Espenscheid v. Directsat USA, LLC

• Decision Date: 04 February 2013
• Docket Number: No. 12–1943.,12–1943.
• Citation: 705 F.3d 770
• Parties: Aaron L. ESPENSCHEID, et al., Plaintiffs–Appellants, v. DIRECTSAT USA, LLC, et al., Defendants–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

705 F.3d 770

Aaron L. ESPENSCHEID, et al., Plaintiffs–Appellants,

v.DIRECTSAT USA, LLC, et al., Defendants–Appellees.

No. 12–1943.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 7, 2012.

Decided Feb. 4, 2013.

Timothy D. Edwards, Attorney, Axley Brynelson, Robert J. Gingras, Attorney, Gingras, Cates & Luebke, Michael J. Modl (argued), Attorney, Axley Brynelson, Heath Paul Straka, Michael J. Luebke, Gingras, Cates & Luebke, Attorneys, Madison, WI, for Plaintiffs–Appelants.

Colin D. Dougherty, Attorney, Fox Rothschild, Blue Bell, PA, Miguel A. Estrada (argued), Attorney, Gibson, Dunn & Crutcher LLP, Washington, for Defendants–Appellees.

Before BAUER, POSNER, and WILLIAMS, Circuit Judges.

POSNER, Circuit Judge.

The three appellants are the named plaintiffs in a class action suit (actually a set of such suits) to enforce the Fair Labor Standards Act and parallel state laws governing minimum wages and overtime. Only the supplemental state law claims were brought as class actions, all under Rule 23(b)(3) of the Federal Rules of Civil Procedure; the claim under the FLSA is a “collective action” governed by section 16(b) of that Act, 29 U.S.C. § 216(b), which allows an employee to bring suit on behalf of all “similarly situated” employees. The relief sought, both under the collective action and the class actions, is damages.

The only difference of moment between the two types of action is that in a collective action the members of the class (of the “collective”) must opt into the suit to be bound by the judgment or settlement in it, while in a class action governed by Rule 23(b)(3) (a class action seeking damages) they must opt out not to be bound. That difference can have consequences, the obvious one being the need to protect the right of Rule 23(b)(3) class members to opt out. But none of the consequences bears on this case. Indeed, despite the difference between a collective action and a class action and the absence from the collective-action section of the Fair Labor Standards Act of the kind of detailed procedural provisions found in Rule 23, see, e.g., O'Brien v. Ed Donnelly Enterprises, Inc., 575 F.3d 567, 584 (6th Cir.2009), there isn't a good reason to have different standards for the certification of the two different types of action, and the case law has largely merged the standards, though with some terminological differences. See Alvarez v. City of Chicago, 605 F.3d 445, 449 (7th Cir.2010); Thiessen v. General Electric Capital Corp., 267 F.3d 1095, 1105 (10th Cir.2001); Shushan v. University of Colorado, 132 F.R.D. 263, 265–68 (D.Colo.1990); but see O'Brien v. Ed Donnelly Enterprises, Inc., supra, 575 F.3d at 584–86;Grayson v. K Mart Corp., 79 F.3d 1086, 1096 (11th Cir.1996); see generally 7B Charles Alan Wright, Arthur R. Miller & Mary K. Kane, Federal Practice and Procedure § 1807, pp. 477–85 (3d ed.2005). Simplification is desirable in law, especially in the present context, because joining a collective action and a class action or actions in one suit, as in this case, is both common and, we have held, permissible. Ervin v. OS Restaurant Services, Inc., 632 F.3d 971, 974 (7th Cir.2011).

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. But the provisions of Rule 23 are intended to promote efficiency as well, American Pipe & Construction Co. v. Utah, 414 U.S. 538, 555–56, 94 S.Ct. 756, 38 L.Ed.2d 713 (1974); Committee Note to Subdivision (b)(3) of 1966 Amendment to Rule 23, and in that regard are as relevant to collective actions as to class actions. And so we can, with no distortion of our analysis, treat the entire set of suits before us as if it were a single class action.

The district judge certified several subclasses but later decertified all of them, leaving the case to proceed as an individual lawsuit by the three plaintiffs—who then settled with the defendants, and so the suit was dismissed. But the settlement reserved the plaintiffs' right to appeal the decertification, and they have appealed, and in a ruling last August, reported at 688 F.3d 872, we rejected the defendants' motion to dismiss the appeal. The defendants had argued that the settling plaintiffs had suffered no injury as a result of the denial of certification and so the federal judiciary had lost jurisdiction of the case. We rejected their argument. The plaintiffs had sought an incentive award (also known as an “enhancement fee”) in the district court for their services as class representatives, and the award was contingent on certification of the class. We held that the prospect of the award if the class was certified gave them a tangible financial stake in getting the denial of class certification revoked, and so entitled them to appeal that denial. We now decide the appeal.

The class (remember that we're treating the FLSA “collective” and the Rule 23 classes as a single class) consists of 2341 technicians employed by defendant DirectSat to install and repair home satellite dishes (we can ignore the other defendant, DirectSat's parent). These technicians are more like independent contractors than employees; they spend the work day installing and repairing satellite equipment at customers' homes and are paid on a piece-rate basis—so many dollars per job—rather than being paid a fixed hourly wage. Nevertheless they are within the Act's broad definition of (covered) employees. See 29 U.S.C. § 203(e), (g); United States v. Rosenwasser, 323 U.S. 360, 361–64, 65 S.Ct. 295, 89 L.Ed. 301 (1945); Secretary of Labor v. Lauritzen, 835 F.2d 1529, 1536–38 (7th Cir.1987); Brock v. Superior Care, Inc., 840 F.2d 1054, 1060 (2d Cir.1988). They therefore are entitled to be paid the federal minimum wage for every hour they work, and 1.5 times their regular hourly wage for every hour they work in excess of 40 hours a week, although the parties disagree over how to calculate that regular hourly wage. See 29 C.F.R. § 778.318.

The suit alleges that management compelled the technicians to do work for which they were not compensated at all, and also to work more than 40 hours a week without being paid overtime for the additional hours. For purposes of deciding the appeal we assume (of course without deciding) that at a trial the plaintiffs could prove that DirectSat's policies violated the Fair Labor Standards Act in these ways. Nevertheless the district judge decertified the class (more precisely, the subclasses into which she had divided the class) when it became apparent that the trial plan submitted by the plaintiffs was infeasible. The plaintiffs then settled. So unless we reverse the decertification order, the case is dead.

There would have been no problem had the plaintiffs been seeking just injunctive or declaratory relief, because then the only issue would have been whether DirectSat had acted unlawfully. But the plaintiffs didn't seek either form of relief (their lawyer says that DirectSat has desisted from its principal violation, though that would not be a defense to a declaratory or injunctive action, United States v. W.T. Grant Co., 345 U.S. 629, 632–33, 73 S.Ct. 894, 97 L.Ed. 1303 (1953); Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 189–90, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000))—only damages. And to determine damages would, it turns out, require 2341 separate evidentiary hearings, which might swamp the Western District of Wisconsin with its two district judges. For it's not as if each technician worked from 8 a.m. to 5 p.m. and was forbidden to take a lunch break and so worked a 45–hour week (unless he missed one or more days because of illness or some other reason) but was paid no overtime. Then each technician's damages could be computed effortlessly, mechanically, from the number of days he worked each week and his hourly wage. And when “it appear[s] that the calculation of monetary relief will be mechanical, formulaic, a task not for a trier of fact but for a computer program, so that there is no need for notice ..., the district court can award that relief without terminating the class action and leaving the class members to their own devices.” Johnson v. Meriter Health Services Employee Retirement Plan, 702 F.3d 364, 372 (7th Cir.2012). Nothing like that is possible here.

The suit charges that DirectSat concealed its violations by forbidding the technicians to record time spent on certain tasks, such as calling customers, filling out paperwork, and picking up tools from one of the company's warehouses. Remember that the technicians are paid on a piece-rate system, which implies—since workers differ in their effort and efficiency—that some, maybe many, of the technicians may not work more than 40 hours a week and may even work fewer hours; others may work more than 40 hours a week. Variance would also result from different technicians' doing different tasks, since it's contended that the employer told them not to report time spent on some of those tasks, though—further complicating the problem of proof—some of them reported that time anyway.

The plaintiffs proposed to get around the problem of variance by presenting testimony at trial from 42 “representative” members of the class. Class counsel has not explained in his briefs, and was unable to explain to us at the oral argument though pressed repeatedly, how these “representatives” were chosen—whether for example they were volunteers, or perhaps selected by class counsel after extensive interviews and hand picked to magnify the damages sought by the class. There is no suggestion that sampling methods used in statistical analysis were employed to create a random sample of class members to be the witnesses, or more precisely random samples, each one...