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FLSA Class Action Defense Cases-Choimbol v. Fairfield Resorts: Virginia Federal Court Conditionally Certifies Class Action Under Fair Labor Standards Act (FLSA) Holding Only “Minimal Evidence” Required To Support Class Action Treatment

FLSA Class Action Certification within Court’s Discretion Even if Supported by only “Minimal Evidence” Virginia Federal Court Holds and Conditionally Certifies Class Action Subject to Defense Motion for Decertification Following Discovery

Plaintiffs filed a class action against their employers (see Note) alleging failure to pay overtime in violation of the federal Fair Labor Standards Act (FLSA). Choimbol v. Fairfield Resorts, Inc., 475 F.Supp.2d 557, 558 (E.D. Va. 2006). Plaintiffs moved the court to certify the lawsuit as a class action; defense attorneys objected on the grounds that plaintiffs were not “similarly situated” to the class and had introduced no evidence that defendant Fairfield Resorts was a “joint employer” of plaintiffs or members of the putative class. The district court rejected defense arguments and conditionally certified a class action, holding that it had authority to grant the motion for class action treatment based on “minimal evidence” subject to a subsequent motion by defense attorneys for decertification of the class action.

The facts underlying the class action complaint are rather complicated but the salient facts are these, found at pages 559 through 561 of the district court’s opinion: Fairfield Resorts operates timeshares including Kingsgate, Governor’s Green and Patriot Place timeshare locations in Virginia. Fairfield contracted with Sandulyak and Nunnery to hire immigrants to provide laundry, housekeeping and grounds maintenance services at certain properties in Virginia. Sandulyak (doing business as Carolina Janitorial) provides regional immigrant labor, and is “commonly owned, staffed and operated” by national immigrant providers Ambassador Hospitality and Proline Management. Fairfield’s contract with Ambassador provided that the immigrant laborers would be employees and Carolina Janitorial and that Fairfield had no right to supervise, direct or control the laborers. In practice, however, Sandulyak failed to supervise the laborers, Carolina Janitorial did not have a manager at the properties, and Sandulyak only visited the properties once every 1-3 months. Rather, for more than a year responsibility for supervision and day-to-day control over the laborers fell to Nunnery, who had negotiated the agreement with Ambassador “in the name and on behalf of Fairfield.”

Ultimately Fairfield, through Nunnery, terminated the contract with Ambassador and executed a new contract that decreased worker compensation. At the time, Nunnery was the sole shareholder of Petra Chemical & Consulting (PC & C) and HK Services, and HK Services also provided immigrant labor to Fairfield, but did so directly, without Ambassador or Proline serving as the “middleman.” Business between Nunnery, PC & C, Fairfield, Ambassador and Sandulyak proceeded under this new contract for two years. Again, Nunnery – acting on behalf of Fairfield, PC & C and HK Services – supervised the immigrant laborers and, additionally, kept track of their time and then forwarded the timecards to Ambassador, Proline, Sandulyak, and Carolina Janitorial. The laborers were paid as follows: The money went from Fairfield to Nunnery to Ambassador to Carolina Janitorial, who then paid the laborers. After Nunnery stopped paid Ambassador, Fairfield skipped the “Nunnery” step in the payment process and sent its funds directly to Ambassador. Under either payment plan, plaintiffs allege they worked in excess of 40 hours per week but were not paid overtime because Fairfield, Nunnery and PC & C conspired with Ambassador and Proline to classify them as “subcontractors” or “contractors” rather than as “employees.” Plaintiffs also allege they were required to pay Nunnery, Sandulyak and Carolina Janitorial “deposits” as a condition of working.

Ambassador proposed a new agreement with Fairfield that increased hourly rates and provided for direct staffing rather than using Sandulyak and Carolina Janitorial; Fairfield agreed to try the program but failed to sign a contract expressing its terms. Through Nunnery, Fairfield later terminated its contract with Ambassador and hired Nunnery, HK Services and PC & C to provide immigrant labor. Nunnery, HK Services and PC & C were engaged in actions and received the benefits of an employee, even though Fairfield represented that they were contractors. Fairfield then stopped using these parties and hired A to Z to provide immigrant workers. “A to Z supervised, directed and controlled the daily assignments of the workers,” and it engaged in actions and received the benefits of an employee, though Fairfield represented that it was a contractor.

Plaintiffs claim that by February 2006, Fairfield knowingly delayed for weeks payment of wages and that A to Z threatened a work stoppage. In response, Fairfield replaced A to Z with SCC of Miami, which provides Latino and Hispanic workers to Fairfield. Plaintiff claim Fairfield conspired with A to Z and SCC to avoid paying the laborers overtime, and that Fairfield “preyed and continues to prey on the ignorance of the majority of immigrant workers who could not and still cannot speak, read or write the English language.”

In August 2005, plaintiffs filed a class action complaint that included RICO claims, common law conspiracy and fraud claims, and claims under the Fair Labor Standards Act of 1938 (FLSA); in March 2006, plaintiffs filed a motion with the court to certify the litigation as a class action, which Fairfield, Nunnery, Petra and HK Services opposed. Choimbol, at 561.

Preliminarily, the federal court held that certification of a class action under the FLSA requires “(1) that the Plaintiffs in the class be ‘similarly situated,’ and (2) that the plaintiffs included in the class ‘opt in’ by filing with the Court their consent to the suit.” Choimbol, at 562 (citation omitted). The two stage test followed in such cases requires first a determination of whether initial notice of the putative class action should be given to potential class members, and stage two is where the court addresses any motion for decertification filed by defense attorneys. Id. The district court stated that the test for the first stage was more relaxed, while the test at the second stage requires “a heightened fact specific” analysis by the court to determine whether in fact the class representatives are “similarly situated” to the balance of the class. Id.

The district court had little difficulty in finding that plaintiffs had satisfied their burden under the stage one analysis. Choimbol, at 562. Indeed, the court flatly rejected defense arguments that a preliminary requirement to class certification was a determination of whether Fairfield was “a joint employer as to each potential Plaintiff and putative member.” Defense attorneys argued that this determination “underscores the need for a highly individualized fact-intensive examination demonstrating the inappropriateness of conditional collective certifications” and pointed to plaintiffs’ failure to introduce or identify “any admissible factual support necessary for certification.” Id. The court, however, reasoned that it had the authority to conditionally certify the class based on “minimal evidence,” id. (citation omitted). Accordingly, the district court granted conditional class certification. Choimbol, at 564-65.

NOTE” The class action complaint named numerous defendants, identified in the opinion as Fairfield Resorts, Robert W. “Bob” Nunnery, Petra Chemical & Consulting, HK Services, Mykhaylo “Mike” Sandulyak, Kelly Kahler, Dan Carusone, Steve Sharkey, Bill Cyphers, Kingsgate Property Owners Association, A to Z Best Services, and Governor’s Green Vacation Owners Association. Choimbol, at 558. Also, plaintiffs’ motion included a request to certify as a class action the claims brought under the Racketeer Influenced and Corrupt Organization Act and under Virginia common law for civil conspiracy and fraud; however, the district court dismissed this aspect of the motion as moot because of its prior determination that the RICO and common law conspiracy and fraud claims were preempted by the FLSA because RRule 23(c) provides for an “opt-out” class while FLSA § 216(b) requires an “opt-in” class. Id., at 561 and n.6.