Labor & Employment Law Daily Wrap Up, TOP STORY—1st Cir.: Out-of-state ‘opt-in’ plaintiffs survive motion to dismiss for lack of personal jurisdiction, (Jan 14, 2022)

By Ronald Miller, J.D.

The Supreme Court’s ruling in Bristol-Myers had no bearing on a district court’s exercise of personal jurisdiction over the opt-ins because the employee’s suit was brought in federal court pursuant to the FLSA’s provisions governing collective actions.

A divided First Circuit, in an interlocutor ...

By Ronald Miller, J.D.

The Supreme Court’s ruling in Bristol-Myers had no bearing on a district court’s exercise of personal jurisdiction over the opt-ins because the employee’s suit was brought in federal court pursuant to the FLSA’s provisions governing collective actions.

A divided First Circuit, in an interlocutory appeal, affirmed a district court’s denial of an employer’s motion to dismiss out-of-state opt-in plaintiffs for lack of personal jurisdiction, in an FLSA collective action alleging that the employer failed to pay employees overtime wages. Contrary to the employer’s contention, the appeals court found no basis for concluding that the district court’s exercise of jurisdiction over the opt-in claims would be improper when there was no dispute the named plaintiff properly served the employer. Further, the appeals court observed that the FLSA and its legislative history showed that Congress created the collective action mechanism to enable all affected employees working for a single employer to bring suit in a single, collective action. Judge Barron filed a separate dissenting opinion (Waters v. Day & Zimmermann NPS, Inc., January 13, 2022, Dyk, T.).

Day & Zimmermann, the employer, provides services to power plants. It is incorporated in Delaware and maintains its principal place of business in Pennsylvania. The plaintiff in this action worked as a mechanical supervisor for the company in Massachusetts.

Collective action. In July 2019, the employee filed a “collective action” complaint against the employer alleging that it violated the FLSA’s overtime-wage provisions because it paid the same hourly rate for all hours worked, including those in excess of 40 in a workweek. Other employees filed written “opt-in” consent forms to participate in the collective action.

In September 2019, the employer moved to dismiss the claims of those opt-ins who had not been employed in Massachusetts. The employer relied on the Supreme Court’s ruling in Bristol-Myers Squibb v. Superior Court of California, 137 S. Ct. 1773, 1779, 1781 (2017). Bristol-Myers held that in view of the Fourteenth Amendment, state courts cannot entertain a state-law mass action if it includes out-of-state plaintiffs with no connection to the forum state. The employer claimed that Bristol-Myers required the dismissal of the opt-in claims because the district court lacked either general or specific personal jurisdiction as to those claims.

The district court denied the employer’s motion to dismiss opt-in claims. It determined that the Supreme Court’s ruling in Bristol-Myers had no bearing on its exercise of personal jurisdiction over the opt-ins because the employee’s suit was brought in federal court pursuant to the FLSA’s provisions governing collective actions, and the opt-ins had joined the suit in accord with that statute’s procedures. Thereafter, the First Circuit granted the employer’s petition to bring an interlocutory appeal.

Opt-in plaintiffs as parties. Before addressing the merits of the employer’s appeal, the appeals court examined whether the opt-in plaintiffs were parties to the action in the district court. The opt-ins’ party status hinged on the question whether they became parties as a result of filing opt-in notices, or whether they could become parties only after the district court conditionally certified that they were “similarly situated.”

The appeals court determined that conditional certification had no bearing on whether the opt-in plaintiffs become parties to the action. The FLSA provides that “[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.” This provision makes clear that in collective actions, opt-in plaintiffs become parties to the proceedings when they give “consent in writing to become such a party and such consent is filed in the court.” Both the Supreme Court and nearly all the circuits that have considered the question agree that opt-in plaintiffs become parties to the action without regard to conditional certification.

Personal jurisdiction. The employer argued that Bristol-Myers required dismissal of the nonresident opt-in claims because the Massachusetts district court lacked either general or specific personal jurisdiction as to those claims. Here, it was agreed that the Fourteenth Amendment does not directly limit a federal court's jurisdiction over purely federal-law claims. Rather, the “constitutional limits” of a federal court’s jurisdiction over federal-law claims are drawn with reference to the Due Process Clause of the Fifth Amendment.

The Fifth Amendment does not bar an out-of-state plaintiff from suing to enforce their rights under a federal statute in federal court if the defendant maintained the “requisite ‘minimum contacts’ with the United States.” There was no contention here that the opt-in plaintiffs lack such contacts with the United States.

Rule 4(k). Still, the employer argued that Rule 4(k)(1) governed not just service of a summons, but also limits a federal court’s jurisdiction after the summons is properly served. Thus, the appeals court had to decide whether Rule 4(k)(1) operated as a free-standing limitation on the exercise of personal jurisdiction in collective actions such as those enabled by the FLSA. However, the appeals court was not persuaded.

Rule 4 is limited to setting forth various requirements for effectively serving a summons on a defendant in federal court, thereby establishing personal jurisdiction over the defendant. Turning to subsection (k) of Rule 4, the appeals court observed that it was apparent it addresses an aspect of how a summons may be served. Nowhere does it suggest that Rule 4 deals with anything other than service of a summons, or that Rule 4 constrains a federal court’s power to act once a summons has been properly served, and personal jurisdiction has been established.

The appeals court found no textual basis in Rule 4 for concluding that the district court’s exercise of jurisdiction over the opt-in claims would be improper when “there is no dispute the named plaintiff properly served [D&Z]” by serving a summons in accord with Rule 4(c). Moreover, the appeals court observed that the history of Rule 4(k) showed that its limited purpose was to govern service of a summons, not to limit the jurisdiction of the federal courts after a summons has been served.

Another reason the appeals court declined to read Rule 4(k)(1)(A) as limiting the court’s authority over the added plaintiffs is that Rule 20 already defines that authority. Rule 20 sets the limit for allowing additional parties to join a pre-existing lawsuit permitting joinder of those parties with claims arising out of the “same transaction [or] occurrence” and presenting common “question[s] of law or fact.” The FLSA’s “similarly situated” limitation for collective actions displaces Rule 20 and limits the range of individuals who may be added as opt-in plaintiffs by requiring that they be “similarly situated.”

Finally, the FLSA and its legislative history show that Congress created the collective action mechanism to enable all affected employees working for a single employer to bring suit in a single, collective action.

Accordingly, the appeals court affirmed the district court’s denial of the employer’s motion to dismiss nonresident opt-in plaintiffs.

Dissent. In a dissenting opinion, Judge Barron argued that the majority decided a significant question of first impression in the First Circuit about the meaning of Rule 4(k)(1)(A) in a manner that created a conflict with the rulings of two circuits. In his view, there was no reason for the appeals court to decide this question at this time, given the interlocutory posture of this appeal. Barron would dismiss the appeal, thereby following the court’s usual wait-and-see approach when confronted with a request to decide an appeal from a denial of a motion to dismiss. The court would thereby ensure that it would not be deciding a major question about the meaning of the federal rules in a case in which it may turn out not to be necessary for it to decide the question at all.

The case is No. 20-1997.

Attorneys: David B. Salmons (Morgan, Lewis & Bockius) for Day & Zimmermann NPS, Inc. Richard J. Burch (Bruckner Burch) for John Waters.

Companies: Day & Zimmermann NPS, Inc.

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