When negotiating a collective action notice to potential opt-in plaintiffs upon an order for or agreement to conditional certification, a defendant-employer often seeks to include language in the notice that if plaintiffs lose the case, they may be liable to the defendant for costs. Not surprisingly, plaintiffs’ counsel usually resists including such a warning, arguing that the imposition of costs never actually happens and that including it has a chilling effect on potential opt-ins. Defendant’s counter usually goes something like this: well, it could happen and potential plaintiffs are entitled to full notice of all the potential benefits and risks of joining the case. One lawyer’s “chilling effect” is another lawyer’s “full disclosure.” Defendants have been without many good examples of a court actually taxing costs against the losing plaintiffs in an FLSA action for a significant sum. That is, until now.
In Kuznyetsov, et al. v. West Penn Allegheny Health System, Inc., the Western District of Pennsylvania affirmed costs in favor of the defendants and against the three named plaintiffs in the amount of $60,890.97. By way of background, the three named plaintiffs filed a collective action pursuant to § 216(b) of the FLSA, the case was conditionally certified, notice was sent to nearly 15,000 current and former employees, and more than 1,000 plaintiffs opted in. After “contentious” discovery and “excessive” motion practice, the court decertified the collective action because the opt-in plaintiffs were not similarly situated. The opt-in plaintiffs’ claims were dismissed without prejudice and the named plaintiffs’ claims were dismissed with prejudice. After defendant filed a bill of costs, the clerk of courts taxed costs in the amount of $60,890.97 (an amount which appeared to be fueled largely by ESI costs) against the named plaintiffs.
Plaintiffs asked the district court to review and deny costs, arguing that it was inequitable to force the three named plaintiffs to pay the costs of defending against the claims of the entire collective, especially because the three plaintiffs would not be able to afford it. The court rejected both arguments. First, it pointed out that the three named plaintiffs had combined annual income of more than $300,000 and thus could bear nearly $61,0000 in costs. While most wage-hour plaintiffs do not earn that much that year, most wage-hour cases do not involve costs that are that high. Here, the result is that each named plaintiff is liable for costs in the amount of about 20% of his or annual income. To put that in perspective, under this ratio, a court would assess $5,000 in costs to a plaintiff earning $25,000 annually.
The court next rejected the argument that costs should be shared by the more than 1,000 plaintiffs who opted in and then were dismissed. The court reasoned that the named plaintiffs “have failed to provide any evidence that counsel informed the opt-in [p]laintiffs that they may be potentially liable for a portion of the costs.” The court found nothing “inequitable” about requiring the named plaintiffs to pay costs for the entire collective: “Plaintiffs chose to bring their claims as a collective action. They were not required to do so. As the named parties, they assumed the associated risks.”
This opinion provides powerful ammunition to counter plaintiffs’ resistance to including a statement in the notice that opt-ins may be liable for a portion of costs if they join and ultimately lose the case — that is, costs do get taxed against losing FLSA plaintiffs, and those costs can be significant. The opinion should also cause a plaintiff’s counsel to think twice about refusing to include cost language in a notice. A notice that does not include that language threatens to leave their original client(s) in the case with full liability for a defendant-employer’s costs unless either (a) plaintiff’s counsel can show that, after the opt-in period, counsel notified opt-ins of their potential liability for costs; or (b) plaintiff’s counsel is prepared to pay for those costs. The latter is not allowed by the rules of professional conduct in many jurisdictions. The former is likely to be disputed by several opt-ins and would be perceived by opt-ins as a “bait and switch” after they joined the case not aware of their potential liability.
To protect the interests of their original clients, the safe course for a plaintiff’s counsel may be to include cost-shifting language in the notice. Defense counsel should remind them of that.