STATE OF TEXAS, Plаintiff - Appellee v. CHIPOTLE MEXICAN GRILL, INCORPORATED; CHIPOTLE SERVICES, L.L.C., Petitioners - Appellees v. UNITED STATES DEPARTMENT OF LABOR, Defendant; CARMEN ALVAREZ, and her Counsel, Respondent - Appellant
No. 18-40246
United States Court of Appeals for the Fifth Circuit
July 2, 2019
Before JOLLY, DENNIS, and HIGGINSON, Circuit Judges.
Appeal from the United States District Court for the Eastern District of Texas
In November 2016, the United States District Court for the Eastern District of Texas (the Texas federal court) enjoined the Department of Labor’s
One week after filing its answer in the New Jersey federal court, Chipotle moved in the Texas federal court to hold Alvarez and her attorneys in contempt.2 After a hearing, the Texas federal court held Alvarez and her counsel in contempt, reasoning that they were bound by the November 2016 injunction because they had acted in privity with the DOL and therefore their lawsuit and allegations against Chipotle in the New Jersey federal court were in violation of the injunction. The court also assessed attorneys’ fees against them. Alvarez and her attorneys appealed.
The issue is whether the Texas federal court may hold Carmen Alvarez and her lawyers in cоntempt for filing the FLSA lawsuit against Chipotle in
I. BACKGROUND
A. The Nevada v. DOL Injunction
On November 22, 2016, in Nevada v. United States Dep’t of Labor, 218 F. Supp. 3d 520, 524–25 (E.D. Tex. 2016), the Texas federal court entered a preliminary injunction against the DOL and its agents in favor of Nevada and twenty other states,3 enjoining the Overtime Rule and the DOL from enforcing or implementing the rule. Specifically, the Overtime Rule proposed to substantially expand the class of employees entitled to overtime pay by raising the salary threshold by which executive, administrative, and professional employees are exempted from the right to overtime pay under the FLSA.
B. The Alvarez v. Chipotle Action (The New Jersey Action)
In June 2017, six months after the district court’s preliminary injunсtion in Nevada v. DOL, Carmen Alvarez, through her lawyers (together with Alvarez, Respondents), filed a lawsuit against Chipotle, her former employer,
C. The Present Contemрt Proceeding by Chipotle Against Alvarez and Her Counsel
On August 1, 2017, Chipotle filed a motion against Respondents in the Texas federal court in the Nevada v. DOL action, asking that court to hold them in contempt for violating the injunction issued in that case.6 Other than filing an answer in the New Jersey action, Chipotle did not further engage in that litigation.7 Chipotle contended in its contempt motion that Alvarez was bound by the injunction because the DOL had adequately represented her interests in that litigation, making her its privy, and that the court should hold her and her lawyers in contempt for alleging and invoking the Overtime Rule in the New Jersey action. Respondents argued that the Texas federal court lacked personal jurisdiction over them; that the Nevada v. DOL injunction did not bind them under
On March 19, 2018, the district court granted Chipotle’s motion and held Respondents in contempt. In its opinion, the district court rejected Respondents’ argument that it lacked personal jurisdiction over them. It concluded that Alvarez was bound by the injunction in privity with the DOL because the DOL represents the interests of employees like Alvarez; that its injunction was “wholly unambiguous” in proscribing the filing of private lawsuits alleging or invoking the Overtime Rule; and that, although Chipotle’s service of process on Respondents was imperfect, Respondents had not proven they were prejudiced thereby. The court ordеred that Respondents pay Chipotle’s attorneys’ fees for the contempt proceeding.8 Respondents timely appealed,9 contending that the Texas federal court’s injunction did not bind them in any way.
II. STANDARD OF REVIEW
We review a district court’s contempt determination for abuse of discretion. See Piggly Wiggly Clarksville, Inc. v. Mrs. Baird’s Bakeries, 177 F.3d 380, 382 (5th Cir. 1999). Thus, “[t]he district court’s underlying findings of fact are reviewed for clear error and its underlying conclusions of law reviewed de novo.” Am. Airlines, Inc. v. Allied Pilots Ass’n, 228 F.3d 574, 578 (5th Cir. 2000). The district court’s ultimate finding thаt privity existed
III. DISCUSSION
A. The District Court Erred in Concluding that Respondents Acted in Privity with the DOL
We consider here the proper reach of an injunction—specifically, the extent to which an injunction can bind individuals who are not parties to the action in which the injunction is entered. “‘It is a principle of general application . . . that one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process.’” Taylor v. Sturgell, 553 U.S. 880, 884 (2008) (quoting Hansberry v. Lee, 311 U.S. 32, 40 (1940)); Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 110 (1969) (“It is elementary that one is not bound by a judgment in personam resulting from litigation in which he is not designated as a party or to which he has not been made a party by service of process.”); see also Freeman v. Lester Coggins Trucking, Inc., 771 F.2d 860, 865–66 (5th Cir. 1985) (“An underlying principle is that ‘[i]t is a violation of due process for а judgment [in a prior suit] to be binding on a litigant who was not a party or a privy and therefore has never had an opportunity to be heard.’” (quoting Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 327 n.7 (1979))). This principle derives from the “‘deep-rooted historic tradition that everyone
“
For privity, “[f]ederal courts have deemed” three “types of relationships ‘sufficiently close’ to justify preclusion”: (1) “a non-party who has succeeded to a party’s interest in property,” (2) “a non-party who controlled the original suit,” and (3) “a non-party whose interests were represented adequately by a party in the original suit.” Sw. Airlines Co. v. Tex. Int’l Airlines, Inc., 546 F.2d 84, 95 (5th Cir. 1977). As to the third type, adequate representation does not exist where a nonparty is merely interested in the same issue or same set of facts, “or because the issue being litigated is one that might affect their interests by providing a judicial precedent that would be applied in a subsequent action.” 11A FED. PRAC. & PROC. CIV. § 2956, at 390 (citing Int’l Bhd. of Teamsters v. Keystone Freight Lines, 123 F.2d 326 (10th Cir. 1941); Baltz v. The Fair, 178 F. Supp. 691, 693 (N.D. Ill. 1959), aff‘d, 279 F.2d 899 (7th Cir. 1960)). “Similarly, the mere fact that a person has committed the enjoined act does not necessarily mean that the injunction should be enforced against that person.” 11A FED. PRAC. & PROC. CIV. § 2956, at 390. Ultimately, a determination that privity exists “represents a legal conclusion that the relationship between the one who is a party on the record and the non-party is sufficiently close.” Sw. Airlines, 546 F.2d at 95; Freeman, 771 F.2d at 864; see
Here, the first two subparts of
In erroneously finding Respondents in privity with the DOL, the district court relied exclusively on this court’s preclusion decision in Southwest Airlines Co. v. Texas International Airlines, Inc., 546 F.2d 84 (5th Cir. 1977). However, the holding of preclusion in Southwest Airlines is inapposite here. The Southwest Airlines litigation began when the Cities of Dallas and Fort Worth and the Dallas/Fort Worth Regional Airport Board (the DFW Airport Board)
In affirming the district court’s order enjoining the state suit, this court held that the interstate airline plaintiffs were in privity with the governmental entities—the cities of Dallas and Fort Worth, and the DFW Airport Board—in the prior federal suit for preclusion purposes because the “legal interests of the carriers do not differ from those of [the government entities] in [the earlier lawsuit]” and thus “they received adequate representation in the earlier litigation and should be bound by the judgment.” Id. at 100. This court was careful to note that the government entities adequately represented the plaintiff carriers’ interests in this later litigation only because of certain specific facts: (1) the carriers “d[id] not claim a breach of legal duty by Southwest, apart from the alleged violation of the general duty to obey valid ordinances,” (2) “the carriers request[ed] the same remedy denied the [government entities], namely the enforcement of the phase-out provision of the ordinance to exclude Southwest from Love Field,” and (3) “the ordinance
The district court was in error in concluding that Southwest supports a finding of privity between Respondents and the DOL. Alvarez’s FLSA action in New Jersey relies on far more thаn a “general duty to obey valid ordinances” as those at issue in the interstate airlines’ lawsuit in Southwest, see 546 F.2d at 100. The FLSA imposes a legal duty on every employer to pay overtime to non-exempt employees and, unlike the phase-out ordinance at issue in Southwest, explicitly establishes a private right of action to enforce that duty. See
Importantly, in Southwest, this court expressly endorsed the proposition that government actors would not be in privity with private litigants under Title VII, a federal employment statute that, similar to the FLSA, authorizes both government litigation and private actions. See 546 F.2d at 98 (citing Rodriguez v. E. Tex. Motor Freight, 505 F.2d 40 (5th Cir. 1977), vacated on other grounds sub nom. E. Tex. Motor Freight Sys. Inc. v. Rodriguez, 431 U.S. 395 (1977); Williamson v. Bethlehem Steel Corp., 468 F.2d 1201 (2d Cir. 1972)). In doing sо, this court noted that “litigation by a government agency will not preclude a private party from vindicating a wrong that arises from related facts but generates a distinct, individual cause of action.” Southwest, 546 F.2d at 98. Such actions, like Alvarez’s FLSA lawsuit, are “for violation of distinct
More generally, Chipotle’s theory that the DOL rеpresents every worker’s legal interests through its enforcement of the FLSA so as to bind every worker in the United States to an injunction where the DOL is the only bound party lacks authoritative support. Although, as the district court noted, the FLSA concerns itself with “the general welfare of employees employed in certain industries engaged in American commerce,” Congress’s statement of such a policy dоes not create a legal nexus or the kind of close identity of interests between a party to litigation and a nonparty required to amount to privity. Instead, as in Title VII discrimination suits, Alvarez’s New Jersey action “claim[s] remedies distinct from the relief imposed in the government litigation” and complains of a “violation of distinct legal duties owed individual employees.” Southwest, 546 F.2d at 98–99 (citing Rodriguez, 505 F.2d 40; Williamson, 468 F.2d 1201).10
Because Respondents were nоt in privity with the DOL and not otherwise bound by the injunction, the district court erred in granting Chipotle’s motion for contempt.11
Because the district court’s contempt order exceeded the bounds of
***
For these reasons, the judgment of the district court is REVERSED, and judgment is RENDERED in favor of Respondents.
Notes
[T]he Department’s Final Rule described at 81 Fed. Reg. 32,391 is hereby enjoined. Specifically, Defendants are enjoined from implementing and enforcing the following regulations as amended by 81 Fed. Reg. 32,391;
29 C.F.R. §§ 541.100 ,541.200 ,541.204 ,541.300 ,541.400 ,541.600 ,541.602 ,541.604 ,541.605 , and541.607 pending further order of this Court.