Second Circuit Federal District Court Denies Rule 23 Class Certification and Grants Decertification of FLSA Collective Action

In a big win for employers facing hybrid off-the-clock class actions, last week the U.S. District Court for the Southern District of New York denied plaintiffs’ motion to certify a class action under three different state wage laws (New York, Illinois and District of Columbia) and granted the motion to decertify a nationwide FLSA collective action against a major U.S. bank with extensive domestic and global operations.  In Ruiz v. Citibank, the court held that in the absence of an illegal company policy, “systemic violations at the branch level” were insufficient to support a nationwide class or collective action, both of which required evidence of uniform nationwide managerial conduct. 

Current and former non-exempt Personal Bankers from 13 states and the District of Columbia claimed that, in an effort to reduce overtime, the bank had a “de facto” policy against paying overtime despite high production targets that, in essence, required them to work overtime.  In addition to their hourly compensation, if Personal Bankers exceeded their monthly sales requirement, they received additional compensation of 15% of their monthly sales credits, up to a certain threshold.  Branch Managers could impose penalties on Personal Bankers, however, for failing to meet their sales targets, ranging from an informal warning, performance improvement plan, or even the possibility of termination.  

The court premised its decision to deny certification of the state law claims on the lack of “commonality” under Rule 23.  Relying heavily on the U.S. Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, the court found that, as in Dukes, the relevant corporate policies were lawful and managers had significant discretion regarding overtime, promotions and discipline.  The court held that, pursuant to Dukes, plaintiffs must establish a common approach by management on a nationwide basis that resulted in off the clock work and unpaid overtime, noting that “evidence that might suffice to demonstrate a local or regional policy might nonetheless fail to suffice at the national level.”  The court further noted that,  after Dukes, evidence of a nationwide uniform policy requires “either (1) comprehensive statistical analyses or (2) anecdotal evidence that reaches a certain critical mass.” 

Here, plaintiffs argued that the bank’s demand for high production while limiting overtime hours created pressure that resulted in off the clock work.  The court rejected this argument based mainly on the bank’s evidence that managers exercised “enormous discretion” over the extent to which overtime was approved, overtime-reduction policies were enforced, and whether penalties were given for failure to meet performance targets. The court found plaintiffs’ anecdotal evidence “deficient in both scale and uniformity” and “insufficient to demonstrate either common direction or a common mode of exercising discretion[.]” Moreover, the court found the evidence demonstrated a “striking lack of uniformity” in how difficult it was for the Personal Bankers to meet their sales targets while working 40 hours per week. The court further noted that even if there was companywide evidence of pressure not to request overtime while meeting performance targets, that evidence was not sufficiently uniform across branches nationwide to result in a “common answer that goes to the ultimate question of liability.”  The court also rejected plaintiffs’ attempts to argue there was a de facto nationwide policy of encouraging off the clock work, finding plaintiffs failed to meet their burden of demonstrating that a “common plan exists that is subject to testing at the class wide level.”  Accordingly, the court held there was an absence of common questions susceptible to class wide proof and denied class certification. 

In granting the bank’s motion for decertification of the FLSA collective action, the court analogized the lack of “commonality” under Rule 23 to the “similarly situated” standard for decertifying collective actions under the FLSA, which is more rigorous than the standard typically applied at the initial conditional certification stage of an FLSA collective action.  The court relied on the same evidence in both analyses, and granted the bank’s motion for decertification finding the plaintiffs failed to provide sufficient evidence of a companywide policy forcing unpaid overtime to overcome the  bank’s lawful overtime and performance policies.  The court reasoned that evidence of individual overtime violations at the district level could not support nationwide class and collective action certification. 

The Southern District of New York’s decision in Citibank adds to the developing precedent utilizing consistent, if not conforming, standards and analyses for certification of Rule 23 class actions and decertification of FLSA collective actions in hybrid cases.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.