On June 15, 2023, Judge Dolly M. Gee, of the Central District of California issued an order and opinion granting Plaintiff Lilibeth Fernandez’ Motion for Conditional Collective Action Certification and denying Defendants’ The Tox Corporation (and its owners’) Motion to Dismiss the Complaint for Lack of Personal Jurisdiction.
In this case, Goodley McCarthy represents Plaintiffs and Opt-In Plaintiffs who allege they were employed as Technicians and Estheticians by a nationwide massage and spa business, with operating locations in New York, California, Texas and several other states. Plaintiffs alleged that they were required to attend The Tox’s training program but were not paid for their attendance. Plaintiffs alleged that The Tox’s training program was centralized and performed by its owner and her assistant in a consistent manner throughout the country. Plaintiffs in New York also alleged violations of New York law in that The Tox required them to work off the clock in a variety of ways, including by working through unpaid lunch breaks and by being clocked out in between servicing clients, but while they were still on shift and performing duties such as cleaning the studio. Plaintiffs further alleged that the owners centralized payroll functions and were therefore responsible for the illegal pay practices on a nationwide basis.
The Tox had argued that the California Court did not possess personal jurisdiction over the company’s owners because they had moved out of California approximately one year prior to being sued. However, there was evidence that the company’s owners started the business at the time lived in California and its studios’ policies and procedures emanated from central decision making by the California corporation, which continued even after the owners moved out of California. Judge Gee rejected the owners’ jurisdictional arguments, holding:
On this record, it cannot plausibly be questioned that the [Owners] had
“continuous and systemic” contacts with California at the time Fernandez filed her
Complaint. See Daimler AG, 571 U.S. at 127. They lived here for nearly a decade
preceding the filing of this suit, and their domicile continued into the FLSA collective
action period. They raised children here, started and ran multiple businesses here, and
continue to be officers or employees of Tox, which is headquartered here. The [Owners]
will be participating in this lawsuit in their capacity as officers of Tox, so there is no offense
to the notions of “fair play and substantial justice” in the exercise of jurisdiction over them.
Int’l Shoe, 326 U.S. at 320. Nor would such an exercise of jurisdiction be unreasonable.
See Asahi Metal Indus. Co. v. Sup. Ct., 480 U.S. 102, 113 (1987).
The Defendants in this case also resisted nationwide collective action certification by arguing that The Tox did not employ Technicians nationally – rather, they argued that many affiliated limited liability companies separately employed the Technicians. The Tox also argued that the practices testified to by workers in New York could not fairly be extrapolated nationwide and should be limited to New York operations. The Court rejected the employer’s arguments as being merits issues for later determination, and granted national certification. In doing so, the Court relied on testimony from the New York Technicians that one owner had stated she conducted trainings nationwide, including in California, Texas and Florida, while the other owner (her husband) singlehandedly ran payroll for all of the company’s locations in the United States.
The Tox decision is important in several respects. Many (but not all) Circuit courts and district courts have held that the Supreme Court’s Bristol-Myers Squibb (BMS) decision applies to FLSA collective actions, these courts have held that unless a defendant is domiciled in the state, a defendant may only be subject to suit in that state by those who performed work in that state. Compare for example, the First Circuit decision in Waters v. Day & Zimmermann NPS, Inc.with the Sixth Circuit’s decision in Canaday v. The Anthem Companies. (The Ninth Circuit will also be deciding this issue in the Cracker Barrel case.) Decisions like Canaday have created jurisdictional barriers for plaintiffs and result in a splintering effect whereby it is more difficult (at times not possible) for plaintiffs to pursue cases on an efficient and consolidated nationwide basis. Instead, in these situations, plaintiffs and their lawyers are forced to pursue several separate smaller actions across the country concerning the same or similar practice by the same employer (sometimes even by filing parallel actions on behalf of the same group of workers against related defendants who may technically reside in different states). In this case, Goodley McCarthy was able to overcome jurisdictional arguments by the Defendants to pursue relief on a nationwide basis for underpaid workers in one consolidated proceeding.
This case is still ongoing and Goodley McCarthy is in the midst of discovery with Defendants.