfy the 'critical question' whether their allegations met the predominance and superiority requirements of Rule 4:32-1(b)(3)." Id. at 100. The court concluded that the plaintiffs' common questions did not predominate over individual issues based on employee variations. Ibid. Based on the same concerns, we affirmed. Id. at 101.
Our Supreme Court noted that, in deciding whether questions of law or fact common to the class predominate over those affecting only individuals, "a certifying court must undertake a rigorous analysis to determine if [Rule 4:32-1(b)(3)] requirements have been satisfied." Id. at 106-07. This requires courts to examine the claims and defenses, as well as the facts and applicable law. Id. at 107. "Accordingly, an examination of the predominance and superiority requirements . . . must include consideration of the . . . factors [in R. 4:32-1(b)(3)(A) to (D)]." Ibid.
With respect to commonality, courts must consider "the number and, more important, the significance of common questions[.]" Id. at 108. For predominance, courts must then "decide whether the 'benefit from the determination in a class action [of common questions] outweighs the problems of individual actions'" and whether "a 'common nucleus of operative facts'" exists. Ibid. (quoting In re Cadillac, supra, 93 N.J. at 430-31).
Moreover, "[p]redominance does not require that all issues be identical among class members or that each class member be affected in precisely the same manner." Id. at 108-09. In fact, the presence of individual issues does not preclude certification of a class, even where those issues will not necessarily be resolved through litigation of the common issues. Id. at 108. Looking to In re Cadillac, supra, 93 N.J. at 438, the Court clarified that class certification merely requires that the common issues be litigated prior to litigation of the individual ones. Iliadis, supra, 191 N.J. at 113. Thus, the Court reversed our affirmance of the trial court's denial of class certification because it determined that common questions predominated. Ibid.
Here, the judge denied certification concluding in part that individual issues predominated over the common ones based on the different groups of hourly employees claiming overtime compensation violations, each of whom would require separate analysis, as well as the additional claims for tortious conversion, N.J.S.A. 2C:20-20 violations, and emotional distress, which did not involve common questions of fact. We agree with this conclusion.
Moreover, by the time plaintiff had brought forward the class certification issue, more than three years had passed since the filing of the original complaint. Rule 4:32-2(a) requires the court to determine whether to certify the class "at an early practicable time." Given that it was possible that other hourly employees existed who likely suffered the same injustices as the original plaintiffs, the three-year delay was unnecessary, and the judge properly exercised his discretion in concluding that the delay precluded certification of the class.
Finally, the court's decision to certify the FLSA collective action remedied any potential prejudice caused to plaintiffs by denial of class action certification on the NJWHL claim. In light of that fact and the ultimate judgment that was entered in plaintiffs' favor, reversal on this issue is not warranted and would have no remedial effect.
We decline plaintiffs' invitation to review the judge's denial of attorneys' fees to Ortiz, as this issue is moot because the judge awarded attorney's fees of $753,807.60 and costs of $35,664.30 on December 4, 2008. Although out of a "reluctance to render legal decisions in the abstract and [a] desire to conserve judicial resources," courts generally will not decide moot issues, such matters will be considered "where they are of substantial importance and are capable of repetition yet evade review." In re J.I.S. Indus. Serv. Co. Landfill, 110 N.J. 101, 104 (1988). The award of attorney's fees is certainly an important issue and the possibility exists that a similar circumstance may arise in the future; however, the issue is not one of such significant public importance as to warrant review despite mootness.
The appeal from the May 9, 2008 order is dismissed as moot; affirmed in all other respects.