929 F.3d 205
5th Cir.2019Background
- In Nov. 2016 the U.S. District Court for the Eastern District of Texas preliminarily enjoined the DOL’s FLSA Overtime Rule, prohibiting the DOL from implementing or enforcing the Rule pending further order.
- In June 2017 Carmen Alvarez sued Chipotle in the D.N.J., alleging she was non-exempt under the Overtime Rule and entitled to overtime; her complaint acknowledged the Texas injunction but argued the Rule’s effective date was not stayed and thus it had taken effect.
- Chipotle answered in New Jersey and then moved in the Texas case to hold Alvarez and her attorneys in contempt for allegedly violating the Texas injunction by invoking the Overtime Rule.
- The Texas district court held Alvarez and her counsel in contempt, finding they were in privity with the DOL (adequately represented by the DOL) and awarded attorneys’ fees to Chipotle.
- The Fifth Circuit reversed: it held Alvarez and her lawyers were not in privity with the DOL, were not bound by the injunction under Federal Rule of Civil Procedure 65(d), and the Texas court lacked personal jurisdiction to enter contempt sanctions against them.
Issues
| Issue | Plaintiff's Argument (Alvarez) | Defendant's Argument (Chipotle) | Held |
|---|---|---|---|
| Whether nonparties who sue invoking the enjoined Rule can be bound by that injunction | Alvarez argued she was not bound because she was not a party and the injunction did not prevent private FLSA suits; she asserted the Rule became effective absent an APA stay | Chipotle argued Alvarez and her counsel were bound because the DOL represented employees’ interests and thus Alvarez was in privity with the DOL | Held: Not bound—no privity; adequate-representation privity not shown |
| Whether Rule 65(d) permits contempt of nonparties absent aiding/abetting or other close relationship | Alvarez: Rule 65(d) limits who is bound; mere notice and similar interests insufficient | Chipotle: The DOL’s enforcement role meant its injunction should bind employees who benefit from the Rule | Held: Rule 65(d) does not reach Alvarez; she was neither an agent nor in active concert nor a privy |
| Whether the Texas court had personal jurisdiction to adjudicate contempt against out-of-district nonparties | Alvarez: No minimum-contacts finding; jurisdiction cannot rest solely on an injunction absent aiding/abetting or other bases | Chipotle: Jurisdiction proper because Alvarez had actual notice and violated the injunction by invoking the Rule | Held: No personal jurisdiction—court relied on Rule 65 theory but there was no aiding/abetting or other basis for jurisdiction |
| Whether attorneys’ fees for contempt were properly awarded | Alvarez: Fees improper because contempt finding was erroneous and jurisdictionally invalid | Chipotle: Fees justified as sanctions for contempt | Held: Fees reversed along with contempt order |
Key Cases Cited
- Taylor v. Sturgell, 553 U.S. 880 (establishes general nonparty preclusion rule and limited exceptions)
- Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100 (one is not bound by judgment in litigation where not a party)
- Regal Knitwear Co. v. N.L.R.B., 324 U.S. 9 (Rule 65(d) derives from common-law doctrine binding those in privity or identified with defendants)
- Southwest Airlines Co. v. Tex. Int'l Airlines, Inc., 546 F.2d 84 (5th Cir.) (preclusion/privity principles; distinguishes public-actor representation from private rights enforcement)
- Waffenschmidt v. MacKay, 763 F.2d 711 (5th Cir.) (aiding/abetting theory for exercising jurisdiction over nonparties)
- Pollard v. Cockrell, 578 F.2d 1002 (5th Cir.) (adequate-representation privity requires accountability relationship)
- Freeman v. Lester Coggins Trucking, Inc., 771 F.2d 860 (5th Cir.) (parallel interests alone insufficient for privity)
- Nat'l Spiritual Assembly of Baha'is of U.S. Under Hereditary Guardianship, Inc. v. Nat'l Spiritual Assembly of Baha'is of U.S., Inc., 628 F.3d 837 (7th Cir.) (discussion of Rule 65(d) and nonparty contempt)