Daniel Ferreras v. American Airlines Inc ( 2019 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 18-3143
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DANIEL FERRERAS; EDWIN GONZALEZ; DOUG
BILLITZ; RUEBEN RAMIREZ; RAMON COCA;
CHRISTOPHER FAUST; MASOUD ZABIHIALAM;
SCOTT ELLENTUCK; DENIS LIPPENS, On Behalf of
themselves and all others similarly situated
v.
AMERICAN AIRLINES, INC.,
Appellant
_______________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 2-16-cv-02427)
District Judge: Hon. Jose L. Linares
_______________
Argued
October 15, 2019
Before: CHAGARES, JORDAN, and RESTREPO, Circuit
Judges.
(Filed: December 24, 2019)
_______________
Jeffrey I. Kohn
Anton Metlitsky [ARGUED]
Mark W. Robertson
O’Melveny & Myers
7 Times Square
Time Square Tower, 33rd Floor
New York, NY 10036
Jason Zarrow
O’Melveny & Myers
1625 I Street, N.W.
Washington, DC 20006
Counsel for Appellant
Brett R. Gallaway
Steven J. Hyman
Lee S. Shalov [ARGUED]
Wade C. Wilkinson
McLaughlin & Stern
260 Madison Avenue
New York, NY 10016
Counsel for Appellees
Adam G. Unikowsky
Jenner & Block
1099 New York Avenue – Suite 900
Washington, DC 20001
Counsel for Amicus Appellant
_______________
2
OPINION OF THE COURT
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JORDAN, Circuit Judge.
This case involves claims for overtime wages brought
by employees of American Airlines, Inc. (“American”). The
employees allege that American violated the New Jersey Wage
and Hour Law (“NJWHL”) because the airline’s timekeeping
system defaults to paying employees based on their work
schedules, even if they work additional hours outside of their
shifts and in excess of 40 hours per week.
The employees brought their claims as a putative class
action and moved for class certification. The District Court
decided that all of the requirements for class certification, as
set forth in Federal Rule of Civil Procedure 23, were met, and
it thus certified the class. American appeals that order, arguing
that the District Court did not conduct a rigorous analysis and
that several of the requirements of Rule 23, including
commonality and predominance, were not met. American
argues that this case cannot proceed as a class action because
determining when each employee was actually working will
necessarily require individualized inquiries. We agree and will
therefore reverse the order of the District Court.
I. BACKGROUND
American’s timekeeping system is programmed to
calculate pay for employees only for the duration of their shifts,
excluding an automatic deduction for a 30-minute meal break.
If an employee clocks in before the employee’s shift begins or
clocks out after the shift ends, the timekeeping system defaults
3
to assuming that the employee only worked during the shift,
rather than working any extra time. American calls those pre-
and post-shift clock-in time durations “grace periods.” The
grace periods allow employees to avoid having to clock in
exactly when their shift begins or clock out exactly when their
shift ends. Similarly, the timekeeping system’s assumption
that an employee takes a 30-minute meal break during a shift
means that employees do not have to return to the time clock
before and after each meal break.
If employees actually do perform work during grace
periods or meal breaks, American’s policy requires them to
identify for a supervisor the time they worked outside of their
shift and ask for approval of that time as an “exception” to their
ordinary work hours. Otherwise, they are not paid for the time
worked outside of their shift.
The class as certified includes all non-exempt, hourly
employees at American’s Newark Liberty International
Airport (“Newark airport”) station, who were employed at any
time from April 29, 2014 through the present. The named
plaintiffs are two fleet service employees and seven mechanics
at that airport. Fleet service employees handle cargo, assist
with lavatory services, and help maneuver aircrafts in and
around hangars. Mechanics perform repairs and updates on
airplanes. A third category of non-exempt hourly-paid
employees included in the class is passenger service agents,
who check passengers in and manage boarding at the gates.
None of the named plaintiffs are passenger service agents.
The plaintiffs complain that, in violation of the
NJWHL, American did not pay its employees for all time
worked because its timekeeping system defaults to paying
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employees based on their work schedules rather than on the
time they actually spent working. The plaintiffs also allege
that, although American purports to have procedures to
compensate employees for unpaid time, management regularly
refuses to pay employees for pre- and post-shift work and work
done during meal breaks. The claims in the complaint focus
on three periods of the workday: (1) while the plaintiffs were
clocked in but before or after their scheduled shift time; (2)
during their scheduled meal breaks; and (3) while off-the-
clock.
In seeking class certification, the plaintiffs argued that,
according to the record, once an American employee clocks in,
the employee begins working until he or she clocks out, and
the “[e]mployees do not delay or engage in non-job-related
personal activities while on the clock.” (D.I. 104-1 at 5.)
American responded that class certification was inappropriate
because the record evidence shows that employees arrived
early and left late for a variety of reasons and engaged in
personal activities before and after their shifts. For example,
American cited one employee as saying that he sometimes
watched TV before his shift, and another as saying he chatted
with other mechanics in the break room before his shift began.
Thus, American argued, the District Court would have to
engage in individualized inquiries to determine if and when
there were occasions when a particular employee was not
compensated for time periods during which he or she was
actually working while clocked in, and the Court would
likewise have to engage in individualized inquiries to
determine when employees were actually working while off
the clock.
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The District Court granted the plaintiffs’ motion for
class certification and created three subclasses. The first
subclass was defined as employees who “have been denied
compensation for work performed before and after their shifts
while on the clock” (the “Grace Period Subclass”). (App. at
3.) The second subclass was defined as employees “who have
been denied compensation for work performed during meal
periods” (the “Meal Break Subclass”). (App. at 4.) The third
subclass was defined as employees “who have been denied
compensation for work performed before their shifts before
clocking in, and for work performed after their shifts after
clocking out” (the “Off-the-Clock Subclass”). (Id.)
In its order granting class certification, the District
Court identified two questions it said are common to the class:
first, whether “hourly-paid American employees at Newark
Liberty International Airport are not being compensated for all
hours worked due to the manner in which American operates
its timekeeping system[,]” and second, “whether American is
violating the NJWHL by imposing a schedule-based
compensation system that in theory permits a supervisor to
authorize compensation for work performed outside of a
scheduled shift, but in practice discourages employees from
seeking such authorization[.]” (App. at 13.)
In determining that the commonality and predominance
requirements had been met, the District Court cited favorably
to caselaw regarding conditional certification under the Fair
Labor Standards Act (“FLSA”) and said that plaintiffs had
presented sufficient “allegations and initial evidence” to certify
the subclasses “at this juncture.” (App. at 13, 14.) The Court
also said American’s argument that whether the plaintiffs were
actually working – rather than engaging in personal activities
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– when clocked in pre- and post-shift was “to be addressed
during discovery, and does not merit a denial of class
certification at this juncture[.]” (App. at 15.)
American petitioned us under Federal Rule of Civil
Procedure 23(f) for review of the class certification decision,
and we granted that petition. This appeal followed.
II. DISCUSSION 1
A party seeking class certification must satisfy the four
requirements of Rule 23(a), as well as the requirements of
either Rule 23(b)(1), (b)(2), or (b)(3). In re Hydrogen Peroxide
Antitrust Litig., 552 F.3d 305, 309 n.6 (3d Cir. 2008). Under
Rule 23(a),
1
The District Court had jurisdiction under 28 U.S.C.
§ 1332(d). Although we conclude that a class cannot be
certified, that does not mean that the District Court lacked
jurisdiction. See Coba v. Ford Motor Co., 932 F.3d 114, 118-
19 (3d Cir. 2019) (holding that a subsequent denial of class
certification does not divest the district court of subject-matter
jurisdiction when the court properly exercised jurisdiction
pursuant to § 1332(d) at the time a claim was filed). We have
jurisdiction under 28 U.S.C. § 1292(e). “We review a class
certification order for abuse of discretion, which occurs if the
district court’s decision rests upon a clearly erroneous finding
of fact, an errant conclusion of law or an improper application
of law to fact. [W]hether an incorrect legal standard has been
used is an issue of law to be reviewed de novo.” In re
Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 312 (3d Cir.
2008) (alteration in original) (internal quotation marks and
citation omitted).
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(1) the class must be so numerous that joinder of
all members is impracticable (numerosity); (2)
there must be questions of law or fact common
to the class (commonality); (3) the claims or
defenses of the representative parties must be
typical of the claims or defenses of the class
(typicality); and (4) the named plaintiffs must
fairly and adequately protect the interests of the
class (adequacy of representation, or simply
adequacy).
Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 590-91 (3d Cir.
2012) (internal quotation marks omitted). Assuming a plaintiff
can show that all of those conditions exist, the requirements of
Rule 23(b) come into play. Here, the plaintiffs are proceeding
under Rule 23(b)(3), which requires proving, first, that
questions of law or fact common to class members
predominate over individualized questions, which is
commonly called the “predominance” requirement, and,
second, that the class action device is superior to other methods
for resolving the claims, which is often referred to as the
“superiority” requirement. Fed. R. Civ. P. 23(b)(3).
Class “certification is proper only if the trial court is
satisfied, after a rigorous analysis” that all of the necessary
Rule 23 requirements have been fulfilled. Wal-Mart Stores,
Inc. v. Dukes, 564 U.S. 338, 350-51 (2011). The Rule “does
not set forth a mere pleading standard.” Id. at 350. As we
explained in In re Hydrogen Peroxide, “the decision to certify
a class calls for findings by the court, not merely a ‘threshold
showing’ by a party, that each of the requirements of Rule 23
is met.” In re Hydrogen Peroxide, 552 F.3d at 307. A rigorous
analysis requires that factual determinations be made by a
8
preponderance of the evidence. Mielo v. Steak ‘n Shake
Operations, Inc., 897 F.3d 467, 483-84 (3d Cir. 2018). Thus,
although a trial court has “broad discretion to control
proceedings and frame issues for consideration under Rule
23[,]” “a class may not be certified without a finding that each
Rule 23 requirement is met.” In re Hydrogen Peroxide, 552
F.3d at 310. Prior to certifying a class, a district court must
resolve every dispute that is relevant to class certification. Id.
at 320.
American argues that the District Court did not apply
the proper class certification standard and that commonality,
under Rule 23(a), and predominance, under Rule 23(b)(3),
were not met. We address those arguments in turn. 2
A. The District Court Did Not Apply the Proper
Standard for Class Certification.
The District Court’s analysis departed from the
standards we have articulated for evaluating a motion for class
2
American also says that the District Court erred in
finding that the superiority requirement was met and that the
class was ascertainable, as required by our precedent. See
Marcus, 687 F.3d at 592-93 (“[A]n essential prerequisite of a
class action, at least with respect to actions under Rule
23(b)(3), is that the class must be currently and readily
ascertainable based on objective criteria.”). Because we find
that commonality and predominance were not met and, in this
case, cannot be met, we do not reach those arguments. Nor do
we address the question of adequacy of representation raised
by the absence of any named plaintiff from among the
passenger service agents.
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certification. Specifically, there are three problems with the
Court’s decision: first, it in effect certified the class
conditionally; second, it applied a “pleading” and “initial
evidence” standard; and third, it failed to resolve conflicts in
the evidence.
The first problem may spring from confusion about
class certification under Rule 23 and collective actions under
the FLSA. Rule 23, unlike the FLSA, does not allow for
conditional certification. See Genesis Healthcare Corp. v.
Symczyk, 569 U.S. 66, 74 (2013) (“Rule 23 actions are
fundamentally different from collective actions under the
FLSA[.]”). As we have cautioned before, “[c]ertification may
not be granted because the plaintiff promises the class will be
able to fulfill Rule 23’s requirements, with the caveat that the
class can always be decertified if it later proves wanting. To
certify a class in this manner is effectively to certify the class
conditionally, which Rule 23 does not permit.” Hayes v. Wal-
Mart Stores, Inc., 725 F.3d 349, 358 (3d Cir. 2013). Instead,
class certification under Rule 23 requires a district court to be
satisfied by a preponderance of the evidence that the plaintiff
has proven each of the Rule’s requirements is met. See Fed. R.
Civ. P. 23 advisory committee’s note to 2003 amendments (“A
court that is not satisfied that the requirements of Rule 23 have
been met should refuse certification until they have been
met.”). The District Court here cited approvingly to a case
dealing with conditional certifications under the FLSA, and
twice explained that the plaintiffs had met their burden “at this
juncture.” (App. at 14, 15 (emphasis added).) That reliance
on, and application of, principles of conditional certification in
the Rule 23 context cannot be permitted.
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Similarly, the Court deviated from our precedent by
employing a pleading and initial evidence standard, rather than
requiring proof by a preponderance of the evidence. The
District Court referred to Rule 23(b)’s requirements as
“pleading requirements” and said that the plaintiffs had met
those requirements by setting forth “allegations and initial
evidence.” (App. at 8, 12-13.) But Rule 23 does not set forth
a mere pleading obligation. Wal-Mart, 564 U.S. at 350. The
District Court’s acceptance of pleading and initial evidence as
an acceptable standard is similar to the “threshold showing”
standard we rejected in In re Hydrogen Peroxide, 552 F.3d at
321. There we explained that “[a] ‘threshold showing’ could
signify, incorrectly, that the burden on the party seeking
certification is a lenient one (such as a prima face showing or
a burden of production) or that the party seeking certification
receives deference or a presumption in its favor.” Id. So too
with a pleading or initial evidence standard. Rule 23 requires
more than allegations, initial evidence, or a threshold showing.
It requires a showing that each of the Rule 23 requirements has
been met by a preponderance of the evidence at the time of
class certification. The District Court thus should not have
determined that the Rule 23 requirements had been met based
on “allegations and initial evidence.”
Finally, it was error for the District Court to leave
unresolved conflicts in the evidence before it. For example,
the Court did not engage with American’s argument that
predominance was not met because individualized proof would
be required to prove that employees were actually working
during the various time periods for which they claim they were
not paid. Instead, the Court noted that the issue would be
“addressed during discovery and that it does not merit a denial
of class certification at this juncture[.]” (App. at 15.) The
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rigorous analysis demanded by Rule 23 requires a court to
resolve such disputes relevant to class certification, before
being satisfied that each of the Rule’s requirements has been
met. Marcus, 687 F.3d at 591.
Because the District Court did not engage in that type
of analysis, we could vacate and remand for further application
of the Rule 23 standards. But because discovery was
essentially complete when the District Court ruled on the
motion for class certification, and the plaintiffs have stated that
no additional discovery is needed to decide the certification
issue, we will reverse rather than remand, as, based on our
review of the record, it is clear that commonality and
predominance cannot be met.
B. Commonality and Predominance Cannot Be
Met.
Rule 23 requires a showing that “there are questions of
law or fact common to the class.” Fed. R. Civ. P. 23(a)(2).
“What matters to class certification ... is not the raising of
common ‘questions’—even in droves—but rather, the capacity
of a class-wide proceeding to generate common answers apt to
drive the resolution of the litigation. Dissimilarities within the
proposed class are what have the potential to impede the
generation of common answers.” Wal-Mart, 564 U.S. at 350(emphasis in original).
The predominance requirement “asks whether the
common, aggregation-enabling, issues in the case are more
prevalent or important than the non-common, aggregation-
defeating, individual issues.” Tyson Foods, Inc. v.
Bouaphakeo, 136 S. Ct. 1036, 1045 (2016). Courts must “give
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careful scrutiny to the relation between common and individual
questions in a case. An individual question is one where
members of a proposed class will need to present evidence that
varies from member to member, while a common question is
one where the same evidence will suffice for each member[.]”
Id. (internal quotation marks omitted).
The commonality and predominance requirements are
closely linked. But the Rule 23(b)(3) predominance
requirement is “far more demanding than the commonality
requirement” found in Rule 23(a). In re Hydrogen Peroxide,
552 F.3d at 311 (internal quotation marks omitted). In fact,
“where an action is to proceed under Rule 23(b)(3), the
commonality requirement is subsumed by the predominance
requirement.” Danvers Motor Co., Inc. v. Ford Motor Co., 543
F.3d 141, 148 (3d Cir. 2008) (internal quotation marks
omitted). If the commonality requirement cannot be met, then
the more stringent predominance requirement obviously
cannot be met either. Cf. Amchem Prods., Inc. v. Windsor, 521
U.S. 591, 623-24 (1997) (“Even if Rule 23(a)’s commonality
requirement may be satisfied …, the predominance criterion is
far more demanding.”).
The plaintiffs here cannot satisfy even the commonality
standard. In its opinion, the District Court identified two
common questions: first, whether hourly-paid American
employees at Newark airport are not being compensated for all
hours worked, and second, whether American has a policy that
discourages employees from seeking exceptions for work done
outside of their shifts. It is not clear, however, how those
questions can “generate common answers apt to drive the
resolution of the litigation.” Wal-Mart, 564 U.S. at 350(emphasis in original). The first question cannot be answered
13
by common evidence about the timekeeping system because a
yes or no answer tells us nothing about actual common work
habits, if there are any. The plaintiffs will still need to go
through the process of proving that each individual employee
worked overtime and is thus entitled to additional
compensation, regardless of any common evidence about
American’s timekeeping system.
Similarly, the second question cannot drive resolution
of the plaintiffs’ case because, again, their claims are, at
bottom, that they were not paid overtime compensation for
hours worked, not that American’s overarching policy
regarding exceptions has deprived anyone in particular of
compensation to which he or she was entitled. Moreover, the
record evidence only demonstrated that a policy of not paying
employees who submitted requests for overtime may have
existed for one group of employees – the mechanics. But the
District Court certified subclasses consisting of all non-
exempt, hourly employees at American’s Newark airport
station, not just mechanics. The passenger service agents and
fleet service employees have different responsibilities and
supervisors than the mechanics. Even if one of the groups was
affected by such a policy, that would not drive the resolution
of the litigation on a classwide basis, see Reinig v. RBS
Citizens, N.A., 912 F.3d 115, 129 (3d Cir. 2018) (expressing
doubt that the conflicting testimony about a company-wide
policy from plaintiffs with different managers could establish
commonality and predominance), and thus the second common
question the District Court identified did not establish
commonality.
Having failed to show commonality, the plaintiffs
necessarily failed too in their effort to show predominance, and
14
it was error for the District Court to conclude otherwise.
Plaintiffs will have to offer individualized proof to show that
they were actually working during the various time periods at
issue, the main point of dispute in this case. For the Grace
Period Subclass, the employees cannot rely on the time clock
to prove when they were actually working because there is
conflicting evidence about whether they were working the
entire time they were clocked in. For example, some
employees testified that they began working immediately after
clocking in. Others testified that they chatted with co-workers
or watched TV after clocking in but before their shifts began.
Thus, whether they were actually working pre- and post-shift
is an open and inherently individualized question.
The District Court also certified the Meal Break and
Off-the-Clock Subclasses. The record shows, however, that
employees were not all working during meal breaks. Any
members of the Meal Break Subclass would have to offer
individualized evidence regarding which meal breaks they
spent working and for how long. And, of course, any claim
that an employee was working off-the-clock would require an
individualized inquiry as to when and to what extent that
happened. There is no easy measure, like the time clock, to
which the parties can turn to determine the amount of time an
employee may have been working. Accordingly, plaintiffs
would again need to provide particularized evidence to show
when employees were working, so common issues do not
predominate over individual ones.
The District Court cited Tyson Foods, Inc. v.
Bouaphakeo, 136 S. Ct. 1036 (2016), to support its conclusion
that individualized variations should not defeat class
certification. But that case is clearly distinguishable. In Tyson
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Foods, the class consisted of employees at a pork processing
plant who were not compensated for the time spent donning
and doffing the protective equipment they had to wear at work.
136 S. Ct. at 1041-42. The issue before the Supreme Court was
whether representative evidence could be used to prove the
amount of time spent donning and doffing, even though
individual employees took different amounts of time to
perform those tasks. Id. at 1041. There was, however, no
dispute about what the activity was that Tyson and the
employees were arguing over. It was the same for everyone –
donning and doffing protective gear. The record evidence
here, on the other hand, demonstrates that employees were not
always working while clocked in and there was substantial
variability in what they were doing, even if some of it could be
called work. Accordingly, this case is unlike Tysons Foods,
and the employees would need individualized, not
representative, evidence to prove their case. Thus,
predominance cannot be established.
III. CONCLUSION
Because the District Court did not perform a rigorous
analysis, and because commonality and predominance cannot
be met under a rigorous analysis, we will reverse the class
certification order.
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