Opt-out Plaintiffs' Individual Claims in an Already Settled Collective Action Are Precluded by Settlement and Release: Second Circuit | Practical Law

Opt-out Plaintiffs' Individual Claims in an Already Settled Collective Action Are Precluded by Settlement and Release: Second Circuit | Practical Law

In Morris v. Affinity Health Plan, Inc., the US Court of Appeals for the Second Circuit released a summary order affirming the district court's holding that the efforts of two plaintiffs who had opted out of a collective action under the Fair Labor Standards Act of 1938 (FLSA) and class action under New York Labor Law (NYLL) are precluded from bringing individual claims by the parties' Joint Stipulation of Settlement and Release.

Opt-out Plaintiffs' Individual Claims in an Already Settled Collective Action Are Precluded by Settlement and Release: Second Circuit

by Practical Law Labor & Employment
Published on 14 Mar 2014 • USA (National/Federal)
In Morris v. Affinity Health Plan, Inc., the US Court of Appeals for the Second Circuit released a summary order affirming the district court's holding that the efforts of two plaintiffs who had opted out of a collective action under the Fair Labor Standards Act of 1938 (FLSA) and class action under New York Labor Law (NYLL) are precluded from bringing individual claims by the parties' Joint Stipulation of Settlement and Release.
In Morris v. Affinity Health Plan, Inc., the US Court of Appeals for the Second Circuit released a summary order affirming the district court's holding that the efforts of two plaintiffs who had opted out of a FLSA collective action and a New York Labor Law (NYLL) class action are precluded from bringing individual claims by the parties' Joint Stipulation of Settlement and Release (13-1265-CV, (2d Cir. Mar. 10, 2014)).

Background

Two opt-out plaintiffs in a settled FLSA collective action and NYLL class action moved to amend the original complaint to add their individual claims. The plaintiffs' motion asserted that they should be permitted to bring individual claims in the settled action, even though they had previously sought to be entirely excluded from it. The district court denied leave to amend for abuse of discretion, concluding that the Joint Stipulation of Settlement and Release precludes the plaintiffs from bringing individual claims in the settled case. The plaintiffs appealed to the Second Circuit.

Outcome

In a summary order, the Second Circuit affirmed the district court's judgment, holding that the plaintiffs' efforts to bring individual claims in the already settled action are precluded by the parties' Joint Stipulation of Settlement and Release.
In reaching this conclusion, the Second Circuit found that:
  • The Joint Stipulation of Settlement and Release states that "Defendant has agreed to settle the Litigation," and "Litigation" is defined as the entire pending action. This suggests that the parties' intent is not to pursue further any of the claims in the entire pending action.
  • The settlement payment formula in the settlement agreement supports the conclusion that the parties intended to resolve the FLSA and the NYLL claims. For example, the formula awards an additional point to class members who opted-in to the collective action to calculate each class member's portion of the payment. Also, the class notice states in bold type that members employed between the pertinent dates could receive their payment "from a class and collective action settlement."
  • Just as this action is a hybrid suit containing both a class action and a collective action, the settlement was a hybrid too. This explains how the class settlement can resolve FLSA claims despite the fact that FRCP 23 (Rule 23) does not govern FLSA actions. Just because the settlement agreement resolved the NYLL claims through Rule 23, this does not diminish the fact that a collective action is a representative action that its representatives may settle. Therefore, the class members were authorized to settle the FLSA and the NYLL claims in one agreement.
  • The collective action's representatives settled the FLSA claim on behalf of those who opted-in to the collective action, which meant that when the district court approved the settlement agreement there was no FLSA claim remaining for the plaintiffs to pursue and the case was appropriately dismissed in its entirety. If plaintiffs were correct that they opted-out of the class action but not the collective action, they would still be bound by the FLSA part of the settlement.
  • The language in the settlement agreement stating that "if you exclude yourself from this settlement, you may sue, continue to sue or be part of a different lawsuit…. regarding these same issues" cannot be construed to allow the opt-out plaintiffs to sue in the settled action at issue, especially because of the clear language resolving the entire litigation.

Practical Implications

Employers should be encouraged by the fact that if a plaintiff tries to use this tactic to keep collective actions alive once settled, perhaps to avoid statutes of limitations which might otherwise preclude them from bringing their individual claims or to take advantage of discovery already undertaken, circuit courts may not be swayed. This opinion is a non-precedential summary order, but courts may find it instructive.