Employer Did Not Waive Right to Arbitrate State Laws in FLSA Overtime Case: Eleventh Circuit | Practical Law

Employer Did Not Waive Right to Arbitrate State Laws in FLSA Overtime Case: Eleventh Circuit | Practical Law

In Collado v. J. & G. Transport, Inc., the US Court of Appeals for the Eleventh Circuit held that a defendant's waiver of the right to arbitrate a federal class action claim under the Fair Labor Standards Act (FLSA) did not extend to state law claims that were later filed in an amended complaint.

Employer Did Not Waive Right to Arbitrate State Laws in FLSA Overtime Case: Eleventh Circuit

by Practical Law Labor & Employment
Published on 27 Apr 2016 • USA (National/Federal)
In Collado v. J. & G. Transport, Inc., the US Court of Appeals for the Eleventh Circuit held that a defendant's waiver of the right to arbitrate a federal class action claim under the Fair Labor Standards Act (FLSA) did not extend to state law claims that were later filed in an amended complaint.
On April 21, 2016, in Collado v. J. & G. Transport, Inc., the US Court of Appeals for the Eleventh Circuit held that although a defendant waived its right to arbitrate a Fair Labor Standards Act (FLSA) claim by litigating the claim, that waiver did not extend to state law claims that the plaintiff asserted in a later amended complaint ( (11th Cir. Apr. 21, 2016)).

Background:

Collado filed a collective action lawsuit alleging that J. & G. Transport (J&G) did not comply with the FLSA's overtime wage requirements in paying its truck drivers. The district court granted Collado's motion to file an amended complaint to add state law claims for breach of contract and quantum meruit. When Collado added the state claims, J&G moved to dismiss the state law claims or to compel arbitration of the claims. J&G conceded that it had waived arbitration of Collado's FLSA claim when it participated in the litigation, but argued that the new state law claims broadened the case's scope, reviving its right to elect arbitration for those claims alone. The district court denied J&G's motion, stating that:
  • The altered theory of the case was not unexpected.
  • Fairness did not compel reviving J&G's right to elect arbitration.
J&G appealed to the Eleventh Circuit.

Outcome:

The Eleventh Circuit reversed the district court's decision and held that J&G's waiver of the right to arbitrate Corrado's FLSA claims did not extend to the state law claims that were filed later. The Eleventh Circuit noted that:
  • In an earlier decision, Krinsk v. SunTrust Banks, Inc., it held that an amended complaint could revive a defendant's waived right to compel arbitration because the defendant could not have foreseen the plaintiff's expansion of the class from hundreds to up to "tens of thousands" of plaintiffs (654 F.3d 1194 (11th Cir. 2011)).
  • A defendant is not required to litigate against potential, but unasserted, claims. Otherwise, a defendant would have to identify all possible claims and file a motion insisting that all of those unpleaded claims be arbitrated. (See Morewitz v. W. of Eng. Ship Owners Mut. Prot. & Indem. Ass'n, 62 F.3d 1356, 1366 (11th Cir.1995).)
The Eleventh Circuit found that:
  • Krinsk is different from this case because Krinsk did not introduce any new claims in its amended complaint, only "revised, mostly similar, claims" (654 F.3d at 1199).
  • Collado did not file the state claims until after J&G had already, by litigation, waived its right to arbitrate the FLSA claim.
  • Similar to the defendant in Dickinson v. Heinold Securities, Inc., J&G did not waive the right to arbitrate the state law claims raised in the amended complaint, because they were not in the case at the time of the waiver (661 F.2d 638, 640 (7th Cir.1981)).

Practical Implications:

In this decision, the Eleventh Circuit established that a defendant's waiver of a right to arbitrate initially-pleaded arbitrable claims does not extend to all potential future claims brought by the same plaintiff(s). A defendant who waived arbitration for a federal claim can appropriately maintain its right to arbitrate state law claims that are raised in a later amended complaint because it is too burdensome to require a defendant to make arbitration waiver determinations for all potential claims.