State v. U.S. Dep't of Labor
Opinion of the Court
*207In November 2016, the United States District Court for the Eastern District of Texas (the Texas federal court) enjoined the Department of Labor's (DOL) proposed Fair Labor Standards Act (FLSA) Overtime Rule
One week after filing its answer in the New Jersey federal court, Chipotle moved in the Texas federal court to hold Alvarez and her attorneys in contempt.
The issue is whether the Texas federal court may hold Carmen Alvarez and her lawyers in contempt for filing the FLSA lawsuit against Chipotle in the New Jersey federal court and contending that she was entitled to overtime pay according to the proposed Overtime Rule. We conclude that *208Texas federal court did not have the authority under Rule 65(d) of the Federal Rules of Civil Procedure to hold Alvarez and her attorneys in contempt, because Alvarez and her attorneys did not act in privity with, and she was not adequately represented by, the DOL in the injunction case; hence, the Texas federal court lacked personal jurisdiction over Alvarez and her attorneys. Accordingly, we reverse the judgment of the District Court, including the award of attorneys' fees against Alvarez and her lawyers, and we render judgment in their favor.
I. BACKGROUND
A. The Nevada v. DOL Injunction
On November 22, 2016, in Nevada v. United States Dep't of Labor ,
B. The Alvarez v. Chipotle Action (The New Jersey Action)
In June 2017, six months after the district court's preliminary injunction in Nevada v. DOL , Carmen Alvarez, through her lawyers (together with Alvarez, Respondents), filed a lawsuit against Chipotle, her former employer, in New Jersey federal court alleging Chipotle violated the Overtime Rule by classifying Alvarez as exempt despite her weekly salary falling below the revised higher threshold. Alvarez's pleadings acknowledged that the DOL had been enjoined from enforcing or implementing the Overtime Rule, but contended that, because the district court in Nevada v. DOL had not stayed the Overtime Rule's effective date under the Administrative Procedure Act, the rule itself had taken effect on December 1, 2016. Chipotle answered that, in its view, the Nevada v. DOL order prevented the Overtime Rule from ever becoming effective in any way.
C. The Present Contempt Proceeding by Chipotle Against Alvarez and Her Counsel
On August 1, 2017, Chipotle filed a motion against Respondents in the Texas federal court in the Nevada v. DOL action, asking that court to hold them in contempt for violating the injunction issued in that case.
On March 19, 2018, the district court granted Chipotle's motion and held Respondents in contempt. In its opinion, the district court rejected Respondents' argument that it lacked personal jurisdiction over them. It concluded that Alvarez was bound by the injunction in privity with the DOL because the DOL represents the interests of employees like Alvarez; that its injunction was "wholly unambiguous" in proscribing the filing of private lawsuits alleging or invoking the Overtime Rule; and that, although Chipotle's service of process on Respondents was imperfect, Respondents had not proven they were prejudiced thereby. The court ordered that Respondents pay Chipotle's attorneys' fees for the contempt proceeding.
II. STANDARD OF REVIEW
We review a district court's contempt determination for abuse of discretion. See Piggly Wiggly Clarksville, Inc. v. Mrs. Baird's Bakeries ,
*210III. DISCUSSION
A. The District Court Erred in Concluding that Respondents Acted in Privity with the DOL
We consider here the proper reach of an injunction-specifically, the extent to which an injunction can bind individuals who are not parties to the action in which the injunction is entered. " 'It is a principle of general application ... that one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process.' " Taylor v. Sturgell ,
" Rule 65(d) of the Federal Rules of Civil Procedure, which governs injunctions and temporary restraining orders, codifies both the general principle and its exceptions." Nat'l Spiritual Assembly of Baha'is ,
Rule 65(d)(2) provides that an injunction "binds only the following who receive actual notice of it by personal service or otherwise: (A) the parties; (B) the parties' officers, agents, servants, employees, and attorneys; and (C) other persons who are in active concert or participation with anyone described in Rule 65(d)(2)(A) or (B)." FED. R. CIV. P . 65(d)(2). The portion *211of the rule stating its only significant exception, subpart (C), contemplates two categories of persons who may be bound by an injunction. See 11A FED. PRAC. & PROC. CIV . § 2956, at 384-85. First, "a nonparty may be held in contempt if he aids or abets an enjoined party in violating an injunction"; second, "an injunction may be enforced against a nonparty in 'privity' with an enjoined party." Nat'l Spiritual Assembly of Baha'is ,
For privity, "[f]ederal courts have deemed" three "types of relationships 'sufficiently close' to justify preclusion": (1) "a non-party who has succeeded to a party's interest in property," (2) "a non-party who controlled the original suit," and (3) "a non-party whose interests were represented adequately by a party in the original suit." Sw. Airlines Co. v. Tex. Int'l Airlines, Inc. ,
Here, the first two subparts of Rule 65(d)(2), as well as the "aiding and abetting" theory, are undisputedly inapplicable. Respondents are clearly not parties to the Nevada v. DOL case; nor are they any "parties' officers, agents, servants, employees, and attorneys." FED. R. CIV. P . 65(d)(2)(A)-(B). Furthermore, although they had notice of the injunction, as demonstrated by the references in the complaint in the New Jersey action, it is uncontested that Respondents did not aid and abet, or otherwise assist or act in concert with, the DOL or any of the its agents to violate the injunction. In holding Respondents in contempt, the district court relied on the concept of adequate representation, holding that the DOL adequately represented Alvarez's interests in the Nevada v. DOL litigation. However, the district court's assessment that the DOL adequately represented Alvarez's interests was mistaken. We have held that privity by virtue of adequate representation requires "the existence of an express or implied legal relationship in which parties to the first suit are accountable to non-parties who file a subsequent suit raising identical issues," Pollard v. Cockrell ,
In erroneously finding Respondents in privity with the DOL, the district court *212relied exclusively on this court's preclusion decision in Southwest Airlines Co. v. Texas International Airlines, Inc. ,
In affirming the district court's order enjoining the state suit, this court held that the interstate airline plaintiffs were in privity with the governmental entities-the cities of Dallas and Fort Worth, and the DFW Airport Board-in the prior federal suit for preclusion purposes because the "legal interests of the carriers do not differ from those of [the government entities] in [the earlier lawsuit]" and thus "they received adequate representation in the earlier litigation and should be bound by the judgment." Id. at 100. This court was careful to note that the government entities adequately represented the plaintiff carriers' interests in this later litigation only because of certain specific facts: (1) the carriers "d[id] not claim a breach of legal duty by Southwest, apart from the alleged violation of the general duty to obey valid ordinances," (2) "the carriers request[ed] the same remedy denied the [government entities], namely the enforcement of the phase-out provision of the ordinance to exclude Southwest from Love Field," and (3) "the ordinance does not establish a statutory scheme looking toward private enforcement of its requirements." Id. at 100 ; see also WRIGHT, MILLER & COOPER, 18A FED. PRAC. & PROC. JURIS . § 4458.1 (3d ed. 2017), at 573-74 (in discussing Southwest , identifying these three considerations as the support for the basic conclusion of no private legal wrong, and therefore preclusion through privity).
The district court was in error in concluding that Southwest supports a finding of privity between Respondents and the DOL. Alvarez's FLSA action in New Jersey relies on far more than a "general duty to obey valid ordinances" as those at issue in the interstate airlines' lawsuit in Southwest , see
*213Importantly, in Southwest , this court expressly endorsed the proposition that government actors would not be in privity with private litigants under Title VII, a federal employment statute that, similar to the FLSA, authorizes both government litigation and private actions. See
More generally, Chipotle's theory that the DOL represents every worker's legal interests through its enforcement of the FLSA so as to bind every worker in the United States to an injunction where the DOL is the only bound party lacks authoritative support. Although, as the district court noted, the FLSA concerns itself with "the general welfare of employees employed in certain industries engaged in American commerce," Congress's statement of such a policy does not create a legal nexus or the kind of close identity of interests between a party to litigation and a nonparty required to amount to privity. Instead, as in Title VII discrimination suits, Alvarez's New Jersey action "claim[s] remedies distinct from the relief imposed in the government litigation" and complains of a "violation of distinct legal duties owed individual employees." Southwest ,
Because Respondents were not in privity with the DOL and not otherwise bound by the injunction, the district court erred in granting Chipotle's motion for contempt.
B. The District Court Lacked Personal Jurisdiction Over Respondents
Because the district court's contempt order exceeded the bounds of Rule 65(d), its exercise of jurisdiction over Respondents was also improper.
***
For these reasons, the judgment of the district court is REVERSED, and judgment is RENDERED in favor of Respondents.
The Overtime Rule is also referred to as the Final Rule by the parties, and was published in the Federal Register as follows: Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees,
Chipotle filed its answer in the New Jersey federal court on July 26, 2017 and its motion for contempt in the Texas federal court on August 1, 2017.
The injunction, in relevant part, read as follows:
[T]he Department's Final Rule described at81 Fed. Reg. 32,391 is hereby enjoined. Specifically, Defendants are enjoined from implementing and enforcing the following regulations as amended by81 Fed. Reg. 32,391 ;29 C.F.R. §§ 541.100 , 541.200, 541.204, 541.300, 541.400, 541.600, 541.602, 541.604, 541.605, and 541.607 pending further order of this Court.
Answer and Affirmative and Other Defenses, Alvarez v. Chipotle Mex. Grill, Inc., et al. , No. 2:17-cv-4095 (D.N.J. July 26, 2017), ECF No. 5.
Order Granting Stay, No. 2:17-cv-4095 (D.N.J. May 8, 2018), ECF No. 37.
At the time of Alvarez's New Jersey action and Chipotle's contempt motion, the Texas federal court had not yet entered a final judgment in the Nevada v. DOL litigation. It did so later in August 2017, declaring the Overtime Rule "invalid."
See Answer ¶¶ 22-23, Alvarez v. Chipotle , No. 2:17-cv-4095 (D.N.J. July 26, 2017), ECF No. 5.
The district court refused to limit the contempt finding to senior attorneys with decisionmaking authority but imposed it on junior attorneys and local counsel as well.
As to nonparties, a contempt order constitutes a final order for purposes of appellate jurisdiction. See S. Ry. Co. v. Lanham ,
We intimate no view whatever on the merits of Alvarez's contentions in the New Jersey action, as those contentions are before the New Jersey federal court rather than this court.
As the district court correctly noted, this court has held that "[t]he movant in a civil contempt proceeding bears the burden of establishing by clear and convincing evidence: (1) that a court order was in effect; (2) that the order required certain conduct by the respondent; and (3) that the respondent failed to comply with the court's order." Petroleos Mexicanos v. Crawford Enters. ,
Because we reverse the district court's contempt order on the basis of Rule 65(d) and lack of personal jurisdiction, we also reverse the district court's award of attorneys' fees to Chipotle.
Reference
- Full Case Name
- State of TEXAS, - Chipotle Mexican Grill, Incorporated Chipotle Services, L.L.C. v. United States DEPARTMENT OF LABOR, Carmen Alvarez, and her Counsel
- Cited By
- 12 cases
- Status
- Published