Droesch v. Wells Fargo Bank, N.A.

Background

Denise Droesch and Shakara Thompson filed a Fair Labor Standards Act collective action against their former employer, Wells Fargo Bank, N.A., on behalf of themselves and others they said were similarly situated. The court previously granted Wells Fargo’s request to require arbitration of Droesch’s claims and the claims of certain opt-in plaintiffs. The court also granted Thompson’s request for conditional certification under Section 216(b) of the Fair Labor Standards Act.

In the conditional-certification order, the court deferred deciding whether employees who had signed arbitration agreements should be excluded from receiving notice of the action. The court had stated that enforceability of the arbitration agreements was better addressed at the second stage of the collective-action process. Wells Fargo obtained permission to seek reconsideration of that portion of the order.

Parties’ arguments

Wells Fargo argued that reconsideration was appropriate because the court had already ruled on the enforceability of the arbitration agreement at issue. Wells Fargo offered a declaration stating that, since December 11, 2015, it had required employees to sign arbitration agreements as a condition of employment and that the agreements had remained substantially the same. Wells Fargo represented that approximately 27,000 of the approximately 34,000 current and former employees within the conditional-certification group had signed binding arbitration agreements.

Wells Fargo argued that sending notice to those employees could create confusion, impose administrative burdens, and cause what it described as injustice by encouraging litigation that could not proceed in the collective action. The plaintiffs argued that Wells Fargo’s evidence was not new and could have been submitted earlier. They also argued that the court lacked authority to reconsider its prior ruling.

Court’s analysis

The court rejected the plaintiffs’ argument that it lacked authority to reconsider the conditional-certification order. It explained that a district court may reconsider an interlocutory order—an order entered before final judgment—while it retains jurisdiction over the case. The court also described reconsideration as an extraordinary remedy generally requiring newly discovered evidence, clear error, an intervening change in controlling law, or one of the grounds listed in the Northern District of California’s local rule.

The court concluded that reconsideration was appropriate in part. It relied on decisions from the Seventh and Fifth Circuits stating that courts should not authorize notice to employees whom the employer has shown entered valid arbitration agreements, but should first allow the employer to present evidence about the agreements’ existence and validity. The court found that approach appropriate here because the plaintiffs’ earlier challenge had focused on alleged procedural and substantive unfairness in the arbitration agreement, rather than on facts unique to particular employees that would prevent enforcement.

The court also noted that Wells Fargo had moved to compel arbitration before the plaintiffs sought conditional certification. Because the court considered both matters at the same time and had not yet ruled on arbitration when Wells Fargo opposed conditional certification, the court declined to fault Wells Fargo for not raising the notice issue earlier. The court further reasoned that, after ruling on enforceability, it would make little sense to send notice to employees whose claims appeared barred from proceeding in the action.

Ruling and next steps

The court granted Wells Fargo’s motion for reconsideration in part. It allowed Wells Fargo the opportunity to submit evidence showing, by a preponderance of the evidence, that the relevant employees signed valid and enforceable arbitration agreements. A preponderance of the evidence means evidence showing that a proposition is more likely true than not.

The court also allowed the plaintiffs limited discovery concerning the arbitration agreements, including documents and a deposition of a Wells Fargo representative under Federal Rule of Civil Procedure 30(b)(6). The parties were ordered to meet and confer about a discovery plan and about whether an agreement could preserve the claims of appropriate potential collective members during any delay in notice. They were required to file a joint statement about their efforts and proposed discovery and notice plans by July 22, 2021. The court set a video status conference for July 29, 2021.