Lindsay v. Government Employees Ins. Co.

• Decision Date: 26 May 2006
• Docket Number: No. 05-7046.,05-7046.
• Citation: 448 F.3d 416
• Parties: Christine LINDSAY and Robert McGruder, Individually and on Behalf of All Other Persons Similarly Situated, Appellants v. GOVERNMENT EMPLOYEES INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

448 F.3d 416

Christine LINDSAY and Robert McGruder, Individually and on Behalf of All Other Persons Similarly Situated, Appellants v. GOVERNMENT EMPLOYEES INSURANCE COMPANY, Appellee.

No. 05-7046.

United States Court of Appeals, District of Columbia Circuit.

Argued December 2, 2005.

Decided May 26, 2006.

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Appeal from the United States District Court for the District of Columbia (No. 04cv01213).

Charles E. Tompkins argued the cause for the appellant. Michael D. Hausfeld was on brief.

Eric Hemmendinger argued the cause for the appellee. Bruce S. Harrison and Daniel A. Cantor were on brief.

Before: HENDERSON, ROGERS and BROWN, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge.

Christine Lindsay and Robert McGruder (appellants) work as auto damage adjusters for the Government Employees Insurance Company (GEICO). GEICO classified all auto damage adjusters as administrative employees, thereby making them ineligible for overtime pay under section 13(a)(1) of the Fair Labor Standards Act, 29 USC §§ 201 et seq. (FLSA or Act). The appellants brought this action against their employer, alleging that GEICO deliberately miscategorized them as administrative employees to avoid paying them overtime pay in violation of the FLSA and the New York Minimum Wage Act, N.Y. Lab. Law §§ 650 et seq. (New York Act). They sought certification of an "opt-in" class under the FLSA. They also sought certification of an "opt-out" class under the New York Act, using Federal Rule of Civil Procedure 23. The district court denied certification of the state law class, concluding that the FLSA class certification procedure requiring all class members to affirmatively opt in precluded it from exercising supplemental jurisdiction over those state law claimants who did not affirmatively join the FLSA claim. We disagree and therefore reverse the order denying certification and remand to the district court.

I.

The appellants' FLSA claim alleged not only that the nature of an auto damage adjuster's job duties entitles them to overtime pay under FLSA but also that GEICO's classification of auto damage adjusters as administrative employees constitutes a willful violation of the Act.¹ See 29 U.S.C. § 207(a). They sued on behalf of themselves and all other similarly situated auto damage adjusters under 29 U.S.C. § 216(b).² Section 216(b) is part of the so-called Portal-to-Portal Act, which the Congress enacted in 1947 in response to judicial interpretations of the FLSA.³ See IBP, Inc. v. Alvarez, ___ U.S. ___, ___, 126 S.Ct. 514, 519, 163 L.Ed.2d 288 (2005). Of particular relevance here, section 216(b) provides that, in an action brought under, inter alia, section 207 — the overtime pay provision — of the FLSA, "[n]o 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." 29 U.S.C. § 216(b). That is, potential class members must affirmatively join ("opt in") the lawsuit. See Thompson v. Sawyer, 678 F.2d 257, 269 (D.C.Cir.1982).

Appellant McGruder also alleged that the nature of a New York-based auto damage adjuster's job duties entitles those adjusters to overtime pay under the New York Act as well. See N.Y. Lab. Law §§ 663(1) (creating civil action for violation of compensation provisions); N.Y. Comp. Codes R. & Regs. tit. 12, § 142-2.2 (requiring overtime compensation of time-and-one-half).⁴ McGruder sought to bring the state law claim on behalf of himself and all other similarly situated New York-based auto damage adjusters pursuant to Federal Rule of Civil Procedure 23. Unlike the procedure set out in 29 U.S.C. § 216(b), Rule 23 class certification requires notice to all potential class members that they must affirmatively decline to join ("opt out") the lawsuit if they do not want to be class members. See Fed.R.Civ.P. 23(c)(2)(B) ("For any class certified under Rule 23(b)(3), the court must direct to class members the best notice practicable under the circumstances . . . that the court will exclude from the class any member who requests exclusion, stating when and how members may elect to be excluded"); In re Veneman, 309 F.3d 789, 792 (D.C.Cir.2002) ("Certification pursuant to Rule 23(b)(3), however, comes with certain procedural requirements: Because members of a class seeking substantial monetary damages may have divergent interests, due process requires that putative class members receive notice and an opportunity to opt out.").

The district court first determined that all GEICO auto damage adjusters nationwide were similarly situated within the meaning of 29 U.S.C. § 216(b). See Lindsay v. Gov't Employees Ins. Co., C.A. No. 04-1213 (D.D.C. Nov. 9, 2004). Accordingly, notices were sent to all potential class members requesting them to affirmatively opt into the action if they so desired. The district court, however, subsequently declined to certify McGruder's requested class of GEICO auto damage adjusters with state law claims under the New York Act. See Lindsay v. Gov't Employees Ins. Co., 355 F.Supp.2d 119 (D.D.C.2004). First noting that "[t]his Circuit has yet to address the question of supplemental jurisdiction in the context of a federal opt-in class and a state opt-out class," the district court briefly surveyed the decisions from other courts — both district and circuit — and ultimately concluded that "it would be inappropriate to exercise jurisdiction over plaintiffs who have not affirmatively opted into the federal action." Id. at 120, 121. Thus, it decided to exercise its supplemental jurisdiction over only the state law claims "of plaintiff McGruder and any New York plaintiff who is eligible to opt into the federal action and opts in by filing a notice of consent." Id. at 123. We allowed the appellants to appeal the order denying class certification pursuant to Federal Rule of Civil Procedure 23(f). See In re Lindsay, No. 05-8001 (D.C. Cir. Mar. 18, 2005). Because subject matter jurisdiction is a prerequisite to class certification, it is properly reviewed in a Rule 23(f) interlocutory appeal. Cf. In re Lorazepam & Clorazepate Antitrust Litig., 289 F.3d 98, 108 (D.C.Cir.2002) (constitutional standing issue properly raised in Rule 23(f) appeal). Accordingly, we consider the district court's denial of class certification based on its decision not to exercise supplemental jurisdiction.

II.

Although it is not clear from the district court order whether the court made its supplemental jurisdiction ruling under 28 U.S.C. § 1367(a)⁵ or 28 U.S.C. § 1367(c),⁶ we conclude that its decision was based on subsection (a). First, its discussion of certification of the state law claims does not mention subsection (c). In contrast, its discussion regarding the exercise of its supplemental jurisdiction over the state law claims of the FLSA class members does. Lindsay, 355 F.Supp.2d at 120-22. Moreover, the authority upon which the district court primarily relies construed section 1367(a) to divest federal courts of subject-matter jurisdiction over state law claimants who do not also have FLSA claims. Rodriguez v. The Texan, Inc., No. 01-C-1478, 2001 WL 1829490, at *1-*2 (N.D.Ill.2001). Because the district court order was based on section 1367(a), we review its decision de novo. See Harris v. Sec'y, Dep't of Veterans Affairs, 126 F.3d 339, 345-346 (D.C.Cir.1997) ("We review the District Court's dismissal for want of jurisdiction de novo, because the District Court dismissed on the grounds that it lacked the original jurisdiction necessary for supplemental jurisdiction under 28 U.S.C. § 1367(a), and not on the grounds that it was exercising its discretion to dismiss supplemental claims remaining after dismissal of original claims as authorized by 28 U.S.C. § 1367(c)(3).").

28 U.S.C. § 1367(a) provides:

Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.

28 U.S.C. § 1367(a) (emphasis added). Leaving aside the beginning proviso for the moment, we think it is clear that section 1367(a) authorizes a district court to exercise its supplemental jurisdiction in mandatory language. See New Rock Asset Partners, L.P. v. Preferred Entity Advancements, Inc., 101 F.3d 1492, 1509 (3d Cir.1996) ("By its language § 1367(a) confers jurisdiction in mandatory terms to include those cases `which form part of the same case or controversy under Article III of the United States Constitution' (except as expressly excluded by statute or as provided for in subsections (b) and (c))."); McCoy v. Webster, 47 F.3d 404, 406 n. 3 (11th Cir.1995) ("Section 1367(a) requires the district court to exercise supplemental jurisdiction over claims which are closely related to claims over which the district court has original jurisdiction." (emphasis added)); Executive Software N. Am. v. U.S. Dist. Ct. for the Cent. Dist. of Cal., 24 F.3d 1545, 1555 (9th Cir.1994) ("By use of the word `shall,' the statute makes clear that if power is conferred under section 1367(a), and its exercise is not prohibited by section 1367(b), a court can decline to assert supplemental jurisdiction over a pendent claim only if one of the four categories specifically enumerated in section 1367(c) applies."). In addition to its reference to subsection (b)'s excepting provision (which relates to diversity jurisdiction only), section 1367(a) includes three other bases for declining to exercise supplemental jurisdiction: (1) a federal statute "expressly provide[s] otherwise"; (2) the "other" claims are no...