HOW TO HANDLE WRITTEN DISCOVERY AND DISCOVERY DISPUTES WITHOUT UNDUE COST & DELAY

Transcription

1 HOW TO HANDLE WRITTEN DISCOVERY AND DISCOVERY DISPUTES WITHOUT UNDUE COST & DELAY DISCOVERY HYPOTHETICAL NO. 1 Rachhana T. Srey NICHOLS KASTER, PLLP 4600 IDS Center 80 South Eighth Street Minneapolis, MN Telephone: (612) srey@nka.com Websites: and ABA Labor & Employment Law Section Conference Seattle, Washington Friday, November 4, 2011 You represent exotic dancers (also known as entertainers ) in a wage and hour case brought as a collective action under the Fair Labor Standards Act. Under Section 216(b) of the Act, entertainers who wish to pursue an overtime claim against the defendant company, ABC Nightclub, must opt-in by filing a consent to join form with the Court. 150 entertainers have joined the case. Once they join the case, they are considered a party to the lawsuit. 1 As entertainers, the plaintiffs job is to entertain ABC Nightclub s customers by dancing on stage and performing personal dances for customers. ABC Nightclub monitors the entertainers conduct and requires entertainers to follow specific company rules. For example, entertainers are required to dance on stage, are told when to dance on stage, cannot choose the music that they dance to, or how much clothing they can remove or leave on while on stage. ABC Nightclub also requires the entertainers to share their tips or gratuities they receive while dancing on stage equally with whichever and however many other entertainers ABC Nightclub selects to dance on stage at the same time. The amount of money an entertainer charges for a personal dance is also set by ABC Nightclub. As for an entertainers physical appearance, ABC Nightclub must approve the entertainer s weight in order for her to dance on stage. Finally, entertainers can spend no more than 40 minutes making her appearance ready for work. 1 See 29 U.S.C. 216(b) ( No employee shall be a party plaintiff to any such [FLSA] 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. ). 1

2 The entertainers allege based on the economic reality of their relationship with ABC Nightclub, they are employees of ABC Nightclub, not independent contractors, and that as employees of the company, they should have been paid a minimum wage, and are entitled to be paid overtime wages for all their overtime hours. ABC Nightclub has served written discovery (interrogatories, document requests, and requests for admissions) on each of the 150 entertainers who have joined the case seeking tax return information and other documents. ABC Nightclub contends that in order to prove that the entertainers are not economically dependent on it, individualized discovery is appropriate and that as a party to the lawsuit, each entertainer must respond to its written discovery requests, and produce all tax returns for the last three years. 1. Are the entertainers tax returns discoverable? And, if so, what limitations should you seek? Under Fed. R. Civ. P. 26(b)(1), discovery is limited to any nonprivileged matter that is relevant to any party s claim or defense. All discovery is subject to the limitations imposed by Fed. R. Civ. P. 26(b)(2)(C). District courts are all over the place in terms of whether tax returns are discoverable in employment cases. 2 2 See, e.g., Uto v. Job Site Servs. Inc., 2010 WL (E.D.N.Y. Sept. 20, 2010) (granting protective orders against discovery request seeking tax returns because tax returns are private, sensitive, irrelevant, and because the defendant could not demonstrate a compelling need for them); Thornton v. Crazy Horse, Inc., 2010 WL , at *1 (D. Ala. Sept. 14, 2010) (denying motion to compel tax returns in exotic dancer misclassification case); Hobson v. Communications Unlimited, Inc., 2011 WL , at *2 (N.D. Ga. Feb. 7, 2011) (denying motion to compel tax returns because there are less burdensome sources for the same information such as interrogatories and a deposition); Clincy v. Galardi South Enterprises, Inc., d/b/a Onyx, No (N.D. Ga. Mar. 3, 2010) (ordering production of the plaintiffs personal income tax returns because it may be relevant to the determination of whether they are independent contractors); Walker et al. v. Bankers Life & Cas. Co., 2008 U.S. Dist. LEXIS 60593, at *22 (N.D. Ill. July 28, 2008) (finding that plaintiffs deduction of certain expenses from their tax returns is relevant to their tax treatment as independent contractors); FedEx Ground Package Sys., Inc., 2006 WL (N.D. Ind. Dec. 14, 2006) (holding that plaintiffs that allege claims under the FLSA... are compelled to produce their tax returns and other related financial information); Pendlebury v. Starbucks Coffee Co., 2005 WL , *2 (S.D. Fla. Aug. 29, 2005) (holding that income tax returns are highly sensitive documents and that courts should only reluctantly order their production during discovery, and denying defendant s motion to compel tax returns because the information sought was obtainable through less intrusive means such as interrogatories, and depositions); Johnson v. Unified Gov t of Wyandottte County/Kansas City, Kan., 2001 WL , at *2-3 (D. Kan. June 15, 2001) (identifying the 2

3 ABC Nightclub will likely argue that the entertainers tax characterization of their work for ABC Nightclub is relevant and is at issue in this case. ABC Nightclub will also argue that whether the entertainers worked as independent contractors for multiple entities at the same time as ABC Nightclub is relevant to whether the entertainers are considered employees of ABC Nightclub. Further, that the tax returns may show business deductions, profitability, and any other employment the entertainers had, which are relevant to the economic reality test. As the entertainers lawyer, you should argue that ABC Nightclub s requests for tax returns should be denied as overbroad, harassing, irrelevant, and seeks non-dispositive and highly personal information on issues not in dispute. Specifically, you should argue that how a putative employee subjectively describes herself is not dispositive to the economic reality test. 3 ABC Nightclub may also want to consider seeking limited documents such as W-2s, Schedule Cs, or 1099 forms, rather than full production of the plaintiffs tax returns because there is often information on the tax returns like spousal information, charitable contributions, pension funds, etc., that have nothing to do with the entertainer s wage and hour claims. If you self-limit the requests, the court may be more willing to order production. Given the amount of private, personal, and confidential information (e.g., social security numbers, checking account numbers, refund amounts, child tax credit amounts, charitable donations, and/or investment information) on an individual s tax returns, the entertainers lawyer should seek limitations and permission to redact specific information even if the tax returns are discoverable. For example, production of tax returns should be limited to the year(s) the entertainer worked for ABC Nightclub, not the last three years. 4 Further, income or business deductions listed on the tax returns unrelated to the entertainers work as an entertainer should be economic reality factors and stating that the court does not find plaintiffs tax returns relevant to any of the six factors ). 3 An analysis of the economic reality test employs a number of factors such as: (1) the degree of control exercised by the employer over the workers; (2) the workers opportunity for profit or loss and their investment in the business; (3) the degree of skill and independent initiative required to perform the work; (4) the permanence or duration of the working relationship; and (5) the extent to which the work is an integral part of the employer s business. Barfield v. N.Y. City Health & Hosp. Corp., 537 F.3d 132, 142 (2d Cir. 2008); Dole v. Amerlink Corp., 729 F. Supp. 73, 76 (E.D. Mo. 1990) (setting forth economic reality factors in an FLSA cable case). None of these factors is singularly dispositive, nor are these factors exclusive. Rather, the main factor is control exercised by the putative employer over the employee. Gustafson v. Bell Atlantic Corp., 171 F. Supp. 2d 311, 325 (S.D.N.Y. 2001). See In re FedEx, 2006 WL , at *2 (rejecting argument as to putative employee s subjective characterization of employment status where as a result of defendant providing independent contractor tax forms, [p]laintiff had little choice but the file the independent contractor forms. ) 4 Edwards v. Multiband Corp., No (D. Minn. Feb. 24, 2011) (limiting defendant s request for tax returns to the years during which the plaintiff performed the work that is the subject of the complaint). 3

4 redacted. To explain, if the entertainer was employed at McDonald s for half of 2010, the income she earned from her employment with McDonald s has nothing to do with the independent contractor analysis, and is not relevant with whether she is economically dependent on ABC Nightclub If the Court orders production of tax returns in some fashion and permits redaction of irrelevant information, should you respond to written discovery for all 150 entertainers included in the case or should you seek a protective order limiting the scope of discovery to a representative sample? A common written discovery dispute is whether discovery should be conducted on a representative or individualized basis. As the entertainers lawyer, you should seek a protective order from the Court under Fed. R. Civ. P. 26(c), and argue that individualized discovery in FLSA cases is unduly burdensome, defeats the purpose of a collective action, and undermines the broad remedial purpose of the Act. 6 This is even true in a small collective action. 7 You could also argue that individualized discovery in FLSA cases has a chilling effect, as courts have recognized. 8 5 Hobson, 2011 WL , at *2 (concluding that because the relevant inquiry is whether the plaintiff was properly categorized as an independent contractor while working for the defendants alone, whether plaintiffs worked for someone else before or after the defendants was not discoverable). 6 See Russell v. Illinois Bell Tele. Co., 2009 WL , at *3 (N.D. Ill. Apr. 30, 2009) (pointing to the enormous burden on plaintiffs counsel as one of the reasons for limiting discovery to be taken from FLSA opt-in plaintiffs); Dernovish v. AT&T Ops., Inc., 2010 WL (W.D. Mo. June 8, 2010) (denying the defendant s request for production of documents on all but one of its interrogatories, finding the requests duplicative, inefficient and counter to the efficiency benefits of the collective action). Cranney v. Carriage Svcs., Inc., 2008 WL , at *3 (D. Nev. June 16, 2008) ( Permitting the full scope of discovery authorized by the Federal Rules of Civil Procedure would undermine the purpose of conditionally certifying a collective action and would be unreasonably burdensome and wasteful of the parties and the court s resources. ); Prentice v. Fund for Public Interest Research, Inc., 2007 WL , at *5 (N.D. Cal. Sept. 18,2007) (stating individualized discovery is rarely appropriate in FLSA collective actions ). 7 See Hart v. Rick s Cabaret Int l Inc., No (S.D.N.Y. Dec. 23, 2010) (denying defendant s request for individualized discovery in a collective action consisting of 53 opt-in plaintiffs because it would be unduly burdensome and expensive to permit extensive discovery of these plaintiffs). 8 See Adkins v. Mid-America Growers, Inc., 141 F.R.D. 466, 468 (N.D. Ill. 1992) (stating, in FLSA action, [T]he use of extensive and complicated interrogatories and depositions by the party opposing the class may debilitate the putative class in such a way as to preclude certification by dissuading class members from continuing to assert their claims. ) (quoting Herbert B. Newberg, Newberg on Class Actions (Supp. l989)). 4

5 As ABC Nightclub s lawyer, you should argue that by opting in to the collective class, each entertainer agreed that they were a party to the lawsuit and therefore subject to discovery. 9 ABC Nightclub could also argue that the collective class size is so small that individualized discovery directed to each opt-in plaintiff is permissible and not burdensome See Brennan v. Qwest Commc ns Int l, Inc., 2009 WL , at *18 (D. Minn. June 4, 2009) ( Having affirmatively opted into this action, as opposed to being absent members of a Rule 23 class action, these plaintiffs through their counsel have agreed to the discovery procedure at issue. As such, they cannot sit on the side-lines and ignore discovery obligations imposed by this Court. ); see also Coldiron v. Pizza Hut, Inc., 2004 U.S. Dist. LEXIS 23610, at * 6 (C.D. Cal. Oct. 25, 2004). 10 See Rosen v. Reckitt & Colman Inc., No. 91 Civ. 1675, 1994 WL , at *3 (S.D.N.Y. Nov. 17, 1994) (permitting the defendants to serve document requests on and depose each member of a 50 plaintiff collective because the size of the... class is small); Krueger v. NY Telephone Co., 163 F.R.D. 446 (S.D.N.Y. 1995) (permitting the defendants to serve interrogatories on all 162 class members where size of collective is small because courts are forced to confront the problem of stability of samples from small sets ). 5