Decertification of Nationwide Collective Action under FLSA Does Not Prohibit Plaintiffs from Seeking Conditional Certification of Statewide Collective Action

Recently, a court in the Eastern District of Virginia was faced with the question of the effect of another district court’s decertification of a nationwide collective action on the efforts of employees here in Virginia to bring a statewide collective action.  See Allen v. Cogent Communications, Inc., No. 1:14cv459 (August 28, 2014).  The employer Cogent Communications, Inc., an internet and network service provider, argued that the plaintiffs were collaterally estopped from bringing a collective action in the Eastern District of Virginia based on the ruling of the other district court.  The Eastern District disagreed, finding that the collective action was not barred by the doctrine of collateral estoppel and further that, in fact, conditional certification of the collective action was appropriate.

In December of 2011, a group of sales account managers employed by Cogent Communications, Inc. filed suit against Cogent in the District Court for the Southern District of Texas (Lagos v. Cogent Commc’ns, Inc., No. H-11-4523), seeking to recover unpaid overtime wages under the FLSA. Cogent took the position that they were exempt from overtime requirements under the outside sales exemption. At the plaintiffs’ request, the court conditionally certified the collective action and the group of plaintiffs included all current and former Global Account Managers and Regional Account Managers employed by Cogent for a specific time that worked more than 40 hours per week. After discovery, however, the court granted Cogent’s motion to decertify which was based on its argument that there were too many differences among the potential plaintiffs.

The plaintiffs in the action brought in the Eastern District of Virginia were Regional Account Managers and Global Account Managers employed in Cogent’s three Virginia offices. Like the plaintiffs in the action brought in the Southern District of Texas, they claimed that Cogent had improperly withheld overtime pay in violation of the FLSA. The plaintiffs asked the court to conditionally certify a collective action consisting of Regional Account Managers and Global Account Managers employed by Cogent in Virginia.

In order for a collective action to be certified under the FLSA, the plaintiff and other employees must be similarly situated and then other plaintiffs must “opt in” to the action by filing consents with the court. As the court explained, the plaintiff’s evidentiary burden at the conditional certification “is ‘fairly lenient’ and requires only ‘minimal evidence’ since generally there has been no discovery at this point.’” Allen, p. 4. Following conditional certification and the parties have been able to conduct discovery, the defendant can then seek decertification, at which time a heightened standard is applied to determine if the plaintiffs are similarly situated. If there is sufficient evidence in the record at the time the court is first considering certification and issuance of notice to the potential class, the court can collapse the two stage certification process. Id.

The defendant argued that the plaintiffs were collaterally estopped from proceeding with this action—claiming that the issue of whether a collective action was appropriate was already addressed by the court in the Southern District of Texas in the Lagos case which “necessarily decided that a collective action of any geographic scope would not be proper because individual issues were too numerous. The defendant also made the alternative argument that even if the plaintiffs were not collaterally estopped, because there had already been substantial discovery in the Lagos case, the court should collapse the two stage certification process and apply the heightened standard.

As the court explained, there are five requirements which must be met for collateral estoppel to apply:

(1) the issue is identical to the one previously litigated; (2) the issue was actually resolved in the prior proceeding; (3) the issue was critical and necessary to the judgment in the prior proceeding; (4) the judgment in the prior proceeding is final and valid; and (5) the party against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue in the prior proceeding.

Id., p. 7 (quoting In re Microsoft Corp. Antitrust Litig., 355 F.3d 322, 326 (4th Cir. 2004)). The court found that collateral estoppel did not apply because the defendants could not show that the first two requirements were met. In Lagos, the court conditionally certified a class made up of all current and former general account managers and regional account managers and the opt-in plaintiffs were from fifteen sales offices. The Lagos court found that there was no evidence that these plaintiffs from these different locations and sales offices performed the same job duties and operated under the same management policies. Here, however, the issue is whether the general account managers and regional account managers from three offices in Virginia are similarly situated and as the court concluded “[t]hese are plainly not identical issues.” Id., p. 8.

Further, the Lagos court did not “necessarily decide the issue presented in this case” as there was no discussion of any Virginia practices. Id. Instead, the Lagos court had ruled that the plaintiffs could not show that they were sufficiently similar nationwide, but “that finding does not prevent the possibility that a collective action focused on a smaller geographic area might reveal sufficiently similar practices warranting resolution of FLSA violations through collective actions.” Id.

After concluding that the collective action was not barred by the collateral estoppel doctrine, the court then determined that the plaintiffs had met the lenient burden applicable at the conditional certification stage and that conditional certification was appropriate. The court rejected the defendant’s argument that it would be appropriate to collapse the two stage process and apply a heightened standard as the discovery in the Lagos case was for a nationwide action and “did not highlight any practices specific to Virginia.” Id., pp. 12-13.