Roundup: 2nd, 4th, 6th and 7th Circuits

Class action waiver cannot block plaintiffs from pursuing claims; Internal complaints are protected activity under the FLSA; District court mishandled discovery in discrimination case; Solvent companies must pay benefits of insolvent affiliate

2nd Circuit: Class action waiver cannot block plaintiffs from pursuing claims

On Feb. 1, the 2nd Circuit decided for the third time that a class action waiver in an arbitration provision is unenforceable when it prevents plaintiffs from pursuing federal antitrust claims.

In In Re: American Express Merchants’ Litigation, a group of merchants sued American Express (AmEx), claiming it was using its market power in charge cards to make merchants submit to elevated fees. However, the agreement they signed with AmEx contains an arbitration clause that includes a class action waiver provision.

The district court found it enforceable, but on appeal, the 2nd Circuit disagreed. AmEx appealed, and the U.S. Supreme Court granted certiorari. The high court vacated and remanded the decision in light of its ruling in Stolt-Nielsen v. AnimalFeeds, which said that parties cannot be forced into class arbitration unless they’ve agreed to it. Right after the 2nd Circuit reaffirmed its ruling, the Supreme Court decided AT&T v. Concepcion, which said that the Federal Arbitration Act preempts state laws that find class action waivers unconscionable, and prompted the 2nd Circuit to reconsider.

The 2nd Circuit again upheld its decision, finding that neither Stolt-Nielsen nor Concepcion dealt with the issue in the AmEx case: whether class action waivers are enforceable if the plaintiffs can show that the cost of bringing individual claims would be prohibitive.

 

4th Circuit: Internal complaints are protected activity under the FLSA

The 4th Circuit sided with the majority of other circuits Jan. 27 when it ruled in Minor v. Bostwick Laboratories, Inc. that internal complaints are protected under the Fair Labor Standard Act’s (FLSA) anti-retaliation provision.

Kathy Minor, a medical technologist at Bostwick Laboratories, met with the company’s COO to report her supervisor for allegedly violating the FLSA by removing overtime from employees’ time sheets. Six days later, Bostwick fired her. Minor sued, claiming her termination was retaliation for the meeting. The district court granted Bostwick’s motion to dismiss, saying the language of the FLSA did not indicate that internal complaints were protected.

On appeal, the 4th Circuit reversed and remanded the decision, citing Supreme Court precedent that found the provision’s phrase “filed any complaint” should be read broadly, and that the FLSA’s remedial purpose suggests internal complaints should be protected. However, the 4th Circuit noted that the statute’s language is ambiguous, and that employees should file complaints with “some degree of formality.”

 

6th Circuit: District court mishandled discovery in discrimination case

In Bobo v. United Parcel Service Inc., the 6th Circuit found that the district court mismanaged the discovery related to the plaintiff ’s discrimination and retaliation claims. The Jan. 9 decision remanded the case, with instructions to widen the scope of discovery.

Walleon Bobo, who is black, was a member of the Army Reserve, for which he took time off from his job as a feeder supervisor at UPS to attend yearly training. His supervisors did not like him missing work, and one reportedly asked him if his service was voluntary. When UPS terminated Bobo for falsifying safety records, he claimed that all the other feeder supervisors did it too, and UPS did not fire any of them. Bobo alleges that UPS fired him because of his race and his military service.

In response to discovery requests, UPS only identified one white, nonmilitary supervisor who was comparable to Bobo. Bobo asked the district court to compel UPS to allow discovery on several others, but it delayed its ruling on the discovery motions until it had already granted summary judgment to UPS. The 6th Circuit reversed and remanded the decision, writing that “the district court improperly restricted the scope of discovery.”

 

7th Circuit: Solvent companies must pay benefits of insolvent affiliate

The 7th Circuit, in Central States, Southeast and Southwest Areas Pension Fund v. SCOFBP, LLC, on Dec. 27, 2011, upheld a district court’s ruling that two solvent business entities, MCRI/Illinois and MCOF/Missouri, are responsible for the unpaid pension benefits of their insolvent affiliate, SCOFBP.

Under the Multiemployer Pension Plan Amendment Act (MPPAA), all “trades or businesses” under “common control” are treated as one employer when deciding withdrawal liability. The 7th Circuit affirmed the district court’s ruling that MCRI and MCOF were “trades or businesses” because they were for-profit limited liability companies and claimed business tax deductions. And though the former proprietor of the three businesses, Michael Cappy, wove a complicated web of ownership, once he went bankrupt, the entities were under “common control” of the bankruptcy estate.

The appellants criticized the district and bankruptcy courts for taking too much time to decide how Cappy’s personal bankruptcy affected the businesses, but the 7th Circuit affirmed the district court’s decision, saying, “We will not permit Cappy to thwart the purpose of the MPPAA.”

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