Opinion
1784CV02731BLS2
07-24-2018
Kanika MISRA et al., Individually and on Behalf of All Others Similarly Situated v. CREDICO (USA), LLC et al.
MEMORANDUM AND ORDER ON CREDICO’S PARTIAL MOTION TO DISMISS
Kenneth W. Salinger, Justice of the Superior Court
Plaintiffs allege that Credico (USA), LLC, DFW Consultants, Inc., and Jason Ward operated as their joint employers. Plaintiffs claim that Defendants violated Massachusetts law by misclassifying employees as independent contractors and by failing to make minimum wage and overtime payments that were required by law.
This action was originally brought by Kanika Misra and Craig Levine, on behalf of themselves and others who worked for Defendants in Massachusetts.
Credico moved to dismiss all claims against it on the ground that Ms. Misra and Mr. Levine had opted into a prior federal lawsuit in New York, joining in a collective action asserting similar claims against Credico under the federal Fair Labor Standards Act (the "FLSA"). Credico argues that Misra and Levine could have asserted claims against it under Massachusetts law in the prior action, final judgment in Credico’s favor has now been entered in that case, and this action is therefore barred by the doctrine of res judicata or claim preclusion.
Plaintiffs then filed amended complaints adding four other named plaintiffs. Juan Melo, Jaqueline Sill, and Lee Tremblay never opted into the prior FLSA collective action. Mr. Jackson’s attempt to opt-in was rejected as untimely.
The Court will treat the motion to dismiss as directed only at the claims asserted against Credico by Ms. Misra and Mr. Levine, as the parties agreed during oral argument.
The Court will ALLOW the motion to the extent that it seeks dismissal of the claims by Misra and Levin. Those claims are barred by the doctrine of claim preclusion because they could have been asserted in the prior FLSA lawsuit, it is not clear that the federal court would have declined to exercise supplemental jurisdiction over those claims, and final judgment has now entered in that prior case. The Court will deny the motion to dismiss with respect to the claims asserted by Mr. Melo Mr. Jackson, Ms. Sill, or Mr. Tremblay, on behalf of themselves and other putative class members who did not opt into the prior action.
The pending motion to dismiss does not violate the order issued by Judge Sanders in December 2017. Judge Sanders specifically authorized Credico "to file a new motion to dismiss that more directly addresses the impact of Vasto and its preclusive effect." Although that procedural order more specifically refers to potential arguments based on collateral estoppel, or issue preclusion, Judge Sanders did not bar Credico from also seeking dismissal based on claim preclusion.
1. The Prior Federal Action
In July 2015, four individuals sued Credico and Comex, Inc., in federal court in Illinois. That lawsuit was transferred on plaintiffs’ motion to the Southern District of New York, where it was docketed as Vasto v. Credico (USA) LLC, 15CV9298 (PAE).
The Court may and does take judicial notice of the pleadings, docket, and other records of this related case, to the extent they have been provided by the parties. Cf. Reliance Ins. Co. v. City of Boston, 71 Mass.App.Ct. 550, 555 (2008) (records of related court proceedings are subject to judicial notice and may be considered in deciding motion to dismiss).
The Vasto plaintiffs alleged that Credico and Comex operated as joint employers and misclassified workers as independent contractors. They brought a putative FLSA collective action, under 29 U.S.C. § 216(b), claiming that Credico and Comex violated the FLSA by not paying required minimum wages and overtime. They also brought putative class actions, under Fed.R.Civ.P. 23, claiming that Credico and Comex violated similar requirements under New York and Arizona law.
In May 2016, the federal court conditionally certified Vasto as an FLSA collective action. Notice of the action was sent to everyone who had done face-to-face marketing work for any subcontractor of Credico in the United States, within the past three years, while classified as independent contractors. The notice informed those workers of their right to opt to participate in the Vasto case as a plaintiff.
The court then approved the form of a notice to be sent to all such workers, informing them of their right to file a form opting in to the Vasto collective action. The federal judge ordered that any further amendments to the complaint by the then-existing plaintiffs be filed by July 10, 2016, and that any additional plaintiff wishing to opt-in to the FLSA collective action had to do so by August 15, 2016.
Plaintiffs represent that more than 1, 700 individuals from 36 different states filed consents requesting to opt-in to the Vasto collective action under the FLSA.
Misra and Levine opted to join in the FLSA collective action in the Vasto case. They both signed forms stating that they "consent and agree to become a ‘party-plaintiff’ in" that case, understand that the lawsuit is brought under the FLSA, and "consent, agree, and opt in to become a plaintiff herein and to be bound by any judgment ... or settlement" in the case.
Neither Misra nor Levine sought leave in Vasto to assert claims against Credico for non-payment of minimum wages and overtime under Massachusetts law.
The Vasto judge ordered in October 2017 that summary judgment be entered in favor of Credico and the other defendants on all claims. The court held that, even assuming that plaintiffs were employees rather than independent contractors, Credico cannot be held liable as plaintiffs’ joint employer either under the FLSA or under New York or Arizona law. See Vasto v. Credico (USA) LLC, 15 Civ. 9298 (PAE), 2017 WL 4877424, *6-*16 (S.D.N.Y. October 27, 2017) (Engelmayer, D.J.)
The Vasto plaintiffs have appealed the judgment in favor of Credico and the other defendants. That appeal is still pending.
It is undisputed that plaintiffs Melo, Sill, and Tremblay never opted into the Vasto case. Plaintiffs’ counsel has represented, and Credico does not dispute, that Jackson submitted a consent form in Vasto but was dismissed from the action because his form was filed after the opt-in deadline. Jackson then opted into a different case pending against Credico in the Southern District of New York, Huffman v. Credico (USA) LLC, 17-cv-04242. Plaintiffs’ counsel represents that Huffman is currently stayed pending the appeal of Vasto.
2. Analysis
2.1. Federal Action’s Preclusive Effect on Unasserted State Law Claims
Since Vasto was decided by a federal court exercising federal question jurisdiction over an FLSA claim, the federal rules of res judicata determine whether the Vasto judgment bars Misra and Levine from asserting new claims against Credico under Massachusetts law. See Alicea v. Commonwealth, 466 Mass. 228, 235 & n.11 (2013); Anderson v. Phoenix Investment Counsel of Boston, Inc., 387 Mass. 444, 449 (1982).
"Under the federal law of claim preclusion," which is part of the doctrine of res judicata, "final judgment on the merits of an action bars the parties and their privies from relitigating claims that were or could have been raised in that action" (emphasis added). Mancuso v. Kinchla, 60 Mass.App.Ct. 558, 567 (2004); accord, e.g., Hatch v. Trail King Industries, Inc., 699 F.3d 38, 45 (1st Cir. 2012). This doctrine reflects a strong policy against claim splitting; it bars a subsequent lawsuit even where the plaintiff "is prepared in a second action to present different evidence or legal theories to support his claim, or seeks different remedies." Mancuso, supra, quoting Heacock v. Heacock, 402 Mass. 21, 23 (1988); accord, e.g., Nalco Co. v. Chen, 843 F.3d 670, 674 (7th Cir. 2016).
Claim preclusion applies under federal law where: (i) final judgment on the merits was entered by a court of competent jurisdiction; (ii) a second suit involves the same parties or those in privity with them; (iii) the claims in the second action "were or could have been raised" in the prior action; and (iv) the claims in both cases arise from the same transaction or series of transactions or from "a common nucleus of operative facts." Massachusetts School of Law at Andover, Inc. v. American Bar Ass’n, 142 F.3d 26, 38 (1st Cir. 1998); accord, e.g., Monhan v. New York City Dept. of Corrections, 214 F.3d 275, 284-85 (2d Cir. 2000); Ohio Valley Envtl. Coalition v. Aracoma Coal Co., 556 F.3d 177, 210 (4th Cir. 2009); Czarniecki v. City of Chicago, 633 F.3d 545, 548 (7th Cir. 2011); Magee v. Hamline Univ., 775 F.3d 1057, 1059 (8th Cir. 2015); Lobo v. Celebrity Cruises, Inc., 704 F.3d 882, 892-93 (11th Cir. 2013).
Where these requirements are satisfied, final judgment in federal court on a federal claim can bar a state court action asserting a state law claim. See Anderson, 387 Mass. at 450. Res judicata will bar the state action if the federal court could have exercised supplemental jurisdiction (previously known as pendent jurisdiction) over the state law claim, unless the federal court "clearly would have declined to exercise" such jurisdiction "as a matter of discretion." Id.
The requirements of claim preclusion are satisfied here. Final judgment has entered in the Vasto case. That judgment can have preclusive effect under federal law even though it is on appeal. See O’Brien v. Hanover Ins. Co., 427 Mass. 194, 201 (1998). And the same parties are involved; Misra and Levine asserted very similar claims against Credico in both actions.
The Court concludes that the jurisdictional and relatedness requirements for claim preclusion are satisfied as well. Misra and Levine could have asserted their claims for minimum wage and overtime payment under Massachusetts law against Credico in the Vasto case because they arise from the same operative facts as their FLSA claims. Indeed, they could have sought to assert putative class claims under Massachusetts law in that action. Where a federal district court has original jurisdiction over at least one claim, for example because it arises under federal law, the court may exercise supplemental jurisdiction over any other claims that "form part of the same case or controversy under Article III of the United States Constitution." 28 U.S.C. § 1367(a). As a result, if workers bring an FLSA collective action and a state law individual or class action seeking minimum wage or overtime payments from the same alleged employer, based on the same compensation policies or practices, a federal district court may exercise supplemental jurisdiction over the state law claim because both claims "derive from a common nucleus of operative fact" and thus are part of the same case or controversy. Shahriar v. Smith & Wollensky Restaurant Group, Inc., 659 F.3d 234, 245 (2d Cir. 2011), quoting Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 308 (2d Cir. 2004); accord, e.g., Ervin v. OS Rest. Servs., Inc., 632 F.3d 971, 979 (7th Cir. 2011); Calderone v. Scott, 838 F.3d 1101, 1104 (11th Cir. 2016); Lindsay v. Government Employees Ins. Co., 448 F.3d 416, 424 (D.C.Cir. 2006).
Plaintiffs’ assertion that a federal district judge sitting in the Southern District of New York had no personal jurisdiction over co-defendants DFW Consultants, Inc., and Jason Ward is beside the point, even assuming it is correct. Misra and Jackson could have sought in Vasto to add claims against Credico under Massachusetts law without naming DFW and Ward as additional defendants. If two businesses are both liable as joint employers for failing to pay wages, the employee may choose to sue either or both of them to recover the unpaid wages; if the plaintiff sues only of them, the other joint employer is not a necessary party under Fed.R.Civ.P. 19(a). McDougal v. State Univ. of New York Downstate Med. Ctr., Long Island College Hosp., no. 12 Civ. 2018 (ILG) (MDG), 2013 WL 1437616, *5 (E.D.N.Y. 2013); Iraheta v. Lam Yuen, LLC, civ. no. DKC 12-1426, 2012 WL 5995689, *5 (D.Md. 2012); Azamar v. Stern, 662 F.Supp.2d 166, 177 (D.D.C. 2009); Moreno v. EDCare Mgmt., Inc., 243 F.R.D. 258, 259 (W.D.Tex. 2007). That is because two people or entities that share potential joint and several liability "are merely permissive parties" who may be joined as defendants, not indispensable parties "whose absence required dismissal of the suit." Temple v. Synthes Corp. Ltd., 498 U.S. 5, 8 (1990).
Nor have Plaintiffs established that the Vasto court "clearly would have declined to exercise" supplemental jurisdiction over claims under Massachusetts law if Misra and Levine had sought to raise them. Cf. Anderson, 387 Mass. at 450. Misra and Levine argue that they probably would not have been allowed to press any claims under Massachusetts law in the Vasto case, because the deadline for returning opt-in forms was five weeks after the deadline for amending the complaint, and because the federal claim in that case was decided on a motion for summary judgment. The fact is, however, that the Vasto judge exercised supplemental jurisdiction over state law claims, deciding that Credico was not a joint employer under New York or Arizona law.
If asked by Misra and Levine, the judge may well have exercised his discretion to exercise jurisdiction over similar claims under Massachusetts law as well. Other federal judges sitting in New York have allowed plaintiffs who opted into an FLSA collective action to amend the complaint, at the end of the opt-in period, to assert additional state law class claims. See Zorrilla v. Carlson Restaurants, 255 F.Supp.3d 465, 477-78 (S.D.N.Y. 2017); Scott v. Chipotle Mexican Grill, Inc., 300 F.R.D. 193, 195 & 198-201 (S.D.N.Y. 2014); Ruggles v. WellPoint, Inc., 687 F.Supp.2d 30, 33-37 (N.D.N.Y. 2009); Lynch v. U.S. Auto. Ass’n, 614 F.Supp.2d 398, 400-04 (S.D.N.Y. 2007). The Vasto court may well have done so too if Misra and Levine had sought such leave at the end of the opt-in period.
The mere possibility, or even an arguable probability, that the Vasto court would not have exercised its discretion to hear claims against Credico under Massachusetts law cannot justify claim splitting or negate the claim preclusion rules under federal law. See Anderson, supra, at 452.
2.2. No Exception for FLSA Collective Actions
Plaintiffs further argue that the federal doctrine of res judicata and its prohibition on claim splitting should not apply in the context of FLSA collective actions.
The Court is not convinced. In any case, it must follow the Supreme Judicial Court’s decision in Anderson, and cannot create a new exception to federal res judicata doctrine that neither SJC nor the Supreme Court has ever recognized. Compare Commonwealth v. Vasquez, 456 Mass. 350, 357 (2010) ("No matter how strongly a Massachusetts trial judge may disagree with this court on an interpretation of Federal constitutional law, or how confident a judge may be that the Supreme Court will disagree with this court on such a question, so long as our holding has not been abrogated, it is the law the judge must apply"), with Attorney General v. Book Named "Tropic of Cancer", 345 Mass. 11, 19-20 (1962) (later Supreme Court holdings interpreting United States Constitution "are controlling" even if inconsistent with earlier SJC decisions), and Nichols v. Vaughn, 217 Mass. 548, 551 (1914) (Supreme Court interpretation of United States Constitution "is authoritative and binding upon all state courts").
The Court recognizes that resolution of a certified class action has preclusive effect only as to the claims that "were or should have been" asserted on behalf of the class members; it does not bar individual class members who were not named plaintiffs from later asserting additional claims against the same defendants, at least if the class as a whole had no opportunity or incentive to press those additional claims. Longval v. Commissioner of Correction, 448 Mass. 412, 417-18 (2007) (prior class action by state prisoners seeking declaratory and injunctive relief did not bar later claim by individual class member seeking damages under G.L.c. 93A); accord Aspinall v. Philip Morris Cos., Inc., 442 Mass. 381, 397 n.19 (2004) (class certified to proceed "only on an economic theory of damages" under c. 93A would not bar "future pursuant of claims for personal injury").
The same principle applies under federal law. See Longval, supra. Indeed, several United States courts of appeal have held that, under federal law, "a class action ... is one of the recognized exceptions to the rule against claim-splitting." Gooch v. Life Inv’rs Ins. Co. of Am., 672 F.3d 402, 429 n.16 (6th Cir. 2012), quoting Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 432 (4th Cir. 2003), cert. denied, 542 U.S. 915 (2004), and 18 Moore’s Federal Practice § 131.40[3][e][iii] (2002).
But class actions under Fed.R.Civ.P. 23 "are fundamentally different" from collective actions under the FLSA. Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66, 74 (2013). When a federal class action is certified, each member of the class will be bound by any settlement or judgment unless the class was certified pursuant to Fed.R.Civ.P. 23(b)(3) (which generally applies to actions seeking damages) and they opt out of the class. See, e.g., Espenscheid v. DirectSat USA, LLC, 705 F.3d 770, 771-72 (7th Cir. 2013). In contrast, "collective actions under the FLSA ... require would-be members of the collectivity to opt in to (i.e., voluntarily join) the class." DeKeyser v. Thyssenkrupp Waupaca, Inc., 860 F.3d 918, 920 (7th Cir. 2017).
By statute, "No 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.A. § 216(b).
"This ‘opt-in’ requirement-mandating that each individual must file an affirmative consent to join the collective action-is the most conspicuous difference between the FLSA collective action device and a class action under Rule 23." Halle v. W. Penn Allegheny Health Sys., Inc., 842 F.3d 215, 225 (3d Cir. 2016).
"This difference means that every plaintiff who opts in to a collective action has party status, whereas unnamed class members in Rule 23 class actions do not." Id., quoting 7B Wright & Miller, Fed. Prac. & Proc. § 1807 (3d Ed. 2016). "[B]y referring to them as ‘party plaintiff[s], ’" in 29 U.S.C.A. § 216(b), "Congress indicated that opt-in plaintiffs should have the same status in relation to the claims of the lawsuit as do the named plaintiffs." Prickett v. DeKalb Cty., 349 F.3d 1294, 1297 (11th Cir. 2003).
As full-fledged plaintiffs, with the same status as the named plaintiffs, Misra and Levine had the opportunity to seek leave to assert Massachusetts law claims against Credico in Vasto. And they had every incentive to do so, if their Massachusetts claims differed materially from the FLSA claims. As explained above, federal judges often grant leave for plaintiffs who have opted into an FLSA collective action to add similar claims under state law, and even to seek class certification for those additional claims. Under these circumstances, the exception to claim preclusion that has been recognized for Rule 23 class actions does not apply here.
See Zorrilla, 255 F.Supp.3d at 477-78; Scott, 300 F.R.D. at 195 & 198-201; Ruggles, 687 F.Supp.2d at 33-37; Lynch, 614 F.Supp.2d at 400-04.
ORDER
The motion to dismiss filed by defendant Credico (USA), LLC is ALLOWED IN PART with respect to the claims asserted by Kanika Misra and Craig Levine, which are hereby dismissed with prejudice. The motion to dismiss is denied with respect to the claims asserted by Juan Melo, Justin Jackson, Jaqueline Sill, and Lee Tremblay.