Opinion
Case No. SA CV 02-507-GLT(MLGx)
October 18, 2002
DENIAL OF APPLICATION TO PREVENT DEFENSE COMMUNICATIONS
On apparent first impression, the Court holds that, in a representative action for unpaid wages or overtime under the Fair Labor Standards Act, 29 U.S.C. § 216(b), a defendant employer may communicate with prospective plaintiff employees who have not yet "opted in," unless the communication undermines or contradicts the Court's own notice to prospective plaintiffs.
I. BACKGROUND
The named Plaintiffs sued their employer for unpaid overtime wages under the Fair Labor Standards Act. They moved under 29 U.S.C. § 216(b) to designate the case as a representative action and give a Court notice to prospective plaintiffs. The Court granted the motion and ordered an appropriate notice.
Before the Court's notice was sent, Defendant sent to its prospective plaintiff sales agent employees an internal memorandum about the case. In particular, Defendant advised employees they could contact Defendant's general counsel to answer any questions they might have. (The memo is attached as an Appendix.)
Plaintiff filed an application to prevent Defendant from communicating with prospective plaintiffs, and require Defendant to pay for a corrective notice.
II. DISCUSSION
The restrictions on defendant communication with class action plaintiffs arise from the existence of an attorney-client relationship. A lawyer is forbidden from communicating with a party the lawyer knows is represented by counsel regarding the subject of the representation, absent counsel's consent. Rules of Professional Conduct of the California State Bar, Rule 2-100; ABA Model Rules of Professional Conduct, Rule 4.2 (1983). In a class action certified under Rule 23, Federal Rules of Civil Procedure, absent class members are considered represented parties unless they choose to "opt out," and defendants cannot contact them without plaintiff counsel's consent. See Fulco v. Continental Cablevision, Inc., 789 F. Supp. 45, 47 (Mass. 1992), collecting authorities.
The situation is different in a § 216(b) representative action for unpaid wages or overtime. Section 216(b) provides, "(n]o employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party . . ." Until they "opt-in," prospective § 216(b) plaintiffs are not yet plaintiffs, they have no attorney, and no attorney-client relation is yet in issue. The Court's authorization to give notice in a § 216(b) case does not create a class of represented plaintiffs, as it does in a Rule 23 class action case.
For purposes of defense communication with prospective plaintiff 6, he situation is more analogous to a Rule 23 class action case before there has been a certification, and the prospective plaintiffs are still unrepresented by counsel. The main difference in such a comparison is that, in a § 216(b) case after Court notice is authorized, the Court has an interest that no defense communication undermine or contradict the Court's own notice. However, in other respects, the defense communication allowed in a § 216(b) representative action during the period before a prospective plaintiff "opts in" should be the same as in a Rule 23 class action before certification and creation of a represented class.
In opposition, plaintiff cites Resnick v. American Dental Association, 95 F.R.D. 372 (N.D.Ill. 1982), an employment discrimination case which is apparently a representative action rather than a Rule 23 class action, for the proposition that, once there is certification, the defendant cannot have ex parte communications with potential class members. Resnick is of little persuasive value: it simply treats the action as a "class action," making no distinction between an "opt-in" and an "opt-out" situation or when the represenation by counsel begins. Resnick does not assist the Court's analysis.
In a Rule 23 class action, pre-certification communication from the defense to prospective plaintiffs is generally permitted. The law is not settled on this issue, but the majority view of the authorities seems to be against a ban on pre-certification communication between Defendant and potential class members.
The Second Circuit, state and federal district courts in California, and a leading treatise conclude pre-certification communication is permissible because no attorney-client relationship exists. Weight Watchers of Philadelphia v. Weight Watchers Int'l, Inc., 455 F.2d 770 (2nd Cir. 1972) (rejecting argument that "once a plaintiff brought suit on behalf of a class, the court may never permit communications between the defendant and other members"); Babbit v. Albertson's Inc., 1993 WL 128089 (N.D.Cal. 1993) (finding "putative class members in the instant action were not represented by class counsel"); Atari v. Superior Ct. of Santa Clara County, 166 Cal.App.3d 867 (1985) ("Absent a showing of actual or threatened abuse, both sides should be permitted to investigate the case fully"); Manual for Complex Litigation, § 30.24 ("Defendants ordinarily are not precluded from communications with putative class members, including discussions of settlement offers with individual class members before certification").
Although many of the cases involve an advance application to the Court to approve a defendant's communication, there appears to be no basis for restricting communications to those having advance court approval.
Plaintiffs' best authority for prohibiting Rule 23 pre-certification communication is Dondore v. NGK Metals Corp., 152 F. Supp.2d 662 (E.D. Pa. 2001), holding the "mere initiation of a class action" prohibits defense counsel contacting or interviewing potential class members. The Dondore court reasoned putative members of a class action are passive beneficiaries because they do not have to do anything to benefit from the suit. This logic is not as applicable in this representative action where potential plaintiffs must affirmatively opt-in to benefit from the suit. In any event, the better weight of authority seems unwilling to adopt the Dondore view.
Other cases restricting pre-certification contact are situations where defendant's communication was misleading or improper. Impervious Paint Industries v. Ashland Oil, 508 F. Supp. 720 (W.D. Ky, 1981) ("In the course of [defendant's] contact of class members, the copy of the class notice was presented along with the oral legal advice which was specifically omitted from the notice prepared by the Court"); Pollar v. Judson Steel Corp., 33 Fair Emp. Prac. Cases 1870 (finding defendant's notices could seriously prejudice the rights of absent class members by failing to disclose material facts about the case).
Based on the provisions of § 216(b) and the similar Rule 26 pre-certification situation, the Court concludes there is no prohibition against pre-"opt-in" communication with a § 216(b) potential plaintiff unless the communication undermines or contradicts the Court's notice. If an undermining or contradictory communication is sent, the Court can control the proceedings through sanctions, requiring payment for a curative notice, prohibition of future ex part communications, or other appropriate orders. The Court should make specific findings of actual or potential abuse or misconduct, and sanctions or limitations on future communications should be narrowly tailored to avoid excessive restraint on speech. Gulf Oil v. Bernard, 452 U.S. 89, 101 (1981).
Of course, if the communication is slanderous, contains a threat of retaliation if a prospective plaintiff opts in, or is otherwise legally inappropriate, the Court can intervene or separate legal remedies are available.
The Court finds Eastwood's September 26, 2002 Internal Memo to prospective plaintiff sales agents does not violate applicable legal standards. It does not state legal advice or appear to undermine or contradict the Court's own notice. Defendant's suggestion to direct questions to its General Counsel is permissible at this pre-"opt in" stage. There is no substantial suggestion of retaliation if an employee opts-in. There does not appear to be serious or undue prejudice as a result of the communication.
III. DISPOSITION
The application for a preventive order is DENIED.
The Court may issue a more complete published order.
EASTWOOD INSURANCE SERVICES, INC. INTERNAL MEMO
Date: September 26, 2002 To: All Sales Agents From: J___ A. P___, CEO Re: Class Action LitigationEastwood Insurance Services, Inc. has been named as a defendant in a lawsuit entitled Parks v. Eastwood Insurance Services, Inc., The substance of this lawsuit is an allegation that we applied in inappropriate standard in the way that we compensate sales agents. There have been a barrage of similar lawsuits recently filed against many insurance companies end brokers. The company disagrees with the allegation and is aggressively defending the lawsuit.
You will be receiving a Notice of the Class Action in the very near future. We know you were never asked to be a part of this lawsuit and so you may have questions about it. Your branch manager doesn't have any information about this lawsuit beyond what we have shared with you. For this reason we have instructed them not to discuss the case with you, but rather, to direct you to contact J___ T___, General Counsel for the Company at (714) 6___. J___ will try to answer any questions you might have.
There may have been numerous rumors made on this topic. This case is in a very early phase so any rumors you may have heard are purely speculative. Please disregard the rumors and trust that the matter will proceed forward in as logical and timely a way as circumstances permit.
We continue to have serious and ambitious business objectives to accomplish, and I encourage you to remain committed to those objectives with me and not allow this matter to become a distraction. Thank you in advance for all of the efforts and dedication which each and everyone of you make to ensure your personal and the company's success.
Thank you,
J___ P___ CEO