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Eleventh Circuit Decision Rejecting Catalyst Theory May Alter the Way FLSA Cases Are Litigated

Last week, in Dionne v. Floormasters Enterprises, Inc., the Eleventh Circuit Court of Appeals issued a decision that is sure to affect how attorneys represent their clients in wage and hour matters.  Florida leads the nation in wage and hour suits filed under the Fair Labor Standards Act (“FLSA”), largely because the plaintiff’s bar here decided over a decade ago to aggressively pursue these suits.  FLSA cases are attractive to plaintiff’s lawyers because the statute includes a one-way prevailing party fees provision that is applicable to plaintiffs only.  If a plaintiff files suit and prevails, the plaintiff gets his/her fees paid by the other side.  There is no reciprocal provision that applies if the defendant wins.

Because of this one-way fee shifting provision, Defendants who deny liability still often find it cost-effective to settle FLSA suits at their outset.  The amount the plaintiff seeks in unpaid wages is usually much less than the attorney’s fees that a defendant will have to pay its own lawyers to defend the suit.  And, if the plaintiff prevails on only a small portion of his claim, the defendant will have to also pay the plaintiff’s attorney’s fees.  It does not take a rocket scientist to understand the “Catch 22” situation that defendants are in.

One defense tactic that lawyers have long considered has been to offer to pay the plaintiff all damages (double the amount of claimed unpaid wages, plus interest) that the plaintiff could hope to receive in the suit, in order to “moot” the cause of action, and to avoid having to pay the plaintiff’s fees.  Unlike other types of case, in FLSA matters most Florida federal courts require that plaintiffs provide a sworn estimate of their claimed damages early in the case, so it is not difficult for the defendant to calculate the precise amount at issue. The problem, though, with tendering the full amount at issue has been that the plaintiff’s attorneys still claim that the plaintiff is the prevailing party in the case, and that the defendant should have to pay the plaintiff’s attorney’s fees.

The Eleventh Circuit in Dionne flatly rejected that argument.  There, after the suit was filed, the Defendant “tendered” full payment to the Plaintiff.  The Defendant also moved to dismiss for lack of subject matter jurisdiction, under the theory that the payment mooted the case because no claim or controversy existed going forward.  The Plaintiff  admitted that the case was now moot, but filed a motion for prevailing party attorney’s fees.  The court rejected the fee application, and awarded the Plaintiff’s counsel nothing.

The Plaintiff appealed, arguing that filing the suit served as a the “catalyst” for the Defendant’s eventual payment, and that the plaintiff was the “prevailing party”.  The Eleventh Circuit disagreed, and stated:  “Dionne is not a ‘prevailing party’ in this action because, in granting Floormasters’ motion to dismiss this lawsuit for lack of subject matter jurisdiction, the District Court did not award a judgment in his favor.”  In other words, unless the court issues a judgment in favor of the plaintiff, the plaintiff has not become the “prevailing party”.

The likely result of this decision is that in single-plaintiff FLSA cases in which the amount in controversy is relatively small, defense attorneys will recommend that their clients tender full payment in order to end the case.  In short, this Eleventh Circuit decision will likely change the way that small, single-plaintiff FLSA cases are handled, and could eventually lead to a decline in the number of these suits filed. 




Big Enough to Drive a Truck Through? Considering Florida’s “Ulterior Purpose” Exception to the Third Party Requirement of a Tortious Interference Claim

There is no basis for holding an individual liable under Title VII, the Florida Civil Rights Act, or the Florida private sector Whistleblower’s Act.  So, managers and co-workers need not fear being sued for discrimination or retaliation.  Only the employer can be held liable, right?  

Not exactly.  Supervisor and co-workers can be sued under one or more tort theories for conduct that violates one of these laws.  For example, a plaintiff who sues her employer alleging that her supervisor sexually harassed her by groping or fondling her in violation of Title VII can also sue the supervisor for battery.

But what about garden variety discrimination or retaliation claims?  Can the facts that support such a claim also support a claim against the plaintiff’s supervisor or co-worker for tortious interference with a business relationship?  According to a recent decision by Florida’s Third District Court of Appeals, Alexis v. Ventura, Case No. 3D10-2879 (Fla. 3d DCA, June 29, 2011), the answer is yes. 

Ketlyn Alexis was terminated from her job with Arbor E&T, LLC. She filed suit under the Florida Civil Rights Act, claiming that her supervisor, Lilliam Ventura, and others subjected her to a hostile work environment based on her race (black) and national origin (Haitian.). 

Alexis later amended her complaint to add Ventura as a defendant, alleging that Ventura tortiously interfered with an advantageous business relationship that Alexis had with Arbor E&T. In particular, Alexis alleged that Ventura made a number of hostile statements and engaged in a number of hostile acts against Alexis.  For example, Alexis alleged in her complaint that Ventura told other employees: “I am the boss and I am in charge and I’m going to make that Haitian Bitch know it.” Alexis alleged that these statements and acts were motivated by a discriminatory intent to undermine Alexis’ job performance in the eyes of Arbor E&T, and that these statements and acts by Ventura ultimately led to Alexis’ termination by Arbor E&T.

Ventura filed a motion to dismiss this count and to dismiss Ventura as a defendant to the action. Ventura argued that, as a matter of law, Alexis could not state a claim against Ventura for tortious interference with a business relationship because Ventura and Alexis were co-workers. The trial court granted the motion, dismissed the claim, and dismissed Ventura as a party defendant.

On appeal, the Third DCA reversed the trial court’s order.  The court noted that to state a claim for unlawful interference with an advantageous business relationship, Alexis must have alleged the following elements: 1. The existence of a relationship between Alexis and her employer, under which Alexis has legal rights; 2. Ventura’s knowledge of the relationship; 3. An intentional and unjustified interference with that relationship; 4. By a third party; 5. Resulting in damages to Alexis caused by the interference.

The court’s decision turned on the fourth element: whether Ventura could be characterized as a “third party” where she and Alexis were co-employees of Arbor E&T. Generally, the court noted, “in the context of a managerial or supervisory employee terminating a plaintiff’s employment, an action will usually not lie against the terminating employee because he/she is considered a party to the employment relationship.”

But, the court wrote, “[t]here is a recognized exception to this general rule, as explained in O.E. Smith’s Sons, Inc., v. George, 545 So. 2d 298 (Fla. 1st DCA 1989): 

For the interference to be unjustified, the defendant must be a third party, external to the business relationship. However, the privileged interference enjoyed by a party that is integral to the business relationship is not absolute.  The privilege is divested when the defendant “acts solely with ulterior purposes and the advice is not in the principal’s best interest.”  Id. at 299 (quoting Sloan v. Sax, 505 So. 2d 526, 528 (Fla. 3d DCA 1987)) (emphasis supplied).

The court noted further that, “[a]lthough ‘an allegation that [defendant] was maliciously motivated does not by itself mean that [defendant] acted outside the scope of his employment,’ Sloan, 505 So. 2d at 528, an allegation that the defendant was not acting on the employer’s behalf or was acting to its detriment satisfies the “third party” requirement.” 

Because Alexis had made the requisite allegations, the Third DCA ruled that Alexis had stated a claim against Ventura for tortious interference with an advantageous business relationship.

It is, of course, a relatively easy matter for a plaintiff to allege that her supervisor, in discriminating against or retaliating against her in violation of the law, was acting solely with ulterior purposes, and not in the best interests of the employer.  Indeed, while an employer accused of discrimination or retaliation will typically deny such allegations, it will also likely take the position that if its supervisor discriminated against or retaliated against the plaintiff, the supervisor was acting with ulterior purposes and not in the employer’s best interest.  After all, an employer is not going to admit that it encourages or condones unlawful discrimination or retaliation. 

So, it would seem that the “ulterior purpose” exception to the third party requirement of a tortious interference claim is “big enough to drive a truck through,” at least in cases of discrimination or retaliation.

The inclusion of a supervisor as a co-defendant complicates an employer’s case.  Depending on the facts, the supervisor may have to retain separate counsel because of a potential conflict of interest.  And the employer may choose, or be obligated, to pay for the supervisor’s defense, which increases the overall cost of the defense.  If the employer agrees to indemnify the supervisor in the event of an adverse judgment, the employer must realize that there are no automatic caps on damages in a tort claim, unlike claims under Title VII or the Florida Civil Rights Act. 

Plaintiff-side lawyers realize that the addition of a supervisor-defendant typically drives up the settlement value of the case, and may even make a plaintiff’s verdict more likely at trial.  Thus, in the wake of the Alexis case, it seems likely that Florida employers will see an increase in tortious interference claims against their supervisors.  


The Florida Employer

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Michael W. Casey III, Kevin E. Vance, Mark J. Beutler, and Teresa M. Maestrelli practice labor and employment law, with a particular focus on labor and employment litigation, including Title VII, ADEA, ADA, Florida Civil Rights Act, and whistleblower claims, as well as non-compete litigation, in state and federal trial and appellate courts in Florida and throughout the United States. They also represent employers before the National Labor Relations Board (NLRB), the National Mediation Board (NMB), the U.S. Department of Labor, including the Wage and Hour Division and the Occupational Safety and Health Administration (OSHA), the Equal Employment Opportunity Commission (EEOC), and various state and local agencies, as well as in arbitrations, collective-bargaining negotiations and union representation elections. Hector A. Chichoni practices in the area of US and global immigration law. He chairs Duane Morris's Florida Immigration Practice. The editors of Chambers USA 2010 also selected Mr. Chichoni as a "Leader in the Immigration Field." He has represented a vast number of corporate and individual clients throughout his career ranging from premier US health care organizations, Fortune 100 and Fortune 500 companies, multinational corporations and universities to doctors, professors, researchers and students. His international experience includes handling matters relating to export controls and global corporate compliance and business transactions. He has represented clients in a wide variety of cases before the US Immigration Court.
© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.
The opinions expressed on this blog are those of the author and are not to be construed as legal advice.