Seventh Circuit Holds That FLSA and Rule 23 Certification Standards Are the Same and Affirms Denial of Certification Based on Lack of Trial Plan

A recent opinion by the Seventh Circuit holds that the standard for certifying a collective action under the FLSA is the same as the standard applied to a class action under Rule 23. In Espenscheid v. DirectSat USA, LLC, No. 12-1943 (7th Cir. Feb. 4, 2013), the court considered decertification by a Western District of Wisconsin District Court of more than 2,000 satellite technicians in an action alleging technicians did not receive overtime and were not compensated for certain hours. In analyzing the standard to apply in evaluating the decertification decision, the court contrasted the opt-in procedure of FLSA collective actions with the opt-out procedure of Rule 23 actions, as well as noted that the FLSA lacks “the kind of detailed procedural provisions found in Rule 23” that set forth the standard for certification. The Court further described the differences between the FLSA and Rule 23, noting that:

It is true that one function of the procedural provisions in Rule 23 is to protect the rights of unnamed class members, who need such protection because unless they are permitted to and do opt out of the class they will be bound by the judgment or settlement. In contrast, collective actions bind only opt-ins.

Despite these differences, however, the Seventh Circuit found that, “there isn’t a good reason to have different standards for certification of the two different types of action.” In so holding the Court stated that, “the provisions of Rule 23 are intended to promote efficiency . . . and in that regard are as relevant to collective actions as to class actions.” Therefore the Court found that the FLSA and Rule 23 certification analysis should be merged into one and treated “as if it were a single class action.”

Applying a single standard to the class, the Seventh Circuit affirmed the lower court’s decertification order finding that the trial plan submitted by the plaintiffs was “unfeasible.” Specifically, noting that the class members did not work uniform schedules, the Court emphasized that “to determine damages would . . . require 2341 separate evidentiary hearings, which might swamp the Western District of Wisconsin with its two district judges.” The Court rejected plaintiffs’ proposal to get around this problem by presenting testimony of a representative group of 42 class members. The Court first voiced its skepticism that such a sample could ever be representative of the entire class. But, even if such a representative sample could be found, the Court stated that, “this would not enable the damages of any members of the class other than the 42 to be calculated.” To hold otherwise, the Court stated, could result in a “windfall” of damages to class members whose overtime hours were less than the hours worked by the representative sample. Therefore, the Court held that “an inference about the work time of thousands of workers” can’t be supported by “evidence of the experience of a small, unrepresentative sample of them.” Accordingly, because class counsel could not propose a feasible litigation plan that addressed these issues, the Seventh Circuit affirmed the lower court’s holding to decertify the class.