In re Citizens Bank, N.A.

15 F.4th 607

IN RE: CITIZENS BANK, N.A., Petitioner

No. 19-3046

United States Court of Appeals, Third Circuit.

Filed: October 5, 2021

Thomas E. Hill, Holland & Knight, 400 South Hope Street, 8th Floor, Los Angeles, CA 90071, Brian A. Sutherland, Reed Smith, 101 Second Street, Suite 1800, San Francisco, CA 94105, Christina Tellado, Holland & Knight, 400 South Hope Street, 8th Floor, Los Angeles, CA 90071, Kim M. Watterson, Reed Smith, 225 Fifth Avenue, Suite 1200, Pittsburgh, PA 15222, Counsel for Petitioner

Justin L. Swidler, Joshua S. Boyette, Swartz Swidler, 1101 Kings Highway North, Suite 402, Cherry Hill, NJ 08034, Daniel A. Horowitz, O'Brien Belland & Bushinsky, 509 South Lenola Road, Building 6, Moorestown, NJ 08057, Robert D. Soloff, 7805 Southwest 6th Court, Plantation, FL 33324, Counsel for Respondents

Before: SMITH, Chief Judge, SHWARTZ and SCIRICA, Circuit Judges

OPINION OF THE COURT

SMITH, Chief Judge.

Twelve current and former mortgage loan officers (MLOs) claim that Citizens Bank forced them—and more than a thousand of their colleagues—to work over forty hours a week without paying them the overtime they were due under state and federal law. They filed a single complaint bringing a collective action under the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 207, 216, and parallel state-law claims that they wished to pursue as a class action under Rule 23 of the Federal Rules of Civil Procedure.¹

The District Court scheduled a trial on the primary factual issue in the FLSA opt-in collective action but left unresolved whether it would certify a class for the state-law opt-out Rule 23 action. Because the FLSA collective action and the Rule 23 class action turn on the same facts, Citizens strongly objected to that procedural order of business. Yet the District Court essentially ignored Citizens’ objections.

With a trial date looming, Citizens filed a petition in our Court for a writ of mandamus. We stayed the case to decide that petition. This opinion explains our decision to issue the stay.

I.

Before discussing the specifics of the parties’ dispute, we will first compare and contrast the two types of aggregate litigation that Plaintiffs are simultaneously pursuing: an FLSA opt-in collective action and a Rule 23(b)(3) opt-out class action.

We begin with the FLSA, which provides a private cause of action against an employer for failing to pay overtime for a workweek of more than forty hours. 29 U.S.C. § 207(a). An FLSA action may be brought "by any one or more employees for and [on] behalf of himself or themselves and other employees similarly situated." 29 U.S.C. § 216(b). The FLSA thus "provides a vehicle for managing claims of multiple employees against a single employer." Halle v. W. Penn Allegheny Health Sys., Inc. , 842 F.3d 215, 223 (3d Cir. 2016). However, "[n]o employee shall be a party plaintiff to any such action 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).

Accordingly, after a "modest factual showing" by the named plaintiffs, a district court must first conditionally certify that the proposed collective action plaintiffs are "similarly situated."² Halle , 842 F.3d at 224 (citation omitted); 29 U.S.C. § 216(b). Conditional certification permits the dissemination of a court-approved notice to all potential plaintiffs, who are then given the opportunity to affirmatively opt in as plaintiffs to the lawsuit. Halle , 842 F.3d at 224.

Once the FLSA plaintiffs provide written notice that they have opted in to the collective, the parties conduct certification-related discovery and, eventually, the group of plaintiffs moves for final certification. Id. at 225. The group then bears the burden of demonstrating by a preponderance of the evidence that they are all "similarly situated" under the FLSA. Id. at 226. If the District Court finally certifies the FLSA collective action, the matter goes forward with the participation of all plaintiffs who have opted in. Id . If, on the other hand, final certification is denied, the opt-in plaintiffs are dismissed as plaintiffs and only the original named plaintiffs proceed to trial. Id.

Turning to the class action device, Rule 23(a) provides that a matter may proceed as a class action only if: the class is so numerous that joinder of all members is impracticable; there are questions of law or fact common to the class; the claims or defenses of the representative parties are typical of the claims or defenses of the class; and the representative parties will fairly and adequately protect the interests of the class. Further, under Rule 23(b)(3), the District Court must find that questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

These issues must be resolved when a District Court decides whether or not to certify a class. Certification requires a two-step analysis in which the District Court must first determine whether the putative class satisfies the numerosity, commonality, typicality, and adequacy of representation provisions of Rule 23(a), and then proceeds to analyze the predominance and superiority provisions of Rule 23(b)(3). Reinig v. RBS Citizens , 912 F.3d 115, 124–25 (3d Cir. 2018). Class certification is appropriate only if, after "rigorous analysis," the District Court concludes that plaintiffs satisfy each and every element by a preponderance of the evidence. Id. at 125 (quoting Marcus v. BMW of N. Am. , 687 F.3d 583, 591 (3d Cir. 2012) ); see also Gen. Tel. Co. of the Sw. v. Falcon , 457 U.S. 147, 161, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982). The class certification decision must happen "at an early practicable time." Fed. R. Civ. P. 23(c)(1)(A). And such a decision—unlike a certification in the FLSA context—may be immediately appealed under Rule 23(f).

Certification of a class means that all individuals falling within the class definition will be bound by the judgment unless they affirmatively request to be excluded. Fed. R. Civ. P. 23(c)(2)(B). Accordingly, after a class is certified, court-approved notice is provided to all class members to advise them, inter alia , of the binding effect of a judgment and to permit them an opportunity to opt out of the class. Fed. R. Civ. P. 23(c)(2). This opt-out opportunity under Rule 23 stands in sharp contrast to the FLSA's opt-in requirement, and "is the most conspicuous difference between the FLSA collective action device and a class action under Rule 23." Halle , 842 F.3d at 225 ; see also Reinig , 912 F.3d at 132.

Despite these marked differences, we have held that an FLSA opt-in collective action is not, by its nature, incompatible with a parallel state law Rule 23 opt-out class action. Knepper v. Rite Aid Corp. , 675 F.3d 249, 261 (3d Cir. 2012). Yet the present mandamus petition brings into sharp relief some of the potential challenges of trying a case that simultaneously includes both forms of aggregate litigation.

II.

With these differences between the FLSA opt-in collective action and the Rule 23 opt-out class action firmly in mind, we return to the procedural history of the parties’ dispute.

In November 2015, three current and former MLOs, Alex Reinig, Ken Gritz, and Bob Soda, filed a complaint alleging that Citizens maintains an unofficial policy or practice requiring MLOs to work off the clock in excess of forty hours per week without paying overtime wages due in accordance with the FLSA, 29 U.S.C. § 207, and Pennsylvania law, 43 Pa. Stat. Ann. § 260.1 et seq ., and § 333.101 et seq .³

Plaintiffs moved for conditional certification of an FLSA opt-in collective action, which the District Court granted in May 2016. Mem. Order May 3, 2016. The District Court concluded that, for FLSA certification purposes, Plaintiffs "established that the ‘off the clock’ claims are related to Citizens’ policy. ..." Id. at 5. Shortly thereafter, the District Court scheduled a trial for September 25, 2017.

After granting conditional FLSA certification, the District Court ordered Plaintiffs to notify the potential members of the collective that they would have 100 days to opt in to the FLSA action. In accordance with the District Court's order, Plaintiffs sent notice to over 1,000 current and former MLOs. Of those, 351 provided the requisite consent forms allowing them to opt in.

After the 100-day period expired, Plaintiffs filed an amended complaint adding nine named plaintiffs to the lawsuit, alleging state law claims arising from the laws of Connecticut, Illinois, Massachusetts, Michigan, New Hampshire, New York, North Carolina, Ohio, and Rhode Island as well as Pennsylvania.⁴ Shortly after filing the amended complaint, Plaintiffs filed a motion for class certification under Rule 23, seeking certification of ten classes, each of which would pursue claims under the overtime laws of a particular state. Citizens responded with two related submissions: one opposing the class certification motion and the other seeking decertification of the FLSA collective action. The parties also filed cross-motions for summary judgment.

By stipulation, the parties agreed to the appointment of a Special Master, who recommended, inter alia , certifying a class for Plaintiffs’ state law claims under Rule 23, denying Citizens’ motion for decertification of the FLSA collective action, and granting final FLSA certification. In its objections to the Special Master's recommendations, and central to the matter before us, Citizens argued that the scheduled FLSA trial date must be postponed because the putative class had not yet been notified of the Rule 23 certification decision, and therefore had not been given a chance to opt out.

The District Court adopted the Special Master's report and recommendations in full. In addition to certifying the Rule 23 state law classes,...