In the very recently issued decision of Cruz v. Lawson Software, Inc., No. 08-5900, Docket #217 (D. Minn. Jan. 5, 2010) (no Westlaw citation is currently available), the District of Minnesota rejected Plaintiffs’ attempt to certify nationwide misclassification and record-keeping classes under the Minnesota Fair Labor Standards Act (“MFLSA”). Plaintiffs sought class certification under Rule 23(b), which “allows a class action when ‘the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.’”
The putative classes were made up of individuals with three job titles (Business Consultants, Systems Consultants, and Technical Consultants) that Plaintiffs claimed had been improperly classified as exempt. Lawson Software is headquartered in Minnesota, but the 476 potential class members resided in forty-three different states. In general, the potential class members performed most of their work away from their home locations, although individual class members estimated that they spent anywhere from 5-80% of the their time travelling. While Plaintiffs argued that, in general, each individual performed work in multiple states in a given year, no evidence before the court established the locations in which each had worked.
The district court had previously dismissed plaintiffs’ state law claims for lack of standing. Cruz v. Lawson Software, Inc., No. 08-5900, Docket #114 (D. Minn. Mary 21, 2009). Plaintiffs re-filed, adding a named plaintiff who resides in Minnesota. Although the addition of the Minnesota plaintiff resolved the standing problem, the court found that its previous holding—that the MFLSA did not have extraterritorial application—posed a similar barrier to class certification. The court noted specifically that 438 of the 476 putative class members lived outside of Minnesota, and two of the individuals for which the court was given information had “never even traveled to Minnesota on Lawson business during the relevant time period.”
The court went on to determine whether, nonetheless, it would be constitutionally permissible to apply Minnesota law to all class members. Following In re St. Jude Med., Inc., 425 F.3d 1116, 1120 (8th Cir. 2005), the court determined that, as the first step in the constitutional analysis, it must “conduct a thorough conflicts-of-law analysis with respect to each plaintiff class member.”
Initially the court noted, “if there is no conflict, then Minnesota law can be applied across the class.” However, examining the relevant state wage and hour laws, the court found that there were significant differences. Plaintiffs admitted that there were differences in the laws of approximately half the states and, for instance, Alabama has no applicable wage and hour laws. Further, the court found conflicts even among those states that Plaintiffs argued had no substantive differences. Specifically, the court found that Minnesota, California and Iowa law have conflicts regarding the “primary duty test,” which is applied to classify an individual who has both exempt and non-exempt duties, and different statutes of limitations.
Since the court found that there were substantive conflicts between the wage and hour laws of the relevant states, and the district court had already found that the MFLSA did not apply extraterritorially, the court then examined “whether blanket application of Minnesota law violates due process.” The district court stated the applicable due process standard is as follows: “For a State’s substantive law to be selected in a constitutionally permissible manner, that State must have a significant contact or significant aggregation of contacts, creating state interests, such that a choice of its law is neither arbitrary nor fundamentally unfair.” Id. (quoting Allstate Ins. Co. v. Hauge, 449 U.S. 302, 312-13 (1981)).
Plaintiffs argued that Lawson would not be unfairly surprised by application of the MFLSA to class members because it “has significant contacts with Minnesota:”
[I]ts principle place of business and corporate headquarters are located in Minnesota; its corporate policies and U.S.-based human resources decisions are developed and administered in Minnesota; the decision to classify Consultants as exempt was made in Minnesota; assignments of Consultants to specific projects are made in Minnesota; the database into which Consultants record their hours is located in Minnesota; training is centrally controlled from Minnesota; client payments are received in Minnesota; and all of the documents relevant to this case are located in Minnesota.
However, the court found that these facts, while potentially important to the analysis, had to be “weighed in the context of a particular class member’s circumstances in order to have any meaning.” Without such an examination, the court found that “across-the-board application of the MFLSA” would violate the Due Process clause.
The court declined to undertake this individualized examination for each of the 476 putative class members, stating that “[s]uch a task would be herculean, particularly given the potential applicability of the laws of all fifty states, the varying geographic nature of each putative plaintiff’s job history, and the number of putative class members.” Even if the court were so inclined to do so, it had not been presented with adequate information to make such a determination. (Having so found, the court did not consider whether such application would be contrary to the Commerce Clause.)
After determining that the MFLSA could not be applied across the board, the court went on to consider whether, nonetheless, it could certify a state-law class based on alleged misclassification. The court found that this was a clear question, and passed over the analysis of Rule 23(a), because plaintiffs could not meet either element of Rule 23(b): (1) “questions of law or fact common to class members predominate over any questions affecting only individual members,” and (2) “a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” With regard to the predominance of common questions, the court found that despite some class-wide similarities in job duties and the classification decision, the requisite individual choice-of-law analysis overwhelmed the common questions of law and fact. The court also flatly rejected plaintiffs’ contention that a class action would be more manageable and superior to other methods of adjudication; it found that the complexity of the choice-of-law question made the case ill-suited for class certification.