Knepper v. Rite Aid Corp.

Decision Date27 March 2012
Docket Number11–1685.,Nos. 11–1684,s. 11–1684
Citation162 Lab.Cas. P 36007,675 F.3d 249,18 Wage & Hour Cas.2d (BNA) 1648
PartiesDaniel KNEPPER, Appellant at No. 11–1684, (D.C. Civil Action No. 09–cv–2069)James Fisher, individually and on behalf of all other persons similarly situated, Appellant at No. 11–1685, (D.C. Civil Action No. 10–cv–1865) v. RITE AID CORPORATION; Eckerd Corporation, d/b/a Rite Aid.
CourtU.S. Court of Appeals — Third Circuit


Peter D. Winebrake, Esquire, (Argued), R. Andrew Santillo, Esquire, The Winebrake Law Firm, LLC, Dresher, PA, Robert E. DeRose, II, Esquire, Barkan Meizlish, LLP, Columbus, OH, Seth R. Lesser, Esquire, Klafter Olsen & Lesser LLP, Rye Brook, NY, for Appellants.

Patrick G. Brady, Esquire, (Argued), Suzanne K. Brown, Esquire, John M. O'Connor, Esquire, Clara H. Rho, Esquire, Epstein Becker & Green, P.C., Newark, NJ, Brian P. Downey, Esquire, Pepper Hamilton LLP, Harrisburg, PA, for Appellees, Rite Aid Corporation and Eckerd Corporation d/b/a Rite Aid.

Daniel E. Turner, Esquire, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Atlanta, GA, for Appellee, Rite Aid Corporation.Laura M. Moskowitz, Esquire, (Argued), United States Department of Labor, Office of the Solicitor, Washington, D.C., for Amicus CuriaeAppellant, Secretary of the United States Department of Labor.David A. Borgen, Esquire, Goldstein, Demchak, Baller, Borgen & Dardarian, Oakland, CA, for Amici CuriaeAppellants, The National Employment Lawyers Association, Comité de Apoyo a los Trabajadores Agrícolas, Cornell Law School Labor Law Clinic, Friends of Farmworkers, Inc., JUNTOS, National Employment Law Project, National Lawyers Guild Labor and Employment Committee, Working Hands Legal Clinic.

Before: SCIRICA, RENDELL and SMITH, Circuit Judges.


SCIRICA, Circuit Judge.

This case involves a putative conflict between an opt-out Fed.R.Civ.P. 23(b)(3) damages class action based on state statutory wage and overtime laws that parallel the federal Fair Labor Standards Act (FLSA) and a separately filed opt-in collective action under 29 U.S.C. § 216(b) of the FLSA. Both suits allege violations arising from the same conduct or occurrence by the same defendant. At issue is whether federal jurisdiction over the Rule 23 class action based solely on diversity under the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), is inherently incompatible with jurisdiction over the FLSA action, and whether the FLSA preempts state laws that parallel its protections.


Plaintiff James Fisher and former plaintiff Robert Vasvari 1 were assistant store managers at Rite Aid stores in Maryland and Ohio respectively. In June 2009, both joined a nationwide opt-in action under 29 U.S.C. § 216(b) of the FLSA in the Middle District of Pennsylvania. Craig v. Rite Aid Corp., et al., No. 4:08–cv–02317–JEJ (M.D.Pa.). The suit sought back pay for alleged misclassification of assistant managers as overtime-exempt under § 207 of the FLSA.

In July 2009, Fisher initiated a Fed.R.Civ.P. 23(b)(3) class action lawsuit in the District of Maryland on behalf of all Maryland Rite Aid assistant managers, seeking damages for alleged misclassification as overtime-exempt under the Maryland Wage Payment and Collection Law and Maryland, Md.Code Ann. Lab. & Empl. §§ 3–501 to –509, and the Maryland Wage and Hour Law (MWHL), Md.Code Ann. Lab. & Empl. §§ 3–401 to –428.2 The District of Maryland dismissed the Payment and Collection claims with prejudice, ruling the statute does not govern claims to overtime pay, but dismissed the claim under the Wage and Hour law without prejudice under the “first-filed” rule, deferring to the Middle District of Pennsylvania. Fisher v. Rite Aid Corp., No. RDB09–1909, 2010 WL 2332101 (D.Md. June 8, 2010). Fisher then refiled his class action in the Middle District of Pennsylvania, asserting jurisdiction based solely on diversity of citizenship under CAFA, 28 U.S.C. § 1332(d).

Also in July 2009, Vasvari initiated a Rule 23(b)(3) class action in the District of Northern Ohio seeking damages for alleged misclassification as overtime-exempt under the Ohio Minimum Fair Wage Standards Act (OMFWSA), O.R.C. §§ 4111.01–4111.17.3 Jurisdiction was based solely on diversity of citizenship under 28 U.S.C. § 1332(d). The case was transferred to the Middle District of Pennsylvania based on the forum selection clause in Vasvari's employment contract. Stipulated Order Concerning Transfer to the Middle District of Pennsylvania, Vasvari v. Rite Aid Corp., No. 4:09–cv–1699 (N.D.Ohio Oct. 19, 2009).

On February 16, 2011, the District Court for the Middle District of Pennsylvania, noting that “each action shares the same determinative issue,” published nearly identical opinions in both cases granting defendants' motion to dismiss on the pleadings under Fed.R.Civ.P. 12(c). Fisher v. Rite Aid Corp., 764 F.Supp.2d 700, 704 n. 2 (M.D.Pa.2011); Knepper v. Rite Aid Corp., 764 F.Supp.2d 707, 710 n. 4 (M.D.Pa.2011). It found that the Ohio state law provisions at issue were not preempted because the FLSA includes a “savings clause” establishing Congress's intent not to preempt state law.4 Knepper, 764 F.Supp.2d at 712. But it ruled the Rule 23 opt-out class actions based on state employment laws paralleling the FLSA were “inherently incompatible” with the opt-in procedure provided by the FLSA, which was “specifically designed to prevent litigation through representative action” and “expresses Congress's intent to ... eliminat[e] representative (i.e., opt-out) actions.” Id. at 714 (internal quotation marks omitted); Fisher, 764 F.Supp.2d at 706 (internal quotation marks omitted). It reached this conclusion even though the Rule 23 class actions were free-standing cases brought under CAFA diversity jurisdiction rather than “combined” actions invoking supplemental jurisdiction, reasoning that “denying a plaintiff the opportunity to litigate a claim in one action, but allowing the claim to proceed in an action that only differs from the original by docket number, does not vindicate the purposes behind application of the doctrine in the first place.” Fisher, 764 F.Supp.2d at 706; Knepper, 764 F.Supp.2d at 713. Based on this ruling that inherent incompatibility barred the suit, the District Court declined to address the further objection that Rule 23 certification would implicate the Rules Enabling Act. Fisher, 764 F.Supp.2d at 704; Knepper, 764 F.Supp.2d at 714.

Plaintiffs appealed. Both actions share the same legal issue and present no meaningful factual differences. We discuss them together.5


29 U.S.C. § 216(b) provides a private right of action to recover for violations of the FLSA, including a suit by “one or more employees for and in behalf of himself or themselves and other employees similarly situated.” In 1947, Congress amended this provision to require that a plaintiff in a FLSA suit “give[ ] his consent in writing to become such a party and such consent is filed in the court in which such action is brought.” Portal–to–Portal Act of 1947, Ch. 52, § 5(a), 61 Stat. 84, 87 (codified at 29 U.S.C. § 216(b)). Because the purpose of this amendment and its implications for federal opt-out class actions based on state law are in dispute, we consider its history in detail.

Congress enacted the FLSA in 1938. Fair Labor Standards Act of 1938, ch. 676, 52 Stat. 1060 (codified at 29 U.S.C. §§ 201–219). The law sought to protect workers, particularly non-unionized workers, by establishing federal minimum wage, maximum hour, and overtime guarantees that could not be avoided through contract. Symczyk v. Genesis HealthCare Corp., 656 F.3d 189, 192 (3d Cir.2011) (quoting Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 707 n. 18, 65 S.Ct. 895, 89 L.Ed. 1296 (1945)). As originally enacted, the law provided for enforcement by the Secretary of Labor or through private actions that could be brought “in any court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated, or such employee or employees may designate an agent or representative to maintain such action for and in behalf of all employees similarly situated.” FLSA, § 16(b), 52 Stat. at 1069.

From 1944 to 1947, the Supreme Court decided three cases determining that on-the-job travel time constituted “work” within the meaning of the FLSA and therefore contributed to the maximum working hours for the calculation of overtime. Tenn. Coal, Iron, & R.R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 64 S.Ct. 698, 88 L.Ed. 949 (1944); Jewell Ridge Coal Corp. v. Local No. 6167, United Mine Workers of Am., 325 U.S. 161, 65 S.Ct. 1063, 89 L.Ed. 1534 (1945); Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 66 S.Ct. 1187, 90 L.Ed. 1515 (1946). While the first two cases were limited to underground mining, the third extended the concept of “portal-to-portal” pay to a large factory, determining that “the time necessarily spent by the employees in walking to work on the employer's premises ... was working time within the scope” of the FLSA. Anderson, 328 U.S. at 691, 66 S.Ct. 1187.

Workers responded to the Mt. Clemens decision by initiating thousands of § 16(b) FLSA suits seeking back pay for “portal-to-portal” violations.6 Nearly all the suits filed under § 16(b) were brought by unions.7 These suits were “representative” in the sense that, as authorized by the statute, they were initiated by third-party union officials as representatives of the employees, the real parties in interest. But despite the broad language allowing suits on behalf of those “similarly situated,” these were not opt-out class actions analogous to suits under modern Rule 23, which did not exist at the time.8 Instead, case law on § 16(b) held that plaintiffs must affirmatively join in a representative action to recover, analogizing such suits to “spurious” class actions available under Rule 23(a)(3) at the time.9 Those filing suits shared this...

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