Zavala v. Wal-Mart Stores Inc., No. 11-2381; Third Circuit; opinion by Smith, U.S.C.J.; filed August 9, 2012. Before Judges Fuentes, Smith and Jordan. On appeal from the District of New Jersey. [Sat below: Judge Brown.] DDS No. 25-8-xxxx [49 pp.]

This suit, which has been pending for more than eight years, was filed by Wal-Mart cleaning crew members who are seeking compensation for unpaid overtime and certification of a collective action under the Fair Labor Standards Act, civil damages under RICO, and damages for false imprisonment. The workers — illegal immigrants who took jobs with contractors and subcontractors Wal-Mart hired to clean its stores — allege: (1) Wal-Mart had hiring and firing authority over them and closely directed their actions such that it was their employer under the FLSA; (2) Wal-Mart took part in a RICO enterprise with predicate acts of transporting illegal immigrants, harboring illegal immigrants, encouraging illegal immigration, conspiracy to commit money laundering, and involuntary servitude; and (3) Wal-Mart’s practice of locking some stores at night and on weekends without always having a manager available with a key constituted false imprisonment.

On appeal, plaintiffs challenge the district court’s dismissal of their RICO claims, the decertification of the conditionally certified FLSA action, and the grant of summary judgment for Wal-Mart on the false imprisonment claims.

Held: To certify an FLSA collective action for trial, the district court must find that plaintiffs have shown by a preponderance of the evidence that the members of the collective action are “similarly situated.” Plaintiffs have failed to satisfy that standard since the similarities among them are too few and the differences are too many. Plaintiffs have failed to state a claim for RICO or RICO conspiracy by failing to allege a pattern of predicate acts. The false-imprisonment claim fails in light of Wal-Mart’s unrefuted evidence of emergency exits and plaintiffs’ consent.

The court first holds that abuse of discretion is the proper standard of review for FLSA decertification and that it will reverse only if the District Court’s decision rests on a clearly erroneous finding of fact, an errant conclusion of law or an improper application of law to fact.

It then approves the district court’s two-standard approach to certification: a fairly lenient standard for conditional certification and a stricter standard on final certification. The standard to be applied on final certification is whether the proposed collective plaintiffs are “similarly situated,” which is to be determined after consideration of all relevant factors on a case-by-case basis. Relevant factors include whether the plaintiffs are employed in the same corporate department, division and location; advance similar claims; and seek substantially the same form of relief. The burden is on the plaintiffs to establish by a preponderance of the evidence that they are similarly situated.

The court says being similarly situated does not mean simply sharing a common status. Rather, it means that one is subjected to some common employer practice that, if proved, would help show a violation of the FLSA. Plaintiffs’ evidence of Wal-Mart’s maintenance manual, the authority of store managers, and the supervision by store employees is relevant to whether it employed the proposed plaintiffs, and such a scheme potentially shows its willfulness in violating the FLSA. But these common links are of minimal utility in streamlining resolution of these cases. Liability and damages still need to be individually proved.

The court of appeals agrees with the district court that the numerous differences among members of the proposed class — including that they worked in 180 different stores in 33 states for 70 different contractors and subcontractors for varying hours and different wages — were significant differences in the factual and employment settings of the individual claimants.

The court concludes that, considering the numerous differences among the proposed class in light of the alleged common scheme’s minimal utility in streamlining resolution of the claims, plaintiffs have not met their burden of showing that they are similarly situated.

As to plaintiffs’ RICO conspiracy claim, the court says RICO conspiracy is not a mere conspiracy to commit the underlying predicate acts. It is a conspiracy to violate RICO, i.e., to conduct or participate in the activities of a corrupt enterprise. Plaintiffs fail to plead facts supporting a conclusion that this was the object of the alleged conspiracy.

The court then considers plaintiffs’ claims regarding RICO predicate acts.

As to their claim of involuntary servitude, the court says “involuntary servitude” was intended to cover those forms of compulsory labor akin to African slavery. Plaintiffs have presented evidence of some difficult working conditions, but nothing akin to African slavery or any modern analogue. Further, their claim that they were threatened with deportation is insufficient to constitute involuntary servitude. They failed to adequately plead the RICO predicate of involuntary servitude.

As to the claim of transporting illegal immigrants for monetary gain, plaintiffs allege that after work crews were fired or arrested, alternative work crews were quickly made available and work crews were transported to work shifts. The court says even assuming that such actions qualify as “transporting,” plaintiffs do not show that Wal-Mart was responsible for the transporting or aided and abetted it.

As to encouraging illegal immigration, the court says plaintiffs fail to allege that Wal-Mart took affirmative steps to assist them to enter or remain unlawfully in the United States, or that it agreed to undertake conduct intended to unlawfully encourage undocumented aliens. Thus, they cannot show that Wal-Mart’s conduct incited aliens to remain in this country unlawfully when they otherwise might not have and they therefore have not alleged that the company engaged in conduct sufficient to constitute encouraging.

Next the court says assuming that plaintiffs’ allegation that a Wal-Mart in Missouri allowed undocumented aliens to sleep in a back room and keep their personal belongings there knowing that they were undocumented aliens supports a harboring illegal immigrants claim, Wal-Mart cannot be held responsible for the actions of a single store manager absent a claim that the decision was ratified by its senior executives, that it was common practice at Wal-Mart stores, or that it was within the manager’s actual or apparent scope of authority. Thus, plaintiffs fail to allege actions by Wal-Mart that would constitute harboring.

Although plaintiffs have plausibly alleged a claim of conspiracy to commit money laundering, a single predicate act is not a pattern of predicate acts and cannot support a RICO claim.

Finally, the court finds that even drawing all reasonable inferences in their favor, plaintiffs have not alleged facts sufficient to support a conspiracy with the purpose of transporting or harboring illegal immigrants or encouraging illegal immigration.

As to the false-imprisonment claims, the court says the majority of these claims fail because plaintiffs impliedly consented to their “imprisonment” by choosing to continue to work, which consent was not withdrawn. Moreover, the availability of emergency exits is dispositive, as false imprisonment cannot occur where this is a safe alternative exit. Here, Wal-Mart has offered evidence of the availability of such exits and plaintiffs do no show that the exits were absent or obstructed in any way.

For appellants — Gilberto M. Garcia (Garcia & Kricko); James L. Linsey, of the N.Y. bar; and Michaelene Loughlin (Loughlin & Latimer). For appellee — Thomas H. Golden, of the N.Y. bar (Willkie, Farr & Gallagher) and David P. Murray, of the D.C. bar (Willkie, Farr & Gallagher).