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Ervin v. OS Restaurant Services

July 1, 2009

DENEENE D. ERVIN, ELIZABETH L. DYE AND DAWN HARDY, ON BEHALF OF THEMSELVES AND ALL OTHER PERSONS SIMILARLY SITUATED, KNOWN AND UNKNOWN, PLAINTIFFS,
v.
OS RESTAURANT SERVICES, INC., D/B/A OUTBACK STEAKHOUSE, DEFENDANT.



The opinion of the court was delivered by: Judge Ronald A. Guzmán

MEMORANDUM OPINION AND ORDER

Plaintiffs have sued OS Restaurant Services, Inc., d/b/a Outback Steakhouse ("Outback") for violations of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201, et seq., the Illinois Minimum Wage Law ("IMWL"), 820 Ill. Comp. Stat. 105/1, et seq., and the Illinois Wage Payment and Collection Act ("IWPCA"), 820 Ill. Comp. Stat. 115/1, et seq. The Court referred plaintiffs' motion for class certification to Magistrate Judge Denlow, who issued a Report and Recommendation ("R&R") to which both plaintiffs and defendant have objected. For the reasons set forth below, the Court rejects plaintiffs' and defendant's objections and adopts the R&R in its entirety.

Discussion

The Court reviews de novo the portions of a magistrate judge's ruling on a motion for class certification to which a party objects. 28 U.S.C. § 636(b)(1); see Harper-Wyman Co v. Conn. Gen. Life Ins. Co., No. 86 C 9595, 1991 WL 18467, at *1 (N.D. Ill. Feb. 8, 1991). The court may "accept, reject, or modify" the R&R, "receive further evidence or recommit the matter to the magistrate judge with instructions." 28 U.S.C. § 636(b)(1).

Magistrate Judge Denlow recommends that plaintiffs' motion for class certification be: (1) denied without prejudice with respect to plaintiffs' IMWL and IWPCA claims for unpaid overtime and defendant's failure to pay minimum wage; and (2) granted with respect to plaintiffs' FLSA claim for defendant's failure to pay minimum wage. Plaintiffs contend that this Court should reject the first recommendation, while defendant argues that the Court should reject the second recommendation.

To obtain certification of a class, a plaintiff must satisfy the four elements of Rule 23(a): (1) numerosity; (2) commonality; (3) typicality; and (4) adequacy of representation. See Fed. R. Civ. P. 23. Once these four elements are satisfied, a plaintiff must satisfy at least one of the requirements of Rule 23(b). Herman v. Cent. States Se. & Sw. Areas Pension Fund, No. 03 C 1010, 2003 WL 21673949, at *2 (N.D. Ill. July 17, 2003).Here, plaintiffs alleged that they satisfy Rule 23(b)(3), which is met where "questions of law or fact common to class members predominate over any questions affecting only individual members, and [where] a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3).

Magistrate Judge Denlow recommends that this Court deny certification of the IMWL and IWPCA claims because of the incompatibility of Rule 23's opt-out feature and the FLSA's opt-in feature. (See R&R 26-29.) Plaintiffs object to Magistrate Judge Denlow's recommendation and argue that a class action is the superior method of adjudicating the state law claims because it would be both efficient and economical. (See Mem. Supp. Pls.' Mot. Class Cert. 12-13.)

While the plaintiffs are correct in stating that judicial economy and efficiency are factors in deciding whether superiority exists, they simply fail to address the incompatibility between the Rule 23 class certification of state law claims and the certification of FLSA claims. (See R & R at 26-29.)

Under Rule 23, all eligible class members are included in the suit unless they choose to "opt out" of the action. Vanskike v. Peters, 974 F.2d 806, 812-13 (7th Cir. 1992). Conversely, an individual does not become a class member in an FLSA suit "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). Congress added this "opt in" provision in 1947 in response to litigation involving plaintiffs with no real personal interest in the case. Hoffman-La Roche Inc. v. Sperling, 493 U.S. 165, 173 (1989). After the addition, claims were limited to plaintiffs who "asserted claims in their own right," thereby "freeing employers of the burden of representative actions." Id. Thus, there is a clear incompatibility between the "opt out" nature of a Rule 23 action and the "opt in" nature of a Section 216 action.

This Court has previously tackled the incompatibility issue as it relates to superiority under Rule 23. In Riddle v. National Security Agency, Inc., the plaintiffs brought suit under the IWPCA and FLSA. No. 05 C 5880, 2007 WL 2746597, at *1 (N.D. Ill. Sept. 13, 2007). In that case, this Court granted plaintiffs leave to provide notice of a collective action under Section 216(b) for the FLSA claim but denied class certification of the plaintiff's IWPCA claim. Id. at *4, *10. In denying class certification of the state law claim, the focus of the inquiry was on whether adjudicating the state law claim as a class action was the superior form of adjudication. Id. at *3.

In Riddle, this Court first acknowledged the differing opinions within this district as to whether the FLSA and state law wage claims were incompatible. It found that in those cases where the court certified as class actions both the state law wage claim and FLSA collective action, the state law claims were originally brought in state court and removed to federal court by the defendant. Id. at *9. On the other hand, in the courts that refused to certify both a state law wage claim and an FLSA collective action, the state law claims were originally brought in federal court. Id. Origination of the suit is an important factor because of the difference between Rule 23's "opt-out" requirement and Section 216(b)'s "opt-in" requirement. In Riddle, the Court was concerned that such a difference would create a scenario in which "the Rule 23 class would likely dwarf the FLSA class, making the state law claims dominate the federal suit." Id. at *3. This result would undermine Congress' intent in enacting the FLSA's opt-in requirement by letting plaintiffs into federal court through the state law wage claims, even when plaintiffs did not take action to get there. Id. Here, the plaintiffs brought their IMWL and IWPCA claims in federal court rather than state court, thereby creating the potential for the scenario we were concerned about in Riddle.

Plaintiffs offer no argument to counter Riddle or its reasoning. Instead, they simply rely on their original filings, arguing that judicial efficiency and economy are justifications for superiority. (See Mem. Supp. Pls.' Mot. Class Cert. 12-13.) Given this Court's prior holding, it was proper for Magistrate Judge Denlow to follow Riddle and recommend that the incompatibility between Rule 23 and Section 216(b) precludes a finding of superiority with regard to the state law wage claims.*fn1

Magistrate Judge Denlow's second recommendation was to grant conditional certification for plaintiffs' FLSA claim. Collective action is appropriate under the FLSA when plaintiffs are "similarly situated." 29 U.S.C. § 216(b). The majority of courts in this district use a two-step approach when confronted with FLSA collective actions. Flores v. Lifeway Foods, Inc., 289 F. Supp. 2d 1042, 1045 (N.D. Ill. 2003). In the first step, courts review the evidence and decide "whether there are allegations sufficient for the court to envision a scenario where the representative plaintiff and putative claimants are 'similarly situated.'" Persin v. CareerBuilder, LLC, No. 05 C 2347, 2005 WL 3159684, at *1 (N.D. Ill. Nov. 23, 2005). At this stage, plaintiffs need only make a "modest factual showing." Flores, 289 F. Supp. 2d at 1045. The "'modest factual showing' requirement is not a stringent standard; a plaintiff need only demonstrate a factual nexus that binds potential members of a collective action together." Gambo v. Lucent Techs., Inc., No. 05 C 3701, 2005 WL 3542485, at *4 (N.D. Ill. Dec. 22, 2005). If plaintiffs can satisfy this requirement, then conditional certification is granted and notice can be given to putative claimants. Persin, 2005 WL 3159684, at *1. It is not until after notice is given and plaintiffs opt in to the suit that a court will engage in the second step by "rigorously review[ing] whether the representative plaintiff and the putative claimants are in fact similarly situated so that the lawsuit may proceed as a collective action." Id.

The magistrate judge was correct in finding that the plaintiffs have made the modest factual showing required at the first stage that defendant had a common policy of both using tip credit employees to perform non-tipped jobs. The deposition testimony of Elizabeth Dye and Tavia Hardy describes a vast array of side jobs they performed during their time as Outback's tip credit employees. (See Pls.' Ex. 1, Dye Dep. at 320:15-331:25; Pls.' Ex. 2, Hardy Dep. at 53:6-169:8.) Further, the declarations of five former Outback employees discuss the work servers and hosts performed that was unrelated to the tipped occupation. (See Pls.' Ex. 3, Marion Decl. ¶¶ 10-11; Pls.' Ex. 4, Gruberman Decl. ¶¶ 3-4; Pls.' Ex. 5, Jones Decl. ¶ 3; Pls.' Ex. 6, Clark Decl. ¶ 4; Pls.' Ex. 7, Haywood Decl. ¶ ...


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