On April 26, 2019, the Northern District of New York held that a group of Plaintiffs failed to satisfy their burden to establish commonality and predominance under Fed. R. Civ. P. 23 and failed to sustain their burden that they were similarly situated to continue as a FLSA collective with respect to their misclassification claims under state and federal law. Jan P. Holick Jr., et al. v. Cellular Sales of New York, LLC, Case No. 1:12 CV-584 (NAM/DJS), 2019 WL 1877176 (N.D.N.Y. Apr. 26, 2019). The Court determined that individualized issues predominated the resolution of the question as to whether a group of merchants, who contracted with Cellular Sales of New York to sell cellular service plans, devices, and accessories through various corporate entities, were independent contractors under New York law and the FLSA.
In 2010 and 2011, Cellular Sales of New York (CSNY), an authorized dealer that markets and sells cellular phone products and services in New York State, contracted with more than three hundred corporate entities, owned by many of the Named and Opt-in Plaintiffs, to sell cell phone service plans, devices, and accessories. These corporate entities and individuals who performed services for those entities were classified as independent contractors. CSNY paid commissions to those corporate entities for products and services sold under the contracts. Plaintiffs’ claimed that they were incorrectly classified as independent contractors. In order to determine whether the merchants had indeed been misclassified, discovery was conducted into the degree of control, if any, CSNY exercised over the Plaintiffs. Plaintiffs gave varying accounts of their ability to set their own work schedules, ability to work outside the retail stores, tax classifications, investment in equipment, supplies, and advertising, and use and hiring of other individuals.
In resolving Plaintiffs’ motion for class certification and CSNY’s motion to decertify the collective, the Court held that Plaintiffs could not satisfy the commonality requirement of Rule 23 of the Federal Rules of Civil Procedure because the amount of control CSNY exerted over each Plaintiff was highly individualized. Although the Court noted that Plaintiffs’ failure to satisfy Rule 23(a)’s commonality requirement was lethal to Plaintiffs’ motion, the Court also held that Plaintiffs’ individualized proof failed to satisfy Rule 23(b)’s predominance requirement. The Court then turned to whether Plaintiffs could sustain their FLSA collective action, determining that in light of the highly individualized, plaintiff-specific analysis required to adjudicate each claim, Plaintiffs and the collective were not similarly situated. The Court rejected Plaintiffs’ arguments that a common scheme of uniform classification under the Sales Agreements was enough to satisfy the FLSA’s similarly situated standard. The Court stated: “[B]lanket classification decisions and uniform corporate policies do not on their own render plaintiffs similarly situated.”
The Court’s ruling underscores the necessity of class discovery, even following an initial collective certification under FLSA §216(b). It is plaintiffs’ burden to show that class and collective certification are warranted. As the Supreme Court stated in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011): “[t]he class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties.”