Killion v. KeHE Distribs.

• Citation: 885 F.Supp.2d 874
• Decision Date: 03 August 2012
• Docket Number: Case Nos. 3:12 CV 470,3:12 CV 1585.
• Parties: Thomas E. KILLION, et al., Plaintiffs, v. KeHE DISTRIBUTORS, Defendant. Barney Dolan, et al., Plaintiffs, v. KeHE Food Distributors, Inc., Defendant.
• Court: U.S. District Court — Northern District of Ohio

885 F.Supp.2d 874

Thomas E. KILLION, et al., Plaintiffs,

v.KeHE DISTRIBUTORS, Defendant.

Barney Dolan, et al., Plaintiffs,

v.KeHE Food Distributors, Inc., Defendant.

Case Nos. 3:12 CV 470, 3:12 CV 1585.

United States District Court,

N.D. Ohio,

Western Division.

Aug. 3, 2012.

Robert A. Bunda, Rebecca Chase Sechrist, Barbara E. Machin, Barbara E. Machin, Bunda, Stutz & Dewitt, Perrysburg, OH, Kerry L. Morgan, Randall A. Pentiuk, Pentiuk, Couvreur & Kobiljak, Wyandotte, MI, for Plaintiffs.

Mark D. Wagoner, Jr., Nicholas T. Stack, Shumaker, Loop & Kendrick, Toledo, OH, Cardelle B. Spangler, Jonathan E. Rosemeyer, Winston & Strawn, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

JACK ZOUHARY, District Judge.

Introduction

This is a dispute under the Fair Labor Standards Act (“FLSA”) where Plaintiffs allege Defendant KeHE Distributors (“KeHE”), a national distributor of food products to supermarkets and retail chains, denied overtime pay to current and former sales representatives (Killion Doc. 1 at 1–3). Plaintiffs seek to certify a collective action against KeHE (Killion Doc. 38), and filed lawsuits in the Northern District of Ohio and the Eastern District of Michigan (Killion Doc. 1; Dolan Doc. 1). The Eastern District of Michigan case, Dolan v. KeHE Food, No. 4:12 CV 1585, was transferred to this Court and consolidated with Killion v. KeHE Distr., LLC., No. 3:12 CV 470 (Dolan Docs. 26 & 31).

Before this Court can decide whether to certify Plaintiffs' collective action, it must decide two counter motions. First, KeHE moved to dismiss Anthony Basnec as a Plaintiff because he signed a Separation and Release Agreement (“the Agreement”)waiving various rights under the FLSA, including the right to join a collective action against KeHE (Killion Doc. 70). Second, Plaintiffs moved to void the Agreement signed by certain named and potential Plaintiffs (Dolan Doc. 5). Both matters have been fully briefed (Dolan Docs. 15 & 20; Killion Docs. 74 & 79). Because the motions raise identical issues, the parties agreed this Court could address both in a single opinion.

As a federal court sitting in diversity, this Court applies Ohio substantive law. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Ohio law requires this Court to apply “[t]he law of the state chosen by the parties to govern their contractual rights....” Schulke Radio Prods., Ltd. v. Midwestern Broad. Co., 6 Ohio St.3d 436, 438, 453 N.E.2d 683 (1983) (quoting Restatement of Law (Second), Conflict of Laws, Section 187 (1971)). Because the parties chose Michigan law to apply, this Court, to the extent necessary, will use that law to interpret the provisions of the Agreement (Killion Doc. 71–2 at 9).

Background

Plaintiffs previously moved to invalidate the Agreements as to Thomas Killion and Carl Ovall (Killion Docs. 36 & 37), arguing FLSA rights “cannot be abridged by contract or otherwise waived because this would ‘nullify the purposes' of the statute....” (Killion Doc. 37 at 4) (quoting Barrentine v. Arkansas–Best Freight Sys. Inc., 450 U.S. 728, 740, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981)). While KeHE conceded that controlling law prevents Plaintiffs from waiving their claims under the FLSA, it distinguished nonwaivable substantive FLSA rights, discussed in Barrentine, from the procedural right to join a collective action (Killion Doc. 46 at 3–4 & 7). Procedural rights, according to KeHE, are waivable.

Without addressing the substantive/procedural dichotomy advanced by KeHE, this Court ultimately determined those Plaintiffs could join the collective action (Killion Doc. 60 at 3–4). Specifically, this Court found the Agreements signed by Killion and Ovall had been modified to preserve their rights—procedural or otherwise—under the FLSA. The Agreements at issue here contain no such modifications.

These Agreements were sent to KeHE sales representatives in February 2012 after they had been notified their positions would be terminated through a reduction in force. The employees were offered a retention bonus if they continued their employment until March 17, 2012, so long as they signed the Agreements. Each Agreement contained a “General Release of Claims and Covenant Not to Sue,” which included a promise not to join “any class or collective action” against KeHE arising under the FLSA or other federal laws (Dolan Doc. 5–1 at 4–5). Basnec, and sixty-eight others, signed and returned the Agreements (Killion Doc. 71–2).

Analysis

The Complaints allege KeHE violated 29 U.S.C. § 207, the overtime provision of the FLSA, by failing to pay various sales representatives for overtime worked in excess of forty hours per week (Killion Doc. 1 at 3; Dolan Doc. 18 at 3). Plaintiffs filed their Complaints pursuant to 29 U.S.C. § 216(b), which allows:

An action ... against any employer ... by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.

Basnec filed his consent pursuant to Section 216(b) (Killion Doc. 58) and also signed the Agreement discussed above. The question for this Court is whether the right to join a collective action—the right described in Section 216(b)—can be waived and, if so, whether the Agreement was valid. The Sixth Circuit has yet to rule on the two questions at issue; however, as explained below, the answer to both questions is yes, though not for reasons advanced by the parties.

KeHE's Argument that Section 216(b) is Procedural

KeHE, relying on a number of district court cases, argues the right to a collective action is procedural and therefore waivable. However, a review of those cases reveals their analysis is based on an overextension and misapplication of circuit case law. KeHE argues (Dolan Doc. 15 at 14):

The overwhelming weight of authority holds that unlike an unsupervised waiver of an employee's substantive rights under the FLSA, employees are free to waive through individual agreement with their employer the procedural right to participate in a class or collective action. See, e.g., Aracri v. Dillard's, Inc., 2011 WL 1388613, at *5 (S.D.Ohio 2011); Winn v. Tenet Healthcare Corp., 2011 WL 294407, at *9 (W.D.Tenn.2011).

There are several problems with this argument.

First, Aracri is distinguishable. That case dealt with a collective action waiver contained in an arbitration agreement, which was ultimately upheld. Its validity was “initially a question of contract interpretation and should be decided in the first instance by an arbitrator.” Aracri, 2011 WL 1388613 at *4 (citing Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 447, 455, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003) (plurality opinion and Justice Stevens' concurrence agreeing that interpretation “should have been made in the first instance by the arbitrator”)). Because that specific clause had yet to be interpreted by the arbitrator, Aracri never reached the waivability of the collective action right.

Second, Aracri relies heavily on a Western District of Tennessee case, which found:

The Supreme Court has held that FLSA rights, such as the right to basic statutory minimum wage, the right to overtime, wages, and the right to liquidated damages, “may not be abridged by contract or otherwise waived.” However, the “mere fact that class actions are mentioned within § 216(b) does not create a ‘right’ for a plaintiff to bring a class action.” The Court finds that none of Plaintiff's potential FLSA remedies are jeopardized if she is deemed to have released her ability to proceed in a class action.

Winn, 2011 WL 294407 at *9 (citations omitted). Winn in turn relies on a Northern District of Illinois case, which bases its analysis on two cases from the Fourth and Eleventh Circuits. See Brown v. Sears Holdings Mgmt., Corp., 2009 WL 2514173, at *3 (N.D.Ill.2009) (citing Long John Silver's Rests., Inc. v. Cole, 514 F.3d 345, 351 (4th Cir.2008); Cameron–Grant v. Maxim Healthcare Servs., Inc., 347 F.3d 1240, 1249 (11th Cir.2003)). According to the sources relied upon by KeHE, those circuit court cases stand for the general proposition that rights to a collective action are waivable. Recalling LeVar Burton's cautionary phrase “but you don't have to take my word for it,” this Court investigated.

The Fourth Circuit in Long John Silver's did not hold that collective actions under the FLSA are procedural in nature and thus waivable, and that case does little to advance KeHE's argument. For starters, Long John Silver's interpreted a completelydifferent part of Section 216(b). In pertinent part, Section 216(b) provides:

An action to recover the liability prescribed in either of the preceding sentences may be maintained against any employer ... by any one or more employees for and in behalf of himself or themselves and other employees similarly situated.

[and]

No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.

The issue in this case involves the first part—the general right to a collective action. Long John Silver's, however, addressed the waivability of the second part—the “opt-in” procedure required to join a collective action.

Additionally, Long John Silver's did not definitively hold that Section 216(b)'s “opt-in” requirement could be waived, but rather determined an arbitrator's decision to certify an “opt-out” class was not a “manifest disregard of the law.” 514 F.3d at 350–53. This reasoning is analogous to that in Aracri, as both cases recognized it was the arbitrator's responsibility to interpret the enforceability of clauses in an arbitration agreement. Accordingly, Long John Silver's is inapplicable and cannot be perfunctorily read to apply to all of Section 216(b)...