A wage-and-hour suit on behalf of Mary Kay sales consultants won’t be heard in New Jersey after the U.S. Court of Appeals for the Third Circuit ruled that Texas law governs interpretation of a forum-selection clause in the cosmetics company’s employment contract.
The appeals court, in a published decision, affirmed a ruling from the U.S. District Court for the District of New Jersey dismissing a potential class action against Addison, Texas-based Mary Kay after finding that Texas law dictates that the claim belongs in that state’s courts.
Ina Collins, who held the positions of sales consultant and sales director for Mary Kay, brought suit on behalf of fellow New Jersey residents who worked for the company from September 2009 to the present. She claims that the company improperly categorizes sales representatives and sales managers as independent consultants, in violation of New Jersey’s Wage Payment Law. Collins also contends that Mary Kay improperly requires sales representatives to pay for marketing materials, merchandise and uniforms out of their own earnings.
U.S. District Judge Madeline Arleo dismissed the suit after Mary Kay brought a forum non conveniens motion, relying on employment agreements specifying that legal claims would be submitted to a Texas court and dictating that Texas law would apply. Arleo’s decision was based on federal common law. On appeal, Collins’ lawyer argued that the analysis should be governed by New Jersey law.
The appeal focused on the scope of the forum-selection clause, not its enforceability, Collins’ lawyer said in briefs and at oral argument.
Third Circuit Judges Michael Chagares, L. Felipe Restrepo and Jane Roth concluded that state contract law, not federal common law, governs the interpretation of the forum-selection clauses in the case. As for which state’s contract law applies, they said the law of New Jersey, the forum state, applies to choice-of-law questions in a diversity case like the present one. And New Jersey choice-of-law rules dictate that when parties to a contract have agreed to be governed by the laws of a particular state, New Jersey courts will ordinarily uphold the contractual choice, the court said. But the parties’ contractual choice doesn’t control in cases where the chosen state has no substantial relationship to the parties or the transaction, and there is no other reasonable basis for the parties’ choice; or where application of the law of the chosen state would be contrary to a fundamental policy of a state that has a materially greater interest than the chosen state in the determination of the particular issue, the court said.
Collins has not demonstrated that either of those exceptions apply, Restrepo wrote for the court. There is no dispute that the parties have a substantial relationship to Texas, and Collins has not shown why New Jersey has a materially greater interest in the application of its own contract law to the interpretation of forum-selection clauses, or how the application of Texas contract law would offend a fundamental policy of New Jersey, Restrepo wrote.
The appeals court declined to find fault with application of the forum non conveniens doctrine by the judge below. Collins did not dispute the availability of an alternate forum to hear her claim, or address with any specificity the public interest factors that could favor litigation in New Jersey federal court over Texas state court, Restrepo wrote. The district court correctly granted Mary Kay’s forum non conveniens motion and dismiss the case because Collins failed to meet the heavy burden required to resist application of the forum-selection clause, the court said.
“We are mindful of the predicament that could arise for a plaintiff who (a) performs work in her home state for a company headquartered in another state, (b) seeks the substantive protections guaranteed by her home state’s wage payment law, and (c) is subject to forum selection and choice-of-law clauses in her employment agreement that point outside of her home state. But it is incumbent on plaintiffs in those situations to challenge the enforceability of the forum selection clauses and to outline for the lower court exactly how they stand to be deprived of the wage payment protections they are otherwise guaranteed. Collins made no attempt to do so in this case,” the court said.
Collins’ lawyer, Ravi Sattiraju of Princeton, declined to comment on the ruling other than to say that his client was weighing her options.
Christine Amalfe of Gibbons in Newark, who represented Mary Kay, declined to comment.
Mary Kay did not respond to a reporter’s message left at company headquarters.