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Koehler v. Freightquote.com, Inc.

United States District Court, Tenth Circuit

August 22, 2013

NANCY KOEHLER, et. al, Plaintiffs,
v.
FREIGHTQUOTE.COM, INC., Defendant.

MEMORANDUM AND ORDER

GERALD L. RUSHFELT UNITED STATES MAGISTRATE JUDGE

This matter is before the Court on Plaintiffs’ Motion for Sanctions and Protective Order (ECF 44). Defendant opposes the motion (ECF 54). The motion is fully briefed and the Court is prepared to rule. As described more fully below, the Court grants Plaintiffs’ motion in part and denies it in part.

I. Background

Plaintiffs bring this collective action to recover unpaid wages and overtime pay pursuant to the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et. seq. Plaintiffs have also added claims under the Kansas Wage Payment Act (“KWPA”), K.S.A. § 44-312 et seq.; and the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), 29 U.S.C. § 1001 et seq. This is a “hybrid” action, where both “opt-out” and “opt-in” representative claims are asserted. The KWPA and ERISA claims are brought as traditional class actions under Fed.R.Civ.P. 23, where class members are given the opportunity to opt out of the case. Pursuant to 29 U.S.C. § 216(b), FLSA class members opt into the case after it is conditionally certified as a collective action.[1] Plaintiffs, and the putative class members, are current and former employees of Defendant Freightquote.com, Inc. Plaintiffs allege that they were mis-classified as exempt and denied compensation for hours worked in excess of forty hours in a workweek.

Plaintiffs filed the current motion for sanctions, alleging that Defendant has had improper communications with potential class members. Plaintiffs ask for the following relief: 1) Requiring Defendant to issue a corrective notice accurately describing the facts of the lawsuit and the legal issues; informing recipients that they may be entitled to become a part of the lawsuit; and informing the putative class members that attending meetings regarding the lawsuit with Defendant and/or Defense counsel, completing any questionnaires offered by Defendant, and/or submitting declarations to Defendant may be adverse to their interests; 2) Requiring Defendant to issue a second corrective notice informing putative class members that John Smith was not terminated as a result of his participation in this action and that employees will not be retaliated against for joining the class; 3) Prohibiting Defendant and their Counsel from further communications with putative class members with regard to the issues in this litigation without first consulting Plaintiffs’ counsel on this matter or without permitting Plaintiffs’ counsel’s attendance; 4) Striking all questionnaires filled out as a result of the meetings held by the Defendant; 5) Requiring the Defendant to pay Plaintiffs’ reasonable attorneys’ fees and costs associated with the filing of the instant motion; 6) Tolling the statute of limitations on this action for all putative class members three years going back from February 4, 2013; and 7) In the event that the instant motion is not granted, Plaintiffs request an Order permitting limited discovery relating to the communications at issue in this motion.

The Court finds that Plaintiffs’ request in paragraph 2 (requiring Defendant to issue a corrective notice regarding John Smith’s termination) should be granted. The remainder of Plaintiffs’ motion is denied.

II. Discussion

Rule 23(d) of the Federal Rules of Civil Procedure provides that “[i]n conducting an action under this rule, the court may issue orders that: . . . impose conditions on the representative parties or on intervenors; . . . or . . . deal with similar procedural matters.”[2] Although class actions serve an important function in our civil justice system, they present “opportunities for abuse as well as problems for courts and counsel in the management of cases.”[3] In Gulf Oil, the Supreme Court held that:

Because of the potential for abuse, a district court has both the duty and the broad authority to exercise control over a class action and to enter appropriate orders governing the conduct of counsel and parties. But this discretion is not unlimited, and indeed is bounded by the relevant provisions of the Federal Rules.[4]

The Court then set forth the test for determining when an order limiting communications between parties and potential class members is appropriate:

Because of these potential problems, an order limiting communications between parties and potential class members should be based on a clear record and specific findings that reflect a weighing of the need for a limitation and the potential interference with the rights of the parties. Only such a determination can ensure that the court is furthering, rather than hindering, the policies embodied in the Federal Rules of Civil Procedure, especially Rule 23. In addition, such a weighing—identifying the potential abuses being addressed—should result in a carefully drawn order that limits speech as little as possible, consistent with the rights of the parties under the circumstances.[5]

Plaintiffs allege that Defendant’s communications with putative class members were misleading. Plaintiffs allege that Defendant mistakenly referred to the action as a “class action” as opposed to a “collective action.” Plaintiffs then assume that this could have led putative class members to believe that they did not need to take action to join the collective action.[6] Even assuming that putative class members could appreciate such a distinction, the Court notes that Plaintiffs have now amended their complaint to add class action claims. In any event, the Court does not find any misconduct on the part of Defendant for generically referring to the action as a “class action, ” nor does the Court find that Defendant lulled putative class members into inaction. Therefore, the Court does not find that equitable tolling of the statute of limitations is appropriate in this case.

If Defendant were to assert a defense of limitations, moreover, any aggrieved Plaintiff could still oppose it by asserting he or she had been misled by the conduct of defense counsel. That would more appropriately address any potential defense of limitations, than would a premature ruling that somehow potential parties are already entitled to a tolling of the defense.

Plaintiffs also allege that Defendant’s notice mis-characterized the law regarding the claimed exemption in this matter. Plaintiffs allege that the notice fails to mention that the primary job duty of the administrative employee must be “directly related to the management or general business operations, ” rather than to “further the company’s business” and by failing to mention that relevant discretion and independent judgment must be exercised “with respect to matters of significance.” Plaintiffs allege that Defendant deliberately misconstrued the exemption in an attempt to cause the putative class members to believe that the litigation involves claims without merit and for which participation would be futile. Plaintiffs also ...


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