Dirksen Federal Courthouse, Chicago
CHICAGO - As the number of class action lawsuits under a landmark federal labor law continue to surge, a Chicago federal appeals panel has established a framework for federal courts in Chicago and elsewhere to use when deciding how to notify potential members of those class actions.
The ruling from the U.S. Seventh Circuit Court of Appeals resolves an interlocutory appeal from Indianapolis-based U.S. District Judge Tanya Pratt and applies to federal courts in Indiana, Illinois and Wisconsin. Judge Thomas Kirsch wrote the panel’s opinion, filed Aug. 5; Judges David Hamilton and John Lee concurred. Hamilton wrote a special opinion.
The underlying dispute involves allegations that Eli Lilly & Company discriminated against older employees by promoting younger workers with less sales experience than veteran employees. Named plaintiff Monica Richards asked the court to send notice of her lawsuit to all “Eli Lilly employees who were 40 or older when they were denied promotions for which they were qualified, since February 12, 2022.”
Judge Pratt granted conditional class certification and agreed to issue the requested notice. But because the Seventh Circuit hadn’t issued a standard for deciding on notice requests allowed them to bring the question to the appeals court in search of formal guidance.
Richards’ case was just one of hundreds of such class actions that have been lodged against businesses in the Seventh Circuit’s three states and among thousands filed annually nationwide.
In 2023 alone, for instance, more than 2,600 class actions were filed nationwide under the federal Fair Labor Standards Act. And Illinois ranked No. 5 among states for such cases in that time, behind only New York, Florida, Texas and Ohio, according to an analysis provided by the law firm of Duane Morris LLP, based on a report from Lex Machina.
“We rarely review a district court’s decision to issue notice,” Kirsch wrote. But since the Fifth and Sixth Circuit appellate courts recently rejected the commonly accepted “modest showing” standard federal judges had used, “we agreed to take this interlocutory appeal,” while cautioning the panel wouldn’t be micromanaging the notice process.
“Because most collective actions settle rather than proceed to trial, the issuance of notice, though it has no legal effect, carries significant practical implications for parties,” Kirsch wrote. “For plaintiffs, broad and early notice helps to increase the size of the collective. This lowers costs, improves plaintiffs’ bargaining position and makes it easier to recruit suitable counsel.”
Richards argued against a new framework, saying that would hamper the discretion of federal district judges. But Kirsch said “imposing guardrails on the exercise of a district court’s discretion is the normal business of appellate courts.”
The panel noted the 1938 Fair Labor Standards Act allows class actions against employers, while the 1967 Age Discrimination in Employment Act explicitly permits such litigation for the type of violation Richards alleged. The judges pointed to a 1989 U.S. Supreme Court opinion, Hoffmann-La Roche Inc. v. Sperling, finding “three core principles to guide the proper facilitation of notice.”
One is being timely and accurate, a second is judicial neutrality and the third is that judges wield their discretion to prevent abuses of the system and ensure any additional parties can join efficiently. Kirsch said the current “modest showing” standard favors “timely notice at the expense of both judicial discretion and neutrality.” If too many ultimately ineligible plaintiffs get notice, the panel said, that might increase discovery costs and incentivize early settlement.
Lilly argued in favor of the Fifth Circuit adopting an approach favoring “a preponderance of the evidence” to decide on issuing notice “or, at the very least, the Sixth Circuit’s strong likelihood of similarity standard. We decline to do either.”
A leading issue, the panel said, is the nature of plaintiffs’ allegations and therefore the availability of evidence — not explicitly definitive but subject to rebuttal — showing “members of the proposed collective are victims of a common unlawful employment practice or policy.” To the extent that might leave a judge assessing competing affidavits, “that’s fine,” Kirsch wrote, given the common occurrence of assessing the existence of factual disputes.
“This threshold showing imposes a meaningful yet appropriate evidentiary burden on the plaintiff, reflecting both the preliminary stage of the proceedings and the practical significance of notice to both parties,” Kirsch wrote. “A lower standard would permit notice based on little more than allegations, conflicting with the court’s warning against encouraging ‘the solicitation of claims.’ By contrast, a substantially higher standard risks leaving some plaintiffs in limbo, unable to make the required showing without access to evidence held by individuals who are not yet parties to the case.”
Once a judge recognizes a dispute about the similarity of proposed class members, the panel continued, the next step is exercising discretion to efficiently facilitate a notice. Judges can issue notice but wait on a similarity determination until a motion for certification or authorize limited, expedited discovery to make their own determination on the similarity dispute without notice.
“This need not be an all-or-nothing determination,” Kirsch wrote. “A district court might decide that a subset of issues relating to the similarly situated analysis are capable of definitive resolution and narrow the scope of notice accordingly, even as it recognizes that other disputes cannot be resolved until later in the proceedings. And if a plaintiff fails to produce evidence that establishes a material factual dispute, a district court might deny the motion for notice without prejudice, subject to possible reconsideration if the plaintiff comes forward with further evidence. The watchword here is flexibility, with respect for the principles outlined in Hoffmann-La Roche and the remedial goals of the FLSA and ADEA.”
The panel vacated Judge Pratt’s ruling and remanded Richards’ complaint for further proceedings consistent with the new framework.
In his addendum, Hamilton wrote Judge Kirsch’s opinion went too far in addressing what would happen after a district judge issues a notice in an FLSA or ADEA case, saying the questions Kirsch explored aren’t at issue in Richards’ lawsuit and exceed addressing the standard for issuing notice.
“To my knowledge this court has never said one side or the other bears a burden of going forward or persuading on those questions,” Hamilton wrote. “We have left those matters to the discretion of the district court to choose a process and to answer the case-management question. Those decisions will most often be based on factors that have more to do with efficiency, fairness and expense than with disputed issues of material fact.”
