{"id":1695,"date":"2024-08-20T08:10:49","date_gmt":"2024-08-20T12:10:49","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=1695"},"modified":"2024-08-20T08:10:49","modified_gmt":"2024-08-20T12:10:49","slug":"the-seventh-circuit-finds-there-is-no-loophole-to-sue-a-texas-company-in-a-nationwide-collective-action-in-a-wisconsin-federal-court","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2024\/08\/20\/the-seventh-circuit-finds-there-is-no-loophole-to-sue-a-texas-company-in-a-nationwide-collective-action-in-a-wisconsin-federal-court\/","title":{"rendered":"The Seventh Circuit Finds There Is No \u201cLoophole\u201d To Sue A Texas Company In A Nationwide Collective Action In A Wisconsin Federal Court"},"content":{"rendered":"

\"\"<\/a>By Gerald L. Maatman, Jr., Gregory Tsonis, and Ryan T. Garippo<\/strong><\/p>\n

Duane Morris Takeaways:<\/em><\/strong>\u00a0 On August 16, 2024, in Luna Vanegas, et al. v. Signet Builders, Inc., No. 23-2964, 2024 WL 3841024 (7th Cir. Aug. 16, 2024), the U.S. Court of Appeals for the Seventh Circuit found that, in a Fair Labor Standards Act (\u201cFLSA\u201d) collective action, a district court must have personal jurisdiction over a defendant for every single one of the would-be plaintiffs\u2019 claims.\u00a0 Those plaintiffs for whom personal jurisdiction does not exist must proceed in a forum where the corporate defendant is essentially at home.\u00a0 This decision<\/a> is a substantial win for employers and helps prevent them from being dragged into nationwide lawsuits far away from where they do most of their business.<\/em><\/p>\n

Case Background<\/strong><\/p>\n

Signet Builders, Inc. (\u201cSignet\u201d) is both incorporated and headquartered in Texas, but its business spans across the nation.\u00a0 As part of its business, Signet employs a small subsect of its employees in Wisconsin who are primarily tasked with building livestock houses.\u00a0 Plaintiff Jose Ageo Luna Vanegas (\u201cLuna Vanegas\u201d) was one of those workers.\u00a0 In 2021, he sued Signet in the U.S. District Court for the Western District of Wisconsin claiming that he was not paid overtime, in violation of the FLSA.\u00a0 Luna Vanegas, however, did not bring his claims on an individual-plaintiff basis, but rather sought to litigate his FLSA claims on a nationwide collective action basis in an effort to magnify the scope of the litigation.<\/p>\n

After Luna Vanegas filed his lawsuit, a complicated legal battle unfolded.\u00a0 Signet filed a motion to dismiss and argued that \u201cLuna Vanegas\u2019s work fell within a provision of the FLSA that exempts agricultural workers from its overtime requirements.\u201d\u00a0 Luna Vanegas v. Signet Builders, Inc.<\/em>, 554 F. Supp. 3d 987, 989-90 (W.D. Wis. 2021) (citing 29 U.S.C. \u00a7 213(b)(12)).\u00a0 The district court held that Luna Vanegas \u201cperformed his work on farms, and the work he performed \u2014 constructing livestock containment structures \u2014 was incidental to farming,\u201d and therefore dismissed his case.\u00a0 Id. <\/em>at 993.<\/p>\n

Luna Vanegas appealed that dismissal to the Seventh Circuit. It reversed the district court \u2014 holding that dismissal was premature.\u00a0 Luna Vanegas v. Signet Builders, Inc.<\/em>, 46 F. 4th 636, 645 (7th Cir. 2022).\u00a0 The Seventh Circuit ruled that \u00a7 213(b)(12) is an affirmative defense, and Luna Vanegas\u2019 complaint did not contain enough facts about the agricultural nature of the work to warrant dismissal.\u00a0 Signet then filed a petition for writ of certiorari and asked the U.S. Supreme Court to decide the issue, which the Supreme Court declined to do.\u00a0 Signet Builders, Inc. v. Luna Vanegas<\/em>, 144 S. Ct. 71 (2023).<\/p>\n

With the case back at the district court, Luna Vanegas filed a motion for conditional certification, a common strategic tactic in FLSA collective actions, and sought to send notice of the lawsuit to a nationwide group of Signet\u2019s employees.\u00a0 Luna Vanegas v. Signet Builders, Inc.<\/em>, No. 21-CV-00054, 2023 WL 5663259, at *1 (W.D. Wis. Sept. 1, 2023).\u00a0 Even though Signet was incorporated and headquartered in Texas, the district court held that it was fair for this notice to go out to employees across the nation, because otherwise the ruling would have \u201cthe practical effect of forcing plaintiffs to file any multi-state FLSA collective action in the defendant employer’s home forum.\u201d\u00a0 Id. <\/em>at *3.\u00a0 Signet then filed a motion for interlocutory appeal, bringing the case back to the Seventh Circuit for a second time.\u00a0 Id.<\/em> at *4.\u00a0 The district court granted that request.<\/p>\n

The Seventh Circuit\u2019s Opinion<\/strong><\/p>\n

On appeal, the Seventh Circuit reversed the district court for the second time, but this time on personal jurisdiction grounds.<\/p>\n

The Seventh Circuit explained that generally a plaintiff can only sue a corporate defendant in three places.\u00a0 First, a corporation can be sued in its state of incorporation.\u00a0 Second, a corporation can be sued in the state where its headquarters is located.\u00a0 And third, a corporation can be sued in any state where the issues connected with that particular case<\/em><\/strong> occurred.\u00a0 In this case, it was undisputed that Signet was incorporated and headquartered in Texas.\u00a0 It was also undisputed that only <\/em><\/strong>Luna Vanegas\u2019 claims (and not the claims of other employees) arose out of Signet\u2019s conduct in Wisconsin.\u00a0 Therefore, the question was whether Signet\u2019s conduct in Wisconsin was sufficient to justify a nationwide case.\u00a0 The Seventh Circuit held that it was not.<\/p>\n

Relying heavily on a recent U.S. Supreme Court decision in Bristol-Myers Squibb Co. v. Superior Ct. of California, San Francisco Cnty.<\/em>, 582 U.S. 255 (2017), the Seventh Circuit held that Signet must be subject to personal jurisdiction in Wisconsin \u2014 for each and every one of the would-be opt-in plaintiffs\u2019 claims \u2014 for the case to go forward on a nationwide basis.\u00a0 This rule differs from the standard in Rule 23 class actions because there, a representative plaintiff can maintain a lawsuit in a foreign jurisdiction as long as the court has jurisdiction over the named plaintiff.<\/p>\n

The Seventh Circuit, however, reasoned that because a collective action plaintiff is not a party until they \u201copt in\u201d to the litigation, FLSA collective actions are truly just \u201cagglomerations of individual claims,\u201d as opposed to one singular lawsuit.\u00a0 Luna Vanegas, <\/em>2024 WL 3841024, at *4.\u00a0 Further, unlike Rule 23 class actions, each party is entitled to proceed individually and \u201cthe statute of limitations on opt-in plaintiffs’ claims enjoys tolling only after the plaintiff files her consent, which goes to show the focus on a plaintiff’s own management of her claim.\u201d\u00a0 Id. <\/em>\u00a0Consequently, the Seventh Circuit set a different standard to find personal jurisdiction in FLSA collective actions than the standard for Rule 23 class actions.<\/p>\n

Additionally, the Seventh Circuit dispensed with a highly technical argument regarding Federal Rules of Civil Procedure 4 and 5 \u2014 holding that it did not save Luna Vanegas\u2019 nationwide lawsuit.\u00a0 Luna Vanegas argued that once personal jurisdiction was established over his claims against Signet in Wisconsin, and service was validly executed pursuant to Rule 4, then he was free to add parties via service under Rule 5.\u00a0 However, the Seventh Circuit succinctly and unequivocally<\/em><\/strong> rejected that argument and held: \u201cThat is not how it works.\u201d <\/em>\u00a0Id. <\/em>at *7 (emphasis added).\u00a0 The Seventh Circuit explained that the Rule 5 workaround only applies if the court already has personal jurisdiction over the defendant as to the opt-in plaintiffs\u2019 claims.\u00a0 Otherwise, a new summons needs to be brought in a venue where the opt-in plaintiff can establish personal jurisdiction over the company.<\/p>\n

Implications For Employers<\/strong><\/p>\n

Although a positive development for employers, this opinion is not a \u201cnail in the coffin\u201d for nationwide FLSA collective actions.\u00a0 Indeed, the Seventh Circuit explicitly noted that \u201c[a] nationwide collective of Signet’s workers could proceed in Texas, which enjoys general jurisdiction over Signet, with no loss of efficiency.\u201d\u00a0 Id. <\/em>at *9.\u00a0 Rather, this opinion simply states that if an employee is going to sue their employer for millions of dollars of potential liability and while asserting a nationwide collective action, they must do so in their employers\u2019 home forum.<\/p>\n

Corporate counsel, however, should not expect the fight to stop here.\u00a0 The Seventh Circuit\u2019s opinion is consistent with recent holdings by the Courts of Appeal in the Third, Sixth, and Eight Circuits, each imposing the same personal jurisdiction requirement.\u00a0 Canaday v. Anthem Cos<\/em>., 9 F.4th 392 (6th Cir. 2021); Fischer v. Fed. Express Corp<\/em>., 42 F.4th 366 (3d Cir. 2022); Vallone v. CJS Sols. Grp., LLC<\/em>, 9 F.4th 861 (8th Cir. 2021).\u00a0 The issue is not entirely settled, however, as the First Circuit reached the opposite conclusion.\u00a0 Waters v. Day & Zimmermann NPS, Inc.,<\/em> 23 F.4th 84, 94 (1st Cir. 2022).\u00a0 Accordingly, the pending circuit split signals that this issue is ripe for consideration by the U.S. Supreme Court.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Gerald L. Maatman, Jr., Gregory Tsonis, and Ryan T. Garippo Duane Morris Takeaways:\u00a0 On August 16, 2024, in Luna Vanegas, et al. v. Signet Builders, Inc., No. 23-2964, 2024 WL 3841024 (7th Cir. Aug. 16, 2024), the U.S. Court of Appeals for the Seventh Circuit found that, in a Fair Labor Standards Act (\u201cFLSA\u201d) … <\/p>\n

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