Mary BILLINGSLEY, on behalf of herself and all others similarly situated, Fannie Thrash, on behalf of herself and all others similarly situated, Plaintiffs-Appellees, v. CITI TRENDS, INC., Defendant-Appellant.
No. 13-12561.
United States Court of Appeals, Eleventh Circuit.
March 25, 2014.
560 Fed. Appx. 914
Before HULL, Circuit Judge, and Goldberg,* Judge, and Smith,** District Judge.
HULL, Circuit Judge:
Plaintiffs-appellees Mary Billingsley and Fannie Thrash (collectively, “Billingsley“) filed a putative collective action pursuant to the Fair Labor Standards Act (“FLSA“),
The district court denied Citi Trends’s motion to compel arbitration, and Citi Trends appeals. After review of the record and the briefs of the parties, and having the benefit of oral argument, we affirm.
I. BACKGROUND
A. Complaint
Citi Trends is a retail clothing store. Billingsley is a store manager at Citi Trends.
On February 23, 2012, Billingsley filed a putative collective action against Citi Trends. In the complaint, Billingsley alleges that Citi Trends violated the FLSA by improperly designating its store managers as exempt employees and failing to compensate them for their overtime hours.
As allowed by the FLSA, Billingsley filed her putative collective action on behalf of herself and other similarly-situated Citi Trends’s store managers. See
B. Planning Conferences and Order
The parties participated in a Rule 26(f)1 conference. And, on May 15, 2012, the parties filed a joint Rule 26(f) planning report. In that report, the parties proposed a schedule and process for pursuing conditional FLSA collective action certification and issuing notice to similarly-situated store managers.
As a general matter, the parties proposed following the conditional collective action certification process endorsed by this Court in Hipp v. Liberty National Life Insurance Co., 252 F.3d 1208, 1219 (11th Cir.2001).2 Consistent with the Hip-
On May 31, 2012, the district court held a scheduling conference with the parties. Based on the joint scheduling conference, on June 14, 2012, the district court entered a preliminary scheduling order pursuant to Rule 16(b). In its order, the district court provided the briefing schedule for conditional collective action certification and court-ordered notice of the action.
C. Motion for Conditional Certification
On August 7, 2012, Billingsley filed a Motion for Conditional Certification and Court Approved Issuance of Notice. Billingsley supported her motion with briefing and evidentiary materials.
On October 17, 2012, after receiving two extensions of time, Citi Trends responded in opposition to Billingsley’s motion for conditional certification. To support its response, Citi Trends filed evidentiary materials, which included (1) fill-in-the-blank declarations and (2) arbitration agreements executed by several dozen store managers (i.e., potential members of the collective action). Citi Trends’s opposition brief informed the district court that—if the court certified the FLSA collective action—the store managers who had executed the arbitration agreements would be subject to arbitration and unable to join the collective action.3
As discussed in detail below, Citi Trends gathered the declarations and arbitration agreements after the district court set forth the schedule and procedures for Billingsley’s motion for conditional certification and notice. Citi Trends gathered these documents through back-room meetings that were “highly coercive” and “interrogation-like.”
D. Motion to Strike and Motion for Entry of Protective Order
On October 31, 2012, based on Citi Trends’s conduct in obtaining the declarations and arbitration agreements from potential collective action members, Billingsley asked the district court for three corrective actions. First, Billingsley filed a motion to strike the store managers’ declarations. Second, Billingsley sought a protective order that would prohibit Citi Trends or its agents “from communicating with any plaintiff, opt-in plaintiff or potential collective class member regarding matters related to this litigation in a[n] intimidating, misleading or coercive manner.” Third, Billingsley asked the district court to “issue a corrective letter or include such corrections in an order granting court supervised notice to potential plaintiffs of their opt-in rights by correcting the effects of [Citi Trends’s] conduct.”
After briefing by both parties, the district court denied Billingsley’s motion to strike and motion for a protective order. The district court deferred ruling on Bill-
E. Ruling on Conditional Certification and Corrective Action
On January 14, 2013, the district court held a hearing on Billingsley’s motion for conditional certification.
Based on affidavits from several opt-in plaintiffs and the lenient standard for conditional certification in a FLSA collective action, the district court granted Billingsley’s (1) motion for conditional certification of the collective action and (2) motion to send court-approved notice to potential opt-in plaintiffs.4
The district court then turned to the issue deferred in its earlier order: Billingsley’s motion for corrective action. Pertaining to the request for corrective action, the district court found that—after the parties’ May 31, 2012 status conference and before Billingsley’s deadline to move for conditional certification and notice—“Citi Trends initiated company-wide in-person meetings between two corporate representatives and its [store managers], who are potential collective class members” but not presently parties to the lawsuit. The district court found that, at these meetings and at Citi Trends’s direction, almost every store manager completed a fill-in-the-blank declaration about her job duties and signed an arbitration agreement that bound the store manager to arbitrate any claims she had against Citi Trends.
Based on its “responsibility to see that an employer not engage in coercion or duress to decrease the size of a collective class and defeat the purpose of the collective action mechanism of the FLSA,” the district court granted, in part, Billingsley’s motion for corrective action. Specifically, the district court ordered that its supervised notice state that any potential plaintiff who felt that she signed the mandatory arbitration agreement under duress was allowed to opt-in to the collective action notwithstanding her agreement to the contrary. Based on this decision, the court stated that Citi Trends could not move to compel arbitration for those store managers who might elect to opt-in to the action, even if those managers had signed the arbitration agreement.
F. Motion for Reconsideration and Motion to Compel Arbitration
Defendant Citi Trends requested reconsideration of the district court’s order allowing putative plaintiffs to opt-in to the FLSA collective action notwithstanding the terms of the arbitration agreement. Citi Trends simultaneously moved to compel arbitration.
After briefing by both parties, the district court granted Citi Trends’s motion for reconsideration and scheduled an evidentiary hearing on Citi Trends’s motion to compel arbitration. The court stated that the hearing was intended to elicit “evidence surrounding the potential opt-in plaintiffs’ signing of the mandatory arbitration agreements to determine if any coercion, duress, or intimidation occurred.”
After a two-day evidentiary hearing, which included live testimony, the district court orally denied Citi Trends’s motion to compel arbitration. The district court followed its oral order with a written order denying Citi Trends’s motion to compel arbitration.
G. District Court’s Findings of Fact
To support its order denying Citi Trends’s motion to compel arbitration, the
Citi Trends devised and implemented a new alternative dispute resolution (“ADR“) policy in the late spring and early summer of 2012—after it was served the complaint in this action on February 27, 2012, and after the district court set a scheduling conference for May 31, 2012. Weeks after the district court’s May 31, 2012 scheduling order,5 Citi Trends began to roll out its new ADR policy. The ADR policy included a mandatory agreement to arbitrate all disputes individually rather than collectively.
By June 30, 2012, Citi Trends sent its human resource representatives to meet with store managers to roll out the new ADR policy—but only to putative collective action members (i.e., store managers). Throughout the summer, Citi Trends’s human resource representatives met individually with all store managers across the country. Citi Trends had two employees in each ADR meeting: a human resources representative and a “witness.”
The human resources representative who met with the store managers advised Citi Trends in its employment decisions. Thus, the store managers reasonably believed the human resources representative had authority to make or influence employment decisions, including hiring and firing decisions.
Store managers were ordered to attend the ADR meetings by their supervisors. Citi Trends did not inform the store managers of the true purpose of the mandatory meetings. Instead of telling the store managers that the meetings concerned the company’s new ADR policy, Citi Trends told the store managers that the mandatory meetings concerned the issuance of a new employee handbook.
Typically, Citi Trends rolled out its new employee handbook in a group setting. The handbook was generally provided in printed form (i.e., not as a photocopy), and the employees were required to sign for the handbook. Here, however, Citi Trends did not follow any of its general procedures for rolling out the employee handbook. Instead, Citi Trends (1) held two-on-one private meetings with each store manager in a small, back room in Citi Trends retail stores—the same places where the store interrogated or investigated its employees, (2) discussed only the ADR policy and the fill-in-the-blank declarations related to the store managers’ job duties, (3) provided photocopied versions of the employee handbooks as the store managers left the meetings, and (4) did not require the store managers to sign for the photocopied employee handbook.6 The district court found that this rushed and atypical rollout of the employee handbook demonstrated that Citi Trends’s handbook rollout was “pretext for presenting the [arbitration] Agreement to the [store managers] to derail their participation in this lawsuit.”
When a store manager arrived at the back-room meetings, a human resources representative greeted the store manager. A second individual was also at each meeting; however, this person was not introduced to, or known by, the store managers.
At the meetings, Citi Trends’s human resources representative gave the store
Citi Trends informed the store managers that the arbitration agreement was a condition of continued employment. The store managers understood that they would be fired if they did not assent to the arbitration agreement or the new ADR policy.7 Thus, the store managers lacked meaningful choice in whether to sign the arbitration agreements or other documents. The district court found the setting of the back-room meetings to be a “highly coercive” and “interrogation-like.”
Opt-in plaintiffs testified that they signed the documents but felt intimidated by the human resources representative. They also felt pressured to sign the arbitration agreements to avoid losing their jobs. Even when specifically requested, Citi Trends did not give the store managers copies of the documents that the store managers signed.
The district court found that Citi Trends did not conceive or begin to institute its ADR policy until after the district court held a scheduling conference to determine when and how Billingsley must move for conditional certification. Citi Trends then rolled out its ADR policy in a “blitzkrieg fashion” and only required potential members of this collective action to agree to the ADR policy. The district court found that Citi Trend’s “ADR roll-out was a hurried reaction specifically targeted at curtailing this litigation.”
The district court found that the “purpose and effect” of the arbitration agreement was “to protect Citi Trends in this lawsuit.” The district court also found that the timing of the arbitration agreement’s rollout “was calculated to reduce or eliminate the number of collective action opt-in Plaintiffs in this case” and the rollout was “replete with deceit” and “designed to be[ ] intimidating and coercive.”
H. District Court’s Conclusions of Law
Based on its findings of fact, the district court concluded that the arbitration agreements were unconscionable as a matter of law. Because the arbitration agreements were unconscionable, the district court denied Citi Trends’s motion to compel arbitration against the opt-in plaintiffs who had signed the arbitration agreements.
The district court also denied Citi Trends’s motion to compel arbitration against the opt-in plaintiffs for an alternative reason. The court found that there was “a record of abuse on the part of Citi Trends in targeting potential class members and procuring the signatures of its [store managers] on the [arbitration] Agreements.” As such, the district court exercised its managerial responsibility to oversee party joinder in FLSA collective actions and determined that—to correct the effect of Citi Trends’s misconduct—it would not enforce the arbitration agreements against any opt-in plaintiffs who signed the agreement under Citi Trends’s coercive ADR rollout process in the summer of 2012.
I. Court-Approved Notice
After the district court conditionally certified the collective action and denied Citi Trends’s motion to compel arbitration, the parties proposed the text of the notice that
The district court approved parties’ proposed notice.
J. Instant Appeal
Defendant Citi Trends timely appealed from the district court’s order denying Citi Trends’s motion to compel arbitration. See
The district court stayed the proceeding below pending resolution of this appeal. The stay went into effect after the notice and joinder (i.e., opt-in) period ended.
II. DISCUSSION
The district court provided alternative reasons for its decision to deny Citi Trends’s motion to compel arbitration. We begin with the district court’s decision to deny Citi Trends’s motion to compel arbitration based on the district court’s responsibility to oversee party joinder in FLSA actions.8
A. FLSA
Congress passed the FLSA to protect workers from overbearing practices of employers who had greatly unequal bargaining power over their workers. See Roland Elec. Co. v. Walling, 326 U.S. 657, 668 n. 5, 66 S.Ct. 413, 418 n. 5, 90 L.Ed. 383 (1946). Congress has expressed a policy that FLSA plaintiffs should have the opportunity to proceed collectively. See
The FLSA’s collective action mechanism (1) reduces the burden on low wage employees through the pooling of resources and (2) allows for the efficient resolution of common issues of law and fact that arise from the same illegal conduct. Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1264-65 (11th Cir.2008); see also Hoffmann-La Roche, 493 U.S. at 170, 110 S.Ct. at 486 (noting a collective action affords plaintiffs the “advantage of lower individual costs to vindicate rights by the pooling of resources” and “[t]he judicial system benefits by efficient resolution in one proceeding of common issues of law and fact“).
Although collective and class actions “serve an important function in our system of civil justice,” collective and class actions present “opportunities for abuse as well as problems for courts and counsel in the management of cases.” Gulf Oil Co. v. Bernard, 452 U.S. 89, 99-100, 101 S.Ct. 2193, 2199-2200, 68 L.Ed.2d 693 (1981) (discussing Rule 23 class actions); see Hoffmann-La Roche, 493 U.S. at 171, 110 S.Ct. at 486-87 (extending reasoning of Gulf Oil to collective actions).
In particular, the benefits of the FLSA’s collection action mechanism “depend on employees receiving accurate and timely notice concerning the pendency of the collective action, so that they can make informed decisions about whether to participate.” Id. at 170, 110 S.Ct. at 486. Because formal notice to putative FLSA collective members is provided after conditional certification has been approved by the district court, pre-certification, ex parte communication with putative FLSA collective members about the case has an inherent risk of prejudice and opportunities for impropriety.
To avoid such prejudice and impropriety and to ensure the potential plaintiffs have a fair opportunity to opt-in to a FLSA collective action, the district court has the discretion to “facilitat[e] notice to potential plaintiffs” and “broad authority” to exercise control over the collective action and to govern the conduct of counsel and parties in the collective action. See Gulf Oil, 452 U.S. at 100, 101 S.Ct. at 2200 (class actions); see also Hoffmann-La Roche, 493 U.S. at 169-71, 110 S.Ct. at 486 (affirming the power of district courts to exercise control over collective actions); Kleiner v. First Nat’l Bank of Atlanta, 751 F.2d 1193, 1200 (11th Cir.1985) (noting the district court’s “preeminent role in managing the notification process“).
A district court’s authority to control counsels’ conduct in a § 216(b) collective action includes the authority to prevent confusion and unfairness concerning an FLSA collective action. See Hoffmann-La Roche, 493 U.S. at 169-71, 110 S.Ct. at 486. It also includes “authority to manage the process of joining multiple parties in a manner that is orderly, sensible, and not otherwise contrary to statutory commands or the provisions of the Federal Rules of Civil Procedure.” Id. at 170, 110 S.Ct. at 486 (citing
Indeed, because of the potential for abuses in collective actions, such as unapproved, misleading communications to absent class members, “the court has a managerial responsibility to oversee the joinder of additional parties to assure that the task is accomplished in an efficient and proper way.” See id. at 170-71, 110 S.Ct. at 486. The district court also has the responsibility to insure that all parties act fairly while the court decides whether and how the action will move forward under the FLSA. See id. at 169-71, 110 S.Ct. at 486.
The district courts’ interest in managing collective actions in an orderly fashion is reinforced by Rule 83(b), which allows courts to “regulate their practice in any manner consistent with” federal or local rules.
C. Court’s Authority to Correct the Effects of Citi Trends’s Conduct
Given the “broad authority” that the district court has to manage parties and counsel in an FLSA collective action, the district court did not abuse its discretion in determining that Citi Trends’s conduct in the summer of 2012 undermined the court’s authority to manage the collective action. Nor did the district abuse its discretion in determining that—to correct the effect of Citi Trends’s misconduct—it would allow putative collective action members to join the lawsuit notwithstanding their coerced signing of the arbitration agreements.
Whatever right Citi Trends may have had to ask its employees to agree to arbitrate, the district court found that its effort in the summer of 2012 was confusing, misleading, coercive, and clearly designed to thwart unfairly the right of its store managers to make an informed choice as to whether to participate in this FLSA collective action. Since the arbitration agreements by their terms will directly affect this lawsuit, the district court had authority to prevent abuse and to enter appropriate orders governing the conduct of counsel and the parties. See Hoffmann-La Roche, 493 U.S. at 171, 110 S.Ct. at 486-87; see also Kleiner, 751 F.2d at 1203 (class action).
The district court simply did what other district courts routinely do: exercise discretion to correct the effects of pre-certification communications with potential FLSA collective action members after misleading, coercive, or improper communications are made.11 See, e.g., Balasanyan v. Nordstrom, Inc., No. 11-CV2609-JM-WMC, 2012 WL 760566, at *1-2, 4 (S.D.Cal. Mar. 8, 2012) (refusing to enforce individual arbitration agreement in an FLSA action because the defendant’s imposition of the agreement was an improper class communication); Williams v. Securitas Sec. Servs. USA, Inc., No. 10-7181, 2011 WL 2713818, at *3, *8-12 (E.D.Pa. July 13, 2011) (invalidating arbitration agreement imposed on the defendant’s employees dur-
District courts’ corrective actions have included refusal to enforce arbitration agreements instituted through improper means and where the timing of the execution of those agreements was similar to the post-filing, pre-certification timing in this case. See, e.g., Balasanyan, 2012 WL 760566, at *1-2; Williams, 2011 WL 2713818, at *3; see also In re Conversion Fee Antitrust Litig., 361 F.Supp.2d at 252-54 (imposing similar corrective action in Rule 23 class action).
The district court did not abuse its discretion in correcting the effects of Citi Trends’s improper behavior in this case. The district court held an initial hearing, after which it denied Citi Trends’s motion to compel arbitration. The court then reconsidered its order, held an additional two-day evidentiary hearing, made specific and detailed findings of fact that were supported by the record, and took minimal action to correct the effects of Citi Trends’s conduct.
The district court limited its order temporally and substantively. The district court limited its order to those agreements signed under the coercive conditions used by Citi Trends in the summer of 2012. And, the district court limited its order to this particular FLSA action. The court specifically said that it was not ruling on the enforceability of the arbitration agreements as they relate to other cases or controversies. The district did not restrict Citi Trends from entering into new arbitration agreements with the store managers; nor did the court prevent store managers from electing to comply with the terms of the arbitration agreements that they signed in the summer of 2012.
The district court’s limited remedial action is not an abuse of its considerable discretion to manage this collective action. Accord Kleiner, 751 F.2d at 1203 (holding that a district court’s power to manage a class action included the power to prohibit a defendant from making “unsupervised,
Because we affirm the district court’s decision to deny enforceability of the arbitration agreements in this case, we necessarily must affirm the district court’s order denying Citi Trends’s motion to compel arbitration.12
III. CONCLUSION
Because the district court did not abuse its discretion in managing the parties’ and counsels’ conduct in this FLSA collective action, the district court’s order denying Citi Trends’s motion to compel arbitration is affirmed.13
AFFIRMED.