Wells Fargo Wage Suit Sets Up Clash Between Arbitration, Notices

Wells Fargo Bank NA hopes to persuade a federal appeals court in Philadelphia to block workers who signed arbitration agreements from receiving notice about joining a wage-and-hour collective lawsuit.

The US Court of Appeals for the Third Circuit will hear oral arguments Wednesday over whether to follow two other federal circuit courts that have ruled that workers who agreed to arbitrate workplace disputes shouldn’t automatically get notices about opting into conditionally certified Fair Labor Standards Act collective actions. Those workers can’t join those suits, so notices would only mislead them into believing otherwise, Wells Fargo said.

The bank is challenging a federal district judge’s ruling that authorized notices to 7,800 mortgage loan officers, including nearly 3,900 who had signed arbitration agreements. The US Chamber of Commerce filed a friend-of-the-court brief backing the bank’s appeal.

A Third Circuit decision affirming the notice order would create a circuit split on the issue, potentially drawing the US Supreme Court into the fray. The Fifth Circuit restricted FLSA noticing in a 2019 decision involving JPMorgan Chose & Co., while the Seventh Circuit minted its standard in 2020 in a case against Facebook Inc.

But a ruling that overturns the judge and brings the Third Circuit in line with the Fifth and Seventh Circuits could raise further obstacles to the legal strategy of filing waves of individual arbitration complaints against companies that use workplace agreements to blunt class and collective lawsuits.

Plaintiffs’ lawyers would likely have a more difficult time locating potential clients for mass arbitrations without the contact information obtained through the FLSA’s noticing process.

The law’s two-step certification process starts with the conditional certification of a collective if the proposed members are similarly situated to the named plaintiff. That prompts the issuance of opt-in notices to proposed members. Employers can move to decertify the collective later in the litigation.

Off-the-Clock

The case stems from former Wells Fargo mortgage loan officer Sandra Bruno’s FLSA lawsuit, filed in 2019. Bruno alleged the bank required her and other workers in her role to work overtime hours without recording them in the timekeeping system.

Judge Robert Colville of the US District Court for the Western District of Pennsylvania, a Trump appointee, granted Bruno’s motion for conditional certification in 2021. Wells Fargo must turn over names, mailing addresses, telephone numbers, and other contact information for the potential collective members, he ordered.

The bank’s argument for excluding workers who signed arbitration agreements was premature, Colville said, noting he had no ability to determine whether those contracts to arbitrate are enforceable. To rule otherwise would cause further delays, he said.

A month later, Colville granted Wells Fargo’s special request to appeal his conditional certification order, citing legal uncertainty about what type of inquiry is necessary to determine whether an arbitration agreement is valid.

The case will go before a Third Circuit panel of Judges Theodore McKee, a Clinton appointee; L. Felipe Restrepo, an Obama appointee, and Stephanos Bibas, a Trump appointee.

Two SCOTUS Decisions

Wells Fargo argued in a brief that two Supreme Court rulings, read together, demand that workers who signed arbitration pacts should be ineligible from getting FLSA notices: Hoffmann-LaRoche Inc. v. Sperling, a 1989 decision authorizing district courts to issue the notices, and Epic Systems Corp. v. Lewis, a 2018 opinion affirming the validity of class-action waivers in workers’ arbitration agreements.

Both the Fifth and Seventh Circuits found that those cases together decided the issue in favor of blocking the collective action notices, the bank said.

“Providing such notices after Epic Systems, the courts held, cannot be reconciled with the principles governing court-facilitated notice established In Hoffmann-La Roche,” Wells Fargo said.

Those circuit courts found that employers that want to exclude workers who agreed to arbitrate their disputes must show that the agreements at issue are enforceable, the bank said. But there’s no dispute about the validity of the arbitration agreements in Bruno’s case, it said.

The Chamber of Commerce said in its brief that allowing notices to go out to workers who signed arbitration agreements would make litigation more expensive for employers and put additional pressure on them to settle lawsuits.

No Special Treatment

In her brief, Bruno urged the appeals court not to carve out an arbitration exception to its standards for conditional certification. Those rules derive from numerous Third Circuit decisions that interpreted Hoffmann-La Roche, including opinions from 2012, 2013, and 2016.

Courts in the circuit can authorize notices to potential collective members if named plaintiffs can connect how they were individually affected by an employer’s policy with how that policy impacted other workers, Bruno said. Nothing more is required, she said.

“This appeal really should be this straightforward,” Bruno said in her brief. “Indeed, based on this Court’s clear standard for conditional certification, district courts in this Circuit have routinely deferred an employer’s assertion of arbitration agreements until after the notice phase.”

The Fifth and Seventh circuits drew “selectively and inaccurately” from Hoffmann-La Roche to create a doctrine that favors arbitration, she said.

Bruno’s attorney, Jeffrey Chivers of Chivers LLP, declined to comment. Wells Fargo’s lawyer, Timothy Watson of Seyfarth Shaw LLP, didn’t respond to requests for comment.

The case is Bruno v. Wells Fargo Bank, NA, 3d Cir., No. 21-02734, oral argument 6/22/22.