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Long John Silver's Restaurants Amicus Brief, supporting appellants

No. 06-1259
__________________________________________________________

IN THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
__________________________________________________________

LONG JOHN SILVER'S RESTAURANTS, INC., et al.,
Plaintiffs-Appellants
v.
ERIN COLE, et al.,
Defendants-Appellees
__________________________________________________________

On Appeal from an Order of the United States District Court
for the District of South Carolina
__________________________________________________________

BRIEF FOR THE SECRETARY OF LABOR
AS AMICUS CURIAE SUPPORTING APPELLANTS
__________________________________________________________

HOWARD M. RADZELY
Solicitor of Labor

GREGORY F. JACOB
Deputy Solicitor

NATHANIEL I. SPILLER
Assistant Deputy Solicitor

EDWARD D. SIEGER
Senior Appellate Attorney

U.S. Department of Labor
Room N-2428
200 Constitution Avenue, N.W.
Washington, D.C. 20210
(202) 693-5771

24000600046

TABLE OF CONTENTS

Table of Authorities

Interest of the Secretary of Labor

Statement of the Issues

Statement of the Case

Statement of Facts

A.    The FLSA's Requirements

B.    The Arbitrator's Award

C.    The District Court's Decision

Summary of Argument

Argument

An Arbitrator Cannot Refuse to Apply the FLSA's Written Consent Requirement Because It Is a Substantive Statutory Right That Applies in Arbitration

A.    Arbitrators Must Apply Substantive Statutory Rights in Arbitration

B.    An "Outcome-determinative" Test Applies in Determining When a Statutory Right is "Substantive"

C.    The Written Consent Requirement is Substantive Under the Outcome Determinative Test

D.    The District Court Erred in Finding "Uncertainty" on Whether the Written Consent Requirement Applies in Arbitration

Conclusion

Certificate of Compliance

Certificate of Service

Attachment

TABLE OF AUTHORITIES

Cases:

Adkins v. Labor Ready, Inc., 303 F.3d 496 (4th Cir. 2002)

American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974)

Apex Plumbing Supply, Inc. v. U.S. Supply Co., 142 F.3d 188 (4th Cir. 1998)

Bailey v. Ameriquest Mortgage Co., 346 F.3d 821 (8th Cir. 2003)

Booker v. Robert Half Int'l, Inc., 413 F.3d 77 (D.C. Cir. 2005)

Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697 (1945)

Brown v. Western Ry., 338 U.S. 294 (1949)

Cameron-Grant v. Maxim Healthcare Servs., Inc., 347 F.3d 1240 (11th Cir. 2003), cert. denied, 541 U.S. 1030 (2004)

Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294 (5th Cir. 2004)

Champion Int'l Corp. v. United Paperworks Int'l Union, 168 F.3d 725 (4th Cir. 1999)

Cole v. Long John Silver's Rests., Inc., 388 F. Supp. 2d 644 (D. S.C. 2005)

Davison v. Sinai Hosp., 462 F. Supp. 778 (D. Md. 1978), aff'd on district court decision, 617 F.2d 361 (4th Cir. 1980)

De Asencio v. Tyson Foods, Inc., 342 F.3d 301 (3d Cir. 2003)

Deley v. Atlantic Box & Lumber Corp., 119 F. Supp. 727 (D. N.J. 1954)

Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383 (2d Cir. 2003)

Engel v. Davenport, 271 U.S. 33 (1926)

Felder v. Casey, 487 U.S. 131 (1988)

Gasperini v. Center for Humanities, Inc., 518 U.S. 415 (1996)

Gibbons v. Equitable Life Assurance Soc'y, 173 F.2d 337 (2d Cir. 1949)

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991)

Greenberg v. Bear, Stearns & Co., 220 F.3d 22 (2d Cir. 2000)

Guaranty Trust Co. v. York, 326 U.S. 99 (1945)

Hadnot v. Bay, Ltd., 344 F.3d 474 (5th Cir. 2003)

Hanna v. Plumer, 380 U.S. 460 (1965)

Hoffman-La Roche, Inc. v. Sperling, 493 U.S. 165 (1989)

Kam Koon Wan v. E.E. Black, Ltd., 75 F. Supp. 553 (D. Haw. 1948)

King v. General Elec. Co., 960 F.2d 617 (7th Cir. 1992)

LaChapelle v. Owens-Illinois, Inc., 513 F.2d 286 (5th Cir. 1975)

Lee v. Vance Executive Prot., Inc., 7 Fed. Appx. 160 (4th Cir. 2001)

Long John Silver's Rests., Inc. v. Cole, 409 F. Supp. 2d 682 (D. S.C. 2006)

Montes v. Shearson Lehman Bros., 128 F.3d 1456 (11th Cir. 1997)

Morrison v. Circuit City Stores, Inc., 317 F.3d 646 (6th Cir. 2003) (en banc)

Patten v. Signator Ins. Agency, Inc., 441 F.3d 230 (4th Cir. 2006)

Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 991 F.2d 141 (4th Cir. 1993)

Ragan v. Merchants Transfer & Warehouse Co., 337 U.S. 530 (1949)

Remmey v. PaineWebber, Inc., 32 F.3d 143 (4th Cir. 1994), cert. denied, 513 U.S. 1112 (1995)

Rowland v. Patterson, 882 F.2d 97 (4th Cir. 1989) (en banc)

Schmidt v. Fuller Brush Co., 527 F.2d 532 (8th Cir. 1975)

Shain v. Armour & Co., 40 F. Supp. 488 (W.D. Ky. 1941)

Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22 (1988)

United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29 (1987)

Wright v. United States Rubber Co., 69 F. Supp. 621 (S.D. Iowa 1946)

Statutes:

Fair Labor Standards Act of 1938, Pub. L. No. 75-718, 52 Stat. 1060 (1938):

Section 16(b), 52 Stat. 1069

Fair Labor Standards Act of 1938, 29 U.S.C. 201 et seq.:

Sections 1-19, 29 U.S.C. 201-219
Section 4, 29 U.S.C. 204
Section 6, 29 U.S.C. 206
Section 6(a), 29 U.S.C. 206(a)
Section 16(b), 29 U.S.C. 216(b)
Section 16(c), 29 U.S.C. 216(c)
Section 7, 29 U.S.C. 217

Portal-to-Portal Act of 1947, Pub. L. No. 80-49, 61 Stat. 84 (1947):

Section 5(a), 61 Stat. 87
Section 7, 61 Stat. 88

Portal-to-Portal Act of l947, 29 U.S.C. 251 et seq.:

Section 6, 29 U.S.C. 255
Section 6(a), 29 U.S.C. 255(a)
Section 7, 29 U.S.C. 256

42 U.S.C. 1983

Miscellaneous:

93 Cong. Rec. (1947):

p. 1560
p. 2182

American Arbitration Association Supplementary Rules for Class Arbitrations

Fed. R. Civ. P.:

Rule 3
Rule 23
Rule 32(a)(7)

IN THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
____________________

No. 06-1259

LONG JOHN SILVER'S RESTAURANTS, INC., et al.,

Plaintiffs-Appellants

v.

ERIN COLE, et al.,

Defendants-Appellees

____________________

On Appeal from an Order of the United States District Court
for the District of South Carolina
____________________

BRIEF FOR THE SECRETARY OF LABOR
AS AMICUS CURIAE SUPPORTING APPELLANTS
____________________

INTEREST OF THE SECRETARY OF LABOR

    The issue the Secretary will address in this case is whether an arbitrator may refuse to apply the Fair Labor Standards Act's (FLSA's) written consent requirement, which provides that an employee must "consent in writing" before being made a party to an FLSA action brought by other employees, 29 U.S.C. 216(b), and also governs the tolling of the applicable statute of limitations, 29 U.S.C. 255, 256. The Secretary of Labor has a strong interest in ensuring that statutory federal rights established by the FLSA are applied in arbitration because the Secretary administers the FLSA, see 29 U.S.C. 204, 211, and protects the rights of employees by, among other things, suing in court to recover the payment of unpaid minimum wage and overtime compensation, 29 U.S.C. 216(c), and to restrain violations of the statute, 29 U.S.C. 217.

STATEMENT OF THE ISSUES

    The Secretary will address only the following question: Whether an arbitrator may refuse to apply the FLSA's written consent requirement.

STATEMENT OF THE CASE

    The appellees in this case are former employees of appellant Long John Silver's Restaurants. In December 2003, they initiated a collective arbitration proceeding before the American Arbitration Association (AAA) in which they alleged that Long John Silver's had violated the FLSA by failing to pay them overtime wages. On June 15, 2004, an arbitrator decided, in a Clause Construction Award, that the parties' arbitration agreement permitted the former employees to bring a class or collective action on behalf of themselves and similarly situated employees. Long John Silver's filed a motion in district court to vacate that award. On September 15, 2005, the district court dismissed Long John Silver's action for lack of subject matter jurisdiction. Cole v. Long John Silver's Rests., Inc., 388 F. Supp. 2d 644 (D. S.C. 2005). Long John Silver's appeal from the district court's decision is pending in No. 06-1050 (4th Cir.).

    On September 19, 2005, the arbitrator decided, in a Class Determination Partial Final Award, to certify an "opt-out" class pursuant to Rule 4 of the AAA's Supplementary Rules for Class Arbitrations. Long John Silver's filed a motion in district court to vacate that award. On January 20, 2006, the district court denied Long John Silver's motion. Long John Silver's Rests., Inc. v. Cole, 409 F. Supp. 2d 682 (D. S.C. 2006). The instant case is Long John Silver's appeal from the district court's certification of an "opt-out" class.

STATEMENT OF FACTS

A.    The FLSA's requirements

The FLSA, 29 U.S.C. 201-219, generally requires employers to pay covered employees a minimum wage and one and one-half times their regular rate of pay for overtime work. 29 U.S.C. 206, 207. Employees may enforce those requirements through private lawsuits, but the right of an employee to do so terminates if the Department of Labor brings a suit to recover the payment of unpaid minimum wages and overtime compensation or a suit to restrain violations of the statute. 29 U.S.C. 216(b), (c), 217. An employee action may be maintained

in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.

29 U.S.C. 216(b) (emphasis added). Courts of appeals have construed this "consent in writing" requirement to be irreconcilable with the "opt-out" rules for class actions under Fed. R. Civ. P. 23. See, e.g., Cameron-Grant v. Maxim Healthcare Servs., Inc., 347 F.3d 1240, 1249 (11th Cir. 2003), cert. denied, 541 U.S. 1030 (2004); King v. General Elec. Co., 960 F.2d 617, 620 (7th Cir. 1992); Schmidt v. Fuller Brush Co., 527 F.2d 532, 536 (8th Cir. 1975); Lachapelle v. Owens-Illinois, Inc., 513 F.2d 286, 289 (5th Cir. 1975).

    The written consent requirement also affects the tolling of the FLSA's statute of limitations. An action to recover unpaid minimum wages or overtime, whether brought by the Secretary or by an employee, must be commenced within two years after the cause of action accrues, except that a cause of action arising out of a willful violation may be commenced within three years. 29 U.S.C. 255(a). An action is "commenced" when the complaint is filed, except that in a collective action under 29 U.S.C. 216(b), the action is commenced with respect to a particular employee when the employee is either named as a plaintiff or has filed his or her written consent. 29 U.S.C. 256. Accordingly, filing a collective action under 29 U.S.C. 216(b) does not toll the applicable statute of limitations for employees until they either join the action as named plaintiffs or consent in writing to become a party. See Lee v. Vance Executive Prot., Inc., 7 Fed. Appx. 160, 167 (4th Cir. 2001) ("consents not filed with the complaint do not relate back") (copy attached). In contrast, the filing of a class complaint under Fed. R. Civ. P. 23 tolls the applicable statute of limitations for unnamed class members.[1] American Pipe & Constr. Co. v. Utah, 414 U.S. 538, 552-553 (1974).

B.    The Arbitrator's award

    In his Class Determination Partial Final Award (Award), the arbitrator certified an "opt-out" class that included all employees who worked for Long John Silver's in the job classifications of salaried restaurant managers from December 17, 1998 through August 22, 2004. Award at 1, 24. The arbitrator reached this conclusion despite recognizing that an "opt-out" class was "irreconcilable" with the "opt-in" procedures of the FLSA. Id. at 15.

    The arbitrator also recognized that "'by agreeing to arbitrate a statutory claim, a party does not forego the substantive rights afforded by the statute; it only submits to their resolution in an arbitral rather than a judicial forum.'" Award at 7 (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991)). The arbitrator did not apply that principle, however, despite recognizing that applying the FLSA's "opt-in" provision and more restrictive statute of limitations would substantially limit the size of the class subject to arbitration. Award at 6. In the arbitrator's view, "there is no evidence of any congressional intent which would impose an opt-in provision upon a class action being privately arbitrated, where the consequence would be to limit the population of intended beneficiaries of the statute." Id. at 7. In support of his decision, the arbitrator described opt-in provisions as "disfavored" and stated that "[t]he salutary objective[s] of the FLSA are advanced by the opt-out procedure" -- even though Congress deliberately amended the FLSA in 1947 to insert an opt-in procedure. Id. at 8.[2]

C.    The district court's decision

    The district court recognized its "clearly established" authority to vacate actions by an arbitrator that are in manifest disregard of the law, but nevertheless denied Long John Silver's motion to vacate the arbitrator's class certification award. Long John Silver's, 409 F. Supp. 2d at 685. The district court stated that it had to exercise its authority "cautiously," because "a 'court's belief that an arbitrator misapplied the law will not justify vacation of an arbitral award.' * * * Instead, a court may vacate an award only where a party has shown 'that the arbitrator[] [was] aware of the law, understood it correctly, found it applicable to the case before [him], and yet chose to ignore it in propounding [his] decision.'" Ibid. (alteration in original) (quoting Remmey v. PaineWebber, Inc., 32 F.3d 143, 149 (4th Cir. 1994)). The district court further stated that the law allegedly ignored by the arbitrator must bear "the status of a clearly established governing principle." Ibid.

    Applying those standards, the district court concluded that the written consent requirement in 29 U.S.C. 216(b) does not qualify as a clearly-established governing principle because the language of the statute requires an employee's written consent to be filed in "court," which, in the district court's view, creates "uncertainty" as to whether the written consent requirement applies in arbitration. Long John Silver's, 409 F. Supp. 2d at 686. The district court also noted "the lack of interpretative authority" on that point. Ibid.

    The district court further concluded that the arbitrator had not disregarded the FLSA. Long John Silver's, 409 F. Supp. 2d at 686. Instead, in the court's view, the arbitrator "rendered a reasoned award" that "thoroughly analyzed" the relationship between 29 U.S.C. 216(b) and the arbitration agreement. 409 F. Supp. 2d at 686. "That the Court may have reached a different conclusion -- or even that the arbitrator may have made a serious error of law -- is of no consequence," the court concluded. Ibid. The court found that the arbitrator had not ignored the law because he was faced with substantial conflicting interpretations of the FLSA that could support a decision for either of the parties. Id. at 687.

SUMMARY OF ARGUMENT

    The arbitrator's certification of an "opt-out" class is irreconcilable with the Fair Labor Standards Act's (FLSA's) written consent requirement. An "opt-out" certification includes employees in a class unless they affirmatively opt out of it, while the written consent requirement provides that "[n]o employee shall be a party plaintiff to any such action unless he gives his consent in writing." 29 U.S.C. 216(b). An "opt-out" class also tolls the applicable statute of limitations for unnamed potential class members, whereas the written consent requirement prohibits such tolling until prospective plaintiffs in a collective action consent in writing. 29 U.S.C. 255, 256; Lee v. Vance Executive Prot., Inc., 7 Fed. Appx. 160, 167 (4th Cir. 2001).

    One of the questions before this Court is whether the written consent requirement is a substantive right that applies in arbitration. See Gilmer v. Interstate Johnson Lane Corp., 500 U.S. 20, 26 (1991) (parties do not forgo substantive statutory rights in arbitration). This Court should hold that the written consent requirement is substantive under the "outcome determinative" test that the Supreme Court uses to distinguish substantive from procedural rights in similar contexts, and so should apply in an arbitration of FLSA claims. Congress's purposes in enacting the written consent requirement also establish that it provides substantive rights. Congress phrased the requirement as a right of employees not to be made parties to actions to which they have not consented in writing, and an employee who did not so consent to an arbitration would have a strong argument that he or she could not be bound by an unfavorable outcome.

    The district court erred by finding "uncertainty" as to whether the written consent requirement applies in arbitration. The court found that 29 U.S.C. 216(b) is ambiguous because it requires that written consent forms be filed "in court." The statute's instruction that the written consent be filed in court does not create "uncertainty" about whether the statute's separately stated requirement that written consent must be secured before an employee may be made a party to an FLSA action applies in arbitration. The same section of the FLSA also provides, for example, that a "court" may award attorney's fees to a prevailing employee, and this Court and other courts have treated the right to attorney's fees as a substantive right that applies in arbitration. Adkins v. Labor Ready, Inc., 303 F.3d 496, 502 n.1 (4th Cir. 2002); Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 299 n.1 (5th Cir. 2004).

ARGUMENT

AN ARBITRATOR CANNOT REFUSE TO APPLY THE FLSA'S WRITTEN CONSENT REQUIREMENT BECAUSE IT IS A SUBSTANTIVE STATUTORY RIGHT THAT APPLIES IN ARBITRATION

    The Secretary's primary concern in this case is to establish that the Fair Labor Standards Act's (FLSA's) written consent requirement gives parties substantive rights that, under Gilmer v. Interstate/Johnson Lane Corporation, 500 U.S. 20, 26 (1991), an arbitrator must apply in arbitration. See Appellants' Br. 13-15, 28, 30, 37-38 (discussing Department's district court briefs). The district court's decision upholds an arbitrator's explicit refusal to treat the written consent requirement as a substantive right and undercuts the usefulness of arbitration as a forum for resolving FLSA disputes. Accordingly, in resolving this case, this Court should hold that the FLSA's written consent requirement embodies substantive rights that apply in arbitration. This court's review is de novo. See, e.g., Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 991 F.2d 141, 145 (4th Cir. 1993) ("The district court's decision confirming the arbitration award is reviewed de novo"); Greenberg v. Bear, Stearns & Co., 220 F.3d 22, 28 (2d Cir. 2000) (district court's application of "manifest disregard" standard is reviewed de novo).

A.    Arbitrators must apply substantive statutory rights in arbitration

    In Gilmer, the Supreme Court stated that by agreeing to arbitrate a statutory claim, "a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than judicial, forum." 500 U.S. at 26 (citation and internal quotation marks omitted). Accordingly, courts have concluded that statutory rights cannot be overridden by an arbitration agreement. See, e.g., Booker v. Robert Half Int'l, Inc., 413 F.3d 77, 83 (D.C. Cir. 2005) (Roberts, J.) (parties concede unenforceability of agreement's ban on punitive damages that would be available for racial discrimination under District of Columbia's Human Rights Act); Hadnot v. Bay, Ltd., 344 F.3d 474, 478 n.14 (5th Cir. 2003) (agreement banning punitive damages "is unenforceable in a Title VII case"); Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 670 (6th Cir. 2003) (en banc) (various limits on Title VII make-whole remedies are unenforceable).

    Those principles apply to the FLSA. As the Eighth Circuit recognized, "the arbitrator has the authority to enforce substantive statutory rights, even if those rights are in conflict with contractual limitations in the agreement that would otherwise apply." Bailey v. Ameriquest Mortgage Co., 346 F.3d 821, 824 (2003). An arbitration decision involving an FLSA claim that manifestly disregards the FLSA should be reversed. See Montes v. Shearson Lehman Bros., 128 F.3d 1456, 1461-1464 (11th Cir. 1997).

B.    An "outcome-determinative" test applies in determining when a statutory right is "substantive"

    Under the well-established Erie doctrine, the Supreme Court has enunciated principles for determining when a right is "substantive" in the context of determining when federal courts exercising diversity jurisdiction must apply substantive state law. See Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). Those principles can equally be used to determine when a federal statutory right is one of substance that must be applied in arbitration proceedings because an agreement to arbitrate is "a kind of forum selection clause." Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 36 (1988) (internal quotation marks and citation omitted). By permitting enforcement of such agreements, the Federal Arbitration Act (FAA) operates like a statute permitting a federal court forum for adjudication of state-law rights.

    In Erie cases, the Court has developed an "outcome determinative" test under which a controlling state law is considered substantive if disregarding that law would lead to a significantly different outcome in federal court than in a state-court suit between the same parties. See, e.g., Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427 (1996). The Court does not apply the test "mechanically to sweep in all manner of variations," but instead is guided by "'the twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the laws.'" Id. at 428 (quoting Hanna v. Plumer, 380 U.S. 460, 468 (1965)); see also Davison v. Sinai Hosp., Inc., 462 F. Supp. 778, 780 (D. Md. 1978), aff'd on district court's opinion, 617 F.2d 361 (4th Cir. 1980).

    The Supreme Court has applied similar outcome-determinative principles in determining whether a state court may apply its own rules of procedure in adjudicating a case brought under a federal statute that authorizes suits in either state or federal court. See Brown v. Western Ry., 338 U.S. 294, 299 (1949) ("desirable uniformity in adjudication of federally created rights" under Federal Employees Liability Act prohibits use of state rule of practice that construes a pleading against the pleader, contrary to federal rule of construing a complaint more broadly); Engel v. Davenport, 271 U.S. 33, 38 (1926) (Jones Act statute of limitations is a provision "of substantive right, setting a limit to the existence of the obligation which the Act creates").

    The outcome-determinative test has been held to encompass different outcomes regarding remedies as well as different outcomes regarding the underlying issue of liability. See Gasparini, 518 U.S. at 428-429 ("not debate[d]" that a statutory cap on damages supplies substantive law for Erie purposes); id. at 426 (state law allowing judge to review a jury award of damages to see if it "deviates materially" from other awards is substantive because it "controls how much a plaintiff can be awarded"). Thus, consistent with this principle, cases like Booker, Hadnot, and Morrison, cited supra, have held that provisions in arbitration agreements that prohibit punitive damages or other remedies allowable under civil rights statutes are invalid. Accordingly, as a general rule, the Supreme Court's "outcome determinative" test, which helps to ensure uniformity and protect party expectations, should apply in determining when a federal statutory provision affords a substantive right that a party does not forgo by agreeing to arbitrate.[3]

C.    The written consent requirement is substantive under the outcome determinative test

    As discussed above, Section 16(b) of the FLSA allows an employee to sue on behalf of other employees similarly situated but provides that "[n]o employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought." 29 U.S.C. 216(b). An employee's written consent is also necessary to toll the applicable statute of limitations. 29 U.S.C. 255, 256; Lee v. Vance Executive Prot., Inc., 7 Fed. Appx. 160, 167 (4th Cir. 2001) (for statute of limitation purposes, "consents not filed with the complaint do not relate back"); see note 1, supra. This written consent requirement is substantive because (1) a failure to apply it in arbitration will lead to significantly different outcomes in the arbitration forum than in a court forum involving the same claim and the same parties, (2) it is integral to the purposes of the FLSA, and (3) this treatment is consistent with the purposes of the Federal Arbitration Act.

    (1)    As the arbitrator recognized, certifying an "opt-out" class rather than requiring an employee's written consent to join the class will significantly affect the number of probable class members. Award at 6. That in turn affects the outcome of the litigation, not only by changing the number of individuals who are subject to a final judgment, but by profoundly affecting the substantive rights of the parties in the litigation. As the Third Circuit explained:

Generally, the distinction between opt-in and opt-out classes is crucial. Under most circumstances, the opt-out class will be greater in number, perhaps even exponentially greater. * * * The aggregation of claims, particularly as class actions, profoundly affects the substantive rights of the parties to the litigation. Notably, aggregation affects the dynamics for discovery, trial, negotiation and settlement, and can bring hydraulic pressure to bear on defendants.

De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 310 (3d Cir. 2003) (emphasis added).

    The written consent requirement also affects the outcome of litigation because, as discussed above, an employee's written consent is necessary to toll the applicable statute of limitations. Cf. American Pipe & Constr. Co. v. Utah, 414 U.S. 538, 551-553 (1974) (limitations period is tolled for absent class members under Fed. R. Civ. P. 23); see note 1, supra. This affect on the limitations period alone makes the written consent requirement substantive. See Guaranty Trust Co. v. York, 326 U.S. 99, 107-112 (1945) (state statute of limitations is substantive for Erie purposes); see also Ragan v. Merchants Transfer & Warehouse Co., 337 U.S. 530, 531 (1949) (federal court exercising diversity jurisdiction must apply state law that says a statute of limitations is not tolled until service of a summons, rather than Fed. R. Civ. P. 3, which says an action is commenced by filing a complaint); Rowland v. Patterson, 882 F.2d 97, 99 (4th Cir. 1989) (en banc) ("settled principle that such state tolling provisions are effectively substantive for Erie purposes").

    (2)(a)    The purposes of the FLSA's written consent requirement reinforce the view that it must be treated as substantive. Before the Portal-to-Portal Act of 1947, the FLSA had no written consent requirement and permitted an action "by any one or more employees for and in behalf of himself or themselves and other employees similarly situated, or such employee or employees may designate an agent or representative to maintain such action for and in behalf of all employees similarly situated." Fair Labor Standards Act of 1938, Pub. L. No. 75-718, 16(b), 52 Stat. 1060, 1069 (emphasis added). The Portal-to-Portal Act removed the italicized language, thereby prohibiting representative actions, and added 29 U.S.C. 216(b)'s written consent provision as a limitation on an employee's ability to sue on behalf of other similarly situated employees. Portal-to-Portal Act of 1947, Pub. L. No. 80-49, 5(a), 7, 61 Stat. 84, 87-88.

    The purpose of those Portal-to-Portal Act changes was to "limit[] private FLSA plaintiffs to employees who asserted claims in their own right and freeing employers of the burden of representative actions." Hoffman-La Roche, Inc. v. Sperling, 493 U.S. 165, 173 (1989). Congress's particular goal in adding the written consent provision to 29 U.S.C. 216(b) was to "prevent[] large group actions, with their vast allegations of liability, from being brought on behalf of employees with no real involvement in, or knowledge of, the lawsuit." Cameron-Grant v. Maxim Healthcare Servs., Inc., 347 F.3d 1240, 1248 (11th Cir. 2003), cert. denied, 541 U.S. 1030 (2004) (citations and internal quotation marks omitted). As Senator Donnell, the Chairman of the Senate Judiciary Committee, explained:

[I]t is certainly unwholesome to allow an individual to come into court alleging that he is suing on behalf of 10,000 persons and actually not have a solitary person behind him, and then later on have 10,000 men join in the suit, which was not brought in good faith, was not brought by a party in interest, and was not brought with the actual consent or agency of the individuals for whom an ostensible plaintiff filed the suit.

93 Cong. Rec. 2182 (1947) (statement of Sen. Donnell). The written consent requirement "clearly enures to the benefit of employers by making them aware of what allegations they face and from whom the allegations originate." Lee, 7 Fed. Appx. at 167.

    Written consent also protects employees in a fundamental way. See 93 Cong. Rec. at 1560 (statement of Rep. Hobbs) (discussing case where a group sued on behalf of alleged claimants without their permission or knowledge and many of the claimants "repudiated the pretense of authority to act for them"); Shain v. Armour & Co., 40 F. Supp. 488, 490 (W.D. Ky. 1941) (some kind of written consent is "necessary in order to show knowledge [by the consenting employees] of the litigation in their behalf, their willingness to participate therein and to be so represented, and to bind them by the final judgment"). Thus, the legislative history makes it clear that Congress, intending an employee's FLSA claims to be litigated as part of a collective action only with his or her express written consent and believing that such consent served the interests of both employers and employees, made such consent integral to the right to bring suit on an employee's behalf.

    (b)    As a consequence, the written consent requirement eliminated the asymmetry that pertained before the Portal-to-Portal Act, under which some courts had treated a judgment favorable to a named plaintiff as res judicata for the entire class, while treating a judgment unfavorable to the named plaintiff as binding only that individual. See Deley v. Atlantic Box & Lumber Corp., 119 F. Supp. 727, 728 (D. N.J. 1954). Res judicata requires, among other things, that before a person can be bound by a prior judgment, the person must have been a party or privy to that judgment. See, e.g., Pension Benefit Guaranty Corp. v. Beverley, 404 F.3d 243, 248-249 (4th Cir. 2005). Relying on the express language of the FLSA that "[n]o employee shall be a party plaintiff" in another employee's action without written consent, 29 U.S.C. 216(b), an employee could make a strong argument that, without written consent, the employee cannot be bound by an unfavorable arbitration award. Certainly, there is nothing in the arbitration agreement at issue in this case that would signal to an employee that by entering into it he or she was giving up his or her statutory right not to be made a party to an FLSA action without first giving consent in writing. The arbitrator's decision making unconsented employees parties to the instant action thus contravenes Congress's intent to make a collective FLSA action binding on all consenting employees regardless of the outcome and threatens to upset the litigation balance delicately but expressly set by Congress.

(3)    Treating the written consent requirement as substantive is also consistent with the FAA. The primary purpose of the FAA "was to reverse the longstanding judicial hostility to arbitration agreements" and to place them "upon the same footing as other contracts." Gilmer, 500 U.S. at 24. At the same time, however, a contract -- including an arbitration contract -- will not be enforced if it violates a specific public policy set out in another statute. See United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 43 (1987). Not requiring written consent in a class arbitration violates the public policy expressed in the FLSA, and accordingly should not be enforced. Cf. Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 704-709 (1945) (employee cannot agree to waive employee rights to FLSA wages). Requiring written consent in arbitration, by contrast, will give effect to the rule that a party who agrees to arbitrate "does not forgo the substantive rights afforded by the statute." Gilmer, 500 U.S. at 26 (citation and internal quotation marks omitted).

    Moreover, allowing an opt-out class action, as the arbitrator did, will add delays and expenses. Requiring written consent helps to ensure that parties receive the benefits they sought in arbitration, i.e., a quick and relatively inexpensive alternative to court resolution of disputes. See Apex Plumbing Supply, Inc. v. U.S. Supply Co., 142 F.3d 188, 193 n.5 (4th Cir. 1998).

D.    The district court erred in finding "uncertainty" on whether the written consent requirement applies in arbitration

    As discussed above, the district court found "uncertainty" on whether the FLSA's written consent requirement clearly applies in arbitration because the FLSA requires a written consent to be "'filed in the court in which [a collective] action is brought.'" Long John Silver's, 409 F. Supp. 2d at 685 (quoting 29 U.S.C. 216(b)). The reference to a "court" as the place where the written consent should be filed does not mean that the requirement that the written consent be secured is inapplicable in arbitration. The statute also provides, for example, that in an employee's action "[t]he court" shall award prevailing plaintiffs a reasonable attorney's fee. 29 U.S.C. 216(b). That reference to a "court" does not imply that attorney's fees cannot be awarded to a prevailing plaintiff in arbitration. Instead, this Court and other courts have held that the right to attorney's fees is a substantive right that applies in arbitration. Adkins v. Labor Ready, Inc., 303 F.3d 496, 502 n.1 (4th Cir. 2002); Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 299 n.1 (5th Cir. 2004). By similar reasoning, the reference to a "court" as the place for filing a written consent does not preclude the consent requirement from applying in arbitration.

    Moreover, whether or not the filing requirement applies in arbitration, the requirement that an employee must "consent in writing" to be made a party to another employee's action would still apply because under the text of the statute the limitation on an employee's right to sue on behalf of other employees is separate from the requirement that the written consent be "filed in the court in which such action is brought." See 29 U.S.C. 216(b) (requiring both conditions before an employee can be a party to such an action). As discussed above, failing to require written consent in arbitration would not only lead to different results in arbitration than in court actions, but would also call into question the enforceability of an adverse arbitration decision against employees who are included in a class without giving written consent.

    Accordingly, for reasons discussed above, this Court should hold that the FLSA's written consent requirement is a substantive right that an arbitrator must apply in the arbitration of an employee's FLSA claim.[4]

CONCLUSION

    The Court should hold that the FLSA's written consent requirement applies in arbitration.

Respectfully submitted.

HOWARD M. RADZELY
Solicitor of Labor

GREGORY F. JACOB
Deputy Solicitor

NATHANIEL I. SPILLER
Assistant Deputy Solicitor

___signed__________
EDWARD D. SIEGER
Senior Appellate Attorney
U.S. Department of Labor
200 Constitution Avenue, N.W.
Room N-2428
Washington, D.C. 20210
(202) 693-5771

JUNE 2006

CERTIFICATE OF COMPLIANCE

    Pursuant to Fed. R. App. P. 32(a)(7), I hereby certify that the Brief for the Secretary of Labor as Amicus Curiae Supporting Reversal is monospaced, has 10.5 or fewer characters per inch and contains 5318 words as determined by the Microsoft Word software system used to prepare the brief.

___signed__________
EDWARD D. SIEGER
Senior Appellate Attorney

CERTIFICATE OF SERVICE

    I hereby certify that two copies of the Brief for the Secretary of Labor as Amicus Curiae Supporting Appellants were mailed first class, postage prepaid, on this 21st day of June 2006, to the following counsel of record:

Henry L. Parr, Jr., Esq.
J. Theodore Gentry, Esq.
Hannah Rogers Metcalfe, Esq.
WYCHE, BURGESS, FREEMAN & PARHAM, PA
44 East Camperdown Way
Greenville, SC 29602

John F. Dienelt, Esq.
Scott McIntosh, Esq.
DLA PIPER RUDNICK GRAY CARY, LLP
1200 19th Street, NW
Washington, DC 20036-2412

Brian P. Murphy, Esq.
BRIAN P. MURPHY LAW FIRM, PC
708 East McBee Avenue
Greenville, SC 29601

Robert P. Davis, Esq.
David M. Gossett, Esq.
Tamara S. Killion, Esq.
MAYER, BROWN, ROWE & MAW, LLP
1909 K Street, NW
Washington, DC 20006-1101

Darrell L. West, Esq.
Morris Reid Estes, Jr., Esq.
STEWART, ESTES & DONNELL, PLC
Suite 1401
424 Church Street
Nashville, TN 37219

___signed__________
EDWARD D. SIEGER
Senior Appellate Attorney

U.S. Department of Labor
Room N-2428
200 Constitution Avenue, NW
Washington, DC 20210
(202) 693-5771


Footnotes

[1]    Applying Fed. R. Civ. P. 23 to an FLSA class complaint would therefore mean that the relevant two- or three-year period of alleged unpaid wages would be the period immediately preceding the bringing of the suit by the original plaintiffs and would be the same for all class members, including those absentee class members who have not affirmatively consented to be in the class. Under the FLSA's written consent (or "opt in") requirement, however, the two- or three-year period is the period immediately preceding the date written consent is filed, which may be later than the date the complaint is filed.

[2]    The arbitrator also decided that the parties' agreement to arbitrate incorporated the AAA's Supplementary Rules for Class Arbitration, which include an "opt-out" procedure similar to that of Fed. R. Civ. P. 23, that the class should not be limited to restaurant managers in South Carolina, and that the prerequisites for a class certification were satisfied. Award at 4, 10-24. The Secretary does not address those issues in this brief.

[3]    Aside from the outcome-determinative test, the Supreme Court has also sometimes more broadly prohibited state laws that conflict with federal purposes. See Felder v. Casey, 487 U.S. 131, 138 (1988) (state notice-of-claim statute does not apply to bar state-court suit under 42 U.S.C. 1983). Because the FLSA's written consent requirement is substantive under an outcome-determinative test, this Court need not apply the broader conflict test.

[4]    Treating the written consent requirement as a substantive right is also consistent with the principle that parties, through an arbitration agreement, can give up the right to a collective action. See Gilmer, 500 U.S. at 32; Adkins, 303 F.3d at 503. The FLSA allows employees to decide whether to bring a collective action without requiring them to do so. See 29 U.S.C. 216(b) (collective action "may be maintained"). Thus, an employee gives up no substantive right by deciding to enforce the employee's FLSA rights through an individual arbitration. In contrast, the written consent requirement is mandatory in the two provisions where it appears. See 29 U.S.C. 216(b) ("No employee shall be a party plaintiff to any such action unless he gives his consent in writing"); 29 U.S.C. 256 (date action is commenced, for purposes of the applicable statute of limitations, "shall be" the date written consent is filed). Accordingly, when an employee brings a collective action on behalf of other employees, the FLSA prohibits the employee from deciding on behalf of other employees to disregard the written consent requirement.