Fifth Circuit Holds Employers Are Not Required to Notify Workers Who Signed Individual Arbitration Agreements of Pending FLSA Class Litigation

The United States Court of Appeals for the Fifth Circuit has ruled a federal district court committed error when it ordered JPMorgan Chase Bank to notify thousands of current and former employees who signed an arbitration agreement waiving their right to engage in collective action against the company about a pending class action case.  In a case titled In re: JPMorgan Chase & Co., No. 18-20825 (5^th Cir., February 21, 2019), a group of Chase employees filed a Fair Labor Standards Act (“FLSA”) class action lawsuit against the company in the Southern District of Texas.  The federal court conditionally certified the class and issued an order requiring Chase to notify approximately 42,000 workers about the pending lawsuit. Because about 35,000 of those individuals signed an arbitration agreement waiving their right to engage in collective action, Chase filed a motion to stay the case and a petition for a writ of mandamus with the nation’s Fifth Circuit Court of Appeals.  In December, the appellate court issued a stay in the case.

In an opinion published on February 21st, the Fifth Circuit enumerated the three conditions that must be met before a writ of mandamus may issue.

A writ of mandamus is “a drastic and extraordinary remedy reserved for really extraordinary cases,” In re Depuy Orthopaedics, Inc., 870 F.3d 345, 350 (5th Cir. 2017), and we may issue the writ only if three conditions are met. First, the petitioner must have “no other adequate means to attain the relief he desires.” Cheney v. U.S. Dist. Court, 542 U.S. 367, 380 (2004). Second, this court “must be satisfied that the writ is appropriate under the circumstances.” Id. at 381. Third, the petitioner must demonstrate a “clear and indisputable right to the writ.” Id.

The appellate court found Chase successfully demonstrated “that the issue presented is irremediable on ordinary appeal and that the writ of mandamus is appropriate under the circumstances.”  After that, the Fifth Circuit examined whether the district court’s order directing Chase to notify all 42,000 current and former workers about the pending class litigation was erroneous.

Although Hoffmann-La Roche gave district courts discretion to send notice of pending FLSA actions to potential opt-in plaintiffs, it did not explain whether Arbitration Employees waiving their right to proceed collectively count as “potential plaintiffs.” That lack of clarity has produced conflicting results from district courts, especially where they use the popular two-stage Lusardi method to certify a collective action.

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Though some district courts have read the Lusardi framework as encouraging courts to wait until stage two to consider the existence of arbitration agreements, we hold that district courts may not send notice to an employee with a valid arbitration agreement unless the record shows that nothing in the agreement would prohibit that employee from participating in the collective action. Hoffmann-La Roche confines district courts’ notice-sending authority to notifying potential plaintiffs; it directs judges “to avoid even the appearance of judicial endorsement of the merits of the action”; and it nowhere suggests that employees have a right to receive notice of potential FLSA claims. The December 10 order is incompatible with Hoffmann-La Roche and with what we hold in this opinion regarding notice.

After finding the district court erred, the Court of Appeals addressed whether Chase met the third requirement for a writ of mandamus.

In spite of our holding that the district court erred in ordering notice to Arbitration Employees, the court did not “clearly and indisputably” err, as is required for a writ of mandamus. Occidental Petroleum, 217 F.3d at 295. Every decision from district courts in this circuit had either adopted the notice of-rights theory pressed by plaintiffs—and endorsed by the district court in the case a quo—or certified collective actions that include Arbitration Employees. That this district court followed numerous others in errantly applying Hoffmann-La Roche suggests that its order did not meet the test for a “clear abuse[] of discretion that produce[s] patently erroneous results.”

Additionally, although ordering that 35,000 employees, who cannot participate in the litigation, receive notice of its pendency comes close to the “solicitation of claims” forbidden by Hoffmann-La Roche, 493 U.S. at 174, other district courts have done the same. Under these circumstances, there is no “usurpation of judicial power” justifying deployment of “one of the most potent weapons in the judicial arsenal.” Cheney, 542 U.S. at 380 (internal quotation marks omitted).

Because Chase failed to show the company had “a clear and indisputable right to the writ,” the U.S. Court of Appeals for the Fifth Circuit denied Chase’s petition for a writ of mandamus but extended its earlier stay by 30 days in order to provide the district court with sufficient time to reconsider the notice order.

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