By Gerald L. Maatman, Jr. and Emilee N. Crowther
Duane Morris Takeaways: In Moore v. MW Servicing, LLC, No. 20-CV-217 (E.D. La. Aug. 2, 2023), Judge Greg Guidry of the U.S. District Court for the Eastern District of Louisiana granted Defendants Motion to Decertify Plaintiffs’ Collective Action, holding that, pursuant to Swales v. KLLM Transportation Services, L.L.C., 985 F.3d 430 (5th Cir. 2021), Plaintiffs had not met their burden of establishing they were “similarly situated” to the opt-ins during the decertification stage. The decision in Moore evidences the new Fifth Circuit regime in certifying/decertifying collective actions post-Swales, in that it properly places the “similarly situated” burden in Plaintiff’s court at all relevant times. The ruling should be required reading for all businesses defending wage & hour litigation in the states comprising the Fifth Circuit.
Case Background
Defendants MW Servicing, LLC, WBH Servicing, LLC, Bruno, Inc., and Joshua Bruno (“Defendants”) own and operate various properties in Louisiana. Plaintiffs Brittany Moore, Dmitry Feller, Jada Eugene, Christopher Willridge, and five opt-in Plaintiffs (“Plaintiffs”) worked for Defendants as property managers, leasing agents, leasing consultants, accounting managers, executive assistants, janitorial/maintenance workers, and babysitters.
Plaintiffs filed their a collective action (the “Complaint”) against Defendants on January 20, 2020, asserting Defendants failed to pay minimum wage under the Federal Labor Standards Act (“FLSA”), and failed to pay, or untimely paid, Plaintiffs their final checks under the Louisiana Wage Payment Act (“LWPA”).
The Lusardi v. Xerox Corporation Standard
At the time Plaintiffs filed their Complaint, the standard practice in federal courts to certify a collective action and send notice to potential opt-in plaintiffs followed the two-step process outlined in Lusardi v. Xerox Corporation, 116 F.R.D. 351 (D.N.J. 1987).
The first Lusardi step, also known as the “notice stage,” required courts to determine whether the named plaintiffs and potential opt-in plaintiffs were “similarly situated” solely on the basis of the pleadings and affidavits submitted by the parties. Id. at 360-61. Once the named plaintiffs met this lenient threshold, courts often granted conditional certification and notice was sent to the potential opt-ins. Id.
The second Lusardi step, also known as the “decertification stage,” permitted defendants to move to decertify the conditional certification, but shifted the burden of establishing that plaintiffs are not “similarly situated” to defendants. Id.
In Moore, Plaintiffs filed their motion for conditional certification on May 5, 2020. Almost a year later, on March 15, 2021, the Court granted Plaintiffs’ Motion for Conditional Certification.
The Fifth Circuit’s Departure From Lusardi “Notice Stage” In Swales
In Swales v. KLLM Transport Services, L.L.C., 985 F.3d 430, 441 (5th Cir. 2021), the Fifth Circuit rejected Lusardi’s “notice stage” approach. The Fifth Circuit held that the text of the FLSA did not require a certification phase, and courts should instead determine at the outset of the case “what facts and legal considerations are material to determining whether Plaintiff and the proposed class are similarly situated.” (emphasis added).
Importantly, in rejecting Lusardi’s “notice stage” approach, the Fifth Circuit held that the burden of establishing that the plaintiffs and opt-ins are “similarly situated” rests with plaintiffs at all relevant times. Id. at 443, n. 65 (“a plaintiff should not be able to simply dump information on the district court and expect the court to sift through it and make a determination as to similarity”).
On January 5, 2022, Defendants in Moore filed a motion to decertify the collective action. They asserted that Plaintiffs were not “similarly situated,” and the collective action should be decertified.
The Court’s Decision
On August 2, 2023, Judge Guidry granted Defendants motion to decertify on the grounds that Plaintiffs had not met their burden to establish they were “similarly situated” to the opt-ins. Moore, No. 20-217, at 7.
In reaching its decision, the Court acknowledged that while Swales rejected the traditional Lusardi “notice stage,” the Fifth Circuit clarified that the factors considered by courts in Lusardi’s “decertification stage” could “help inform or guide” courts “similarly situated analysis.” Id. at 3 (citing Loy v. Rehab Synergies, L.L.C., 71 F 4th 329, 336-37 (5th Cir. 2023)). Thus, even though Lusardi’s “notice stage” had been employed in this case, the Court elected to impose Swales for the decertification stage and required Plaintiffs to establish that they had met the “similarly situated” requirement of the FLSA. Id.
The court considered three factors, including: “(1) the disparate factual and employment settings of the individual plaintiffs; (2) the various defenses available to defendant which appear to be individual to each plaintiff; [and] (3) fairness and procedural considerations.” Id. at 3 (quoting Thiessen v. Gen. Elec. Capital Corp., 267 F.3d 1095, 1103 (10th Cir. 2001)).
As to the first factor, the Court noted substantial differences existed between the plaintiffs and opt-ins’ method of payment (salary versus hourly), employer (all worked for different entities), job titles, and the asserted wrongful acts of Defendants. Id. at 5-6. As to the second factor, the Court found that too many individualized claims remained in the matter (such as joint employment, good faith and willfulness, common policies, and salary status), which would necessarily require individualized defenses. Id. at 6. As to the final factor, while the Court acknowledged that the plaintiffs and opt-ins did have some overlapping common issues, “other methods of managing [the] litigation to the benefit of judicial efficiency” existed. Id.
Ultimately, the Court found that a single trial of all plaintiffs’ claims would “result in confusion both for the jury and management of the trial itself,” and granted Defendants’ motion to decertify the collective action. Id. at 7.
Implications for Employers
In the Fifth Circuit pre-Swales, plaintiffs’ counsel could readily establish that plaintiffs and opt-ins were “similarly situated” during the notice stage by presenting minimal evidence. After plaintiffs’ counsel met this low threshold and conditional certification was granted, employers were left with two options: (1) expend significant resources to conduct extensive discovery in pursuit of establishing that plaintiffs and opt-ins were not “similarly situated”; or (2) settle. Thus, until Swales, Plaintiffs’ counsel were able to utilize employers’ looming financial burden to unfairly obtain settlements on the basis of threadbare evidence.
Post-Swales, however, district courts in the Fifth Circuit are required to “rigorously scrutinize the realm of ‘similarly situated’ workers, [at] the outset of the case, not after a lenient, step-one ‘conditional certification.’” Swales, 985 F.3d at 434. By placing the FLSA’s “similarly situated” burden on Plaintiffs, this ensures that collective action complaints can no longer be used as fishing expeditions, and reduces the likelihood that frivolous lawsuits are filed.
Since Swales, the Sixth Circuit in Clark v. A&L Homecare and Training Center, LLC, 68 F.4th 1003, 1009 (6th Cir. 2023), similarly rejected Lusardi’s two-step certification approach, but elected not to adopt Swales “rigorous scrutiny” standard. Instead, the Sixth Circuit held that notice must only be sent to potential plaintiffs if they show “a ‘strong likelihood’ that those employees are similarly situated to the plaintiffs themselves.” Id. at 1011.
While at present only the Fifth and Sixth Circuits have departed from the longstanding Lusardi standard, other circuits may follow suit, and depending on how many circuits “jump ship” from Lusardi, the issue may soon be ripe for judicial review with the U.S. Supreme Court.