Lola v. Skadden, Arps, Meagher, Slate & Flom LLP et al
Filing
35
OPINION AND ORDER re: 22 MOTION to Dismiss Plaintiff's First Amended Complaint filed by Skadden, Arps, Meagher, Slate & Flom LLP, Tower Legal Staffing, Inc. IT IS HEREBY ORDERED THAT Defendants' motion to dismiss the First Amended Complaint is GRANTED. The Clerk of the Court is respectfully directed to terminate the motion pending at Doc. No. 22 and to close the case. (Signed by Judge Richard J. Sullivan on 9/16/2014) (mro)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
_____________________
No. 13-cv-5008 (RJS)
_____________________
DAVID LOLA,
on behalf of himself and all others similarly situated,
Plaintiffs,
VERSUS
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, et uno,
Defendants.
_____________________
OPINION AND ORDER
September 16, 2014
_____________________
RICHARD J. SULLIVAN, District Judge:
Plaintiff David Lola brings this putative
collective action against Defendants
Skadden, Arps, Slate, Meagher and Flom
LLP (“Skadden”) and Tower Legal Staffing,
Inc. (“Tower”) for violations of the overtime
provision of the Fair Labor Standards Act
(“FLSA”), 29 U.S.C. §§ 201 et seq., arising
out of Lola’s work as a contract attorney in
North Carolina. Now before the Court is
Defendants’ motion to dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(6) on
the ground that Lola and other contract
attorneys who performed the same work are
exempt from the FLSA as licensed attorneys
engaged in the practice of law. Skadden
further argues that it should be dismissed
because Lola has not adequately alleged that
it acted as his employer. For the reasons
discussed below, Defendants’ motion is
granted.
I. BACKGROUND
A. Facts
Lola worked for Defendants for
approximately fifteen months starting in
April 2012. 1 (FAC ¶ 9.) During this period,
1
The facts are drawn from the First Amended
Complaint (Doc. No. 17 (“FAC”)), and are assumed
to be true for purposes of this motion. In deciding
the motion, the Court has also considered
Defendants’ supporting memorandum (Doc. No. 23
(“Mem.”)), Lola’s memorandum in opposition (Doc.
he worked in North Carolina and reviewed
documents for Skadden in connection with a
multi-district litigation pending in the
United States District Court for the Northern
District of Ohio (the “MDL Litigation”).
(Id. ¶¶ 9, 30.) Although Lola is a licensed
attorney, he is not admitted to practice law
in either North Carolina or the Northern
District of Ohio. 2 (Id.) North Carolina
permits attorneys licensed in other states to
provide legal services in North Carolina
under certain limited circumstances. See 27
N.C. Admin. Code 2.5 Rule 5.5(c).
Litigation performed similar work and were
likewise paid hourly rates that remained the
same for any hours worked in excess of
forty hours per week. (Id. ¶¶ 16–17.)
During his employment, Lola was
“explicitly informed by Tower that he was
an employee of Tower for purposes of [the]
project.” (FAC ¶ 10.) Tower paid Lola and
required him to comply with Tower’s
procedures. (Id.) However, Lola was also
told that he needed to follow any procedures
set by Skadden, and he worked under the
supervision of Skadden attorneys.
(Id.
¶¶ 11–12.) Skadden had the authority to
terminate Lola’s work on the MDL
Litigation. (Id. ¶ 14.) A Skadden attorney
also interviewed Lola for a “team lead
position” on the MDL Litigation. (Id. ¶ 14.)
Lola’s work during this period was
strictly supervised by Defendants, and his
“entire responsibility . . . consisted of
(a) looking at documents to see what search
terms, if any, appeared in the documents,
(b) marking those documents into the
categories predetermined by Defendants,
and (c) at times drawing black boxes to
redact portions of certain documents based
on specific protocols that Defendants
provided.” (FAC ¶¶ 24–28.) Defendants
provided Lola with the documents he
reviewed, the search terms he was to use in
connection with those documents, and the
procedures he was to follow if search terms
appeared. (Id.) He was paid $25 per hour
for this work and worked between forty-five
and fifty-five hours per week. (Id. ¶¶ 32–
33.) He was paid at the same rate for any
hours he worked in excess of forty hours per
week. (Id. ¶ 34.) Other attorneys whom
Defendants employed to work on the MDL
No. 26 (“Opp.”)), and Defendants’
memorandum (Doc. No. 28 (“Rep.”)).
B. Procedural History
Lola filed the Complaint on July 18,
2013, and the First Amended Complaint on
October 3, 2013. (Doc. Nos. 1, 17.) The
First Amended Complaint asserts a single
claim against Defendants for failure to pay
Lola and the other members of the putative
collective action an overtime wage rate of
one-and-a-half times the regular rate for
hours worked in excess of forty per week.
Following a pre-motion conference on
October 31, 2013, Defendants filed the
instant motion to dismiss. (Doc. No. 22.)
The motion was fully briefed on January 24,
2014. (Doc. No. 28.)
II. LEGAL STANDARD
reply
To survive a motion to dismiss pursuant
to Rule 12(b)(6) of the Federal Rules of
Civil Procedure, a complaint must “provide
the grounds upon which [the] claim rests.”
ATSI Commc’ns, Inc. v. Shaar Fund, Ltd.,
493 F.3d 87, 98 (2d Cir. 2007). The
plaintiff must allege “enough facts to state a
claim to relief that is plausible on its face.”
2
At the pre-motion conference, Lola’s counsel
represented to the Court that Lola is in fact licensed
in California, which Defendants did not dispute.
(Doc. No. 30 (“PMC Tr.”) at 12:20–21.) Although
the Court assumes this representation to be correct
for purposes of this opinion, none of the Court’s
analysis turns on the particular state where Lola is
licensed.
2
Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007). “A claim has facial plausibility
when the plaintiff pleads factual content that
allows the court to draw the reasonable
inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). In reviewing a Rule
12(b)(6) motion to dismiss, a court must
accept as true all factual allegations in the
complaint and draw all reasonable
inferences in favor of the plaintiff. ATSI
Commc’ns, 493 F.3d at 98. However, that
tenet “is inapplicable to legal conclusions.”
Iqbal, 556 U.S. at 678. Thus, a pleading that
only offers “labels and conclusions” or “a
formulaic recitation of the elements of a
cause of action will not do.” Twombly, 550
U.S. at 555. If the plaintiff “ha[s] not
nudged [his] claims across the line from
conceivable to plausible, [his] complaint
must be dismissed.” Id. at 570.
so to the Secretary of the Department of
Labor (“DOL”). Id. (providing that “terms
[may be] defined and delimited from time to
time by regulations of the Secretary”).
Pursuant to this grant of authority, the DOL
has promulgated a number of rules defining
the scope of the professional exemption,
including the following:
(a) The term “employee employed in
a bona fide professional capacity” in
section 13(a)(1) of the Act also shall
mean:
(1) Any employee who is the holder
of a valid license or certificate
permitting the practice of law or
medicine or any of their branches
and is actually engaged in the
practice thereof[.]
29 C.F.R. § 541.304.
III. DISCUSSION
The issue presented by Defendants’
motion is whether, on the face of the First
Amended Complaint, Lola is exempt from
the FLSA overtime requirement by virtue of
being “the holder of a valid license . . .
permitting the practice of law . . . [who] is
actually engaged in the practice thereof.”
The parties agree that Lola is a licensed
attorney. (Mem. at 7; Opp. at 1.) They
dispute, however, whether he was “actually
engaged in the practice [of law]” during his
employment. Defendants argue that even if,
as the First Amended Complaint alleges, the
work that Lola performed was neither
“glamorous” nor “high-profile,” reviewing
documents in connection with pending
litigation is a “core attorney function
performed by attorneys on a daily basis
[that] requires attorneys to use their legal
training.” (Mem. at 1.) Lola responds that
his work was not the practice of law because
it was “mechanical” and “did not involve the
use of any legal judgment or discretion.”
(Opp. at 9.)
Defendants move to dismiss the First
Amended Complaint on two grounds. First,
they argue that, taking the allegations of the
First Amended Complaint to be true, Lola
was exempt from the overtime provision of
the FLSA as a licensed attorney engaged in
the practice of law. Second, Skadden argues
that Lola has failed to adequately plead that
it was his employer. Because, as discussed
below, the Court dismisses the First
Amended Complaint on the first ground, it is
unnecessary to consider the second.
The overtime provision of the FLSA
requires employers to pay employees one
and one-half times the regular rate of pay for
any hours worked in excess of forty per
week, 29 U.S.C. § 207(a)(1), but exempts
from this requirement “any employee
employed in a bona fide . . . professional
capacity,” id. § 213(a)(1). The statute does
not itself define the terms of the professional
exemption, but delegates the authority to do
3
(RA) (S.D.N.Y. Dec. 11, 2013); Oberc v. BP
PLC, No. 13-cv-01382 (KMH), 2013 WL
6007211 (S.D. Tex. Nov. 13, 2013). In light
of the absence of interpretive guidance from
the DOL and controlling authority from the
Second Circuit, the Court must determine
how the regulation should be interpreted.
Before turning to the substantive
questions presented by Defendants’ motion
– what the term “practice of law” means and
whether, taking the allegations in the First
Amended Complaint to be true, Lola
engaged in the practice of law so defined –
the Court addresses two preliminary issues:
(1) whether, in interpreting 29 C.F.R.
§ 541.304, the Court should fashion an
entirely new federal standard for the
“practice of law” or adopt existing state
standards, and (2) if the latter, which state’s
substantive law furnishes the relevant
standard. For the reasons discussed below,
the Court concludes that: (A) in applying 29
C.F.R. § 541.304, federal courts should
adopt state law definitions of the “practice
of law,” (B) the law of the state in which the
employee performed the work – in this case,
the law of North Carolina – should control,
and (C) under North Carolina law, Lola
engaged in the practice of law.
Although the interpretation of 29 C.F.R.
§ 541.304 is undoubtedly an issue of federal
common law, “[i]t does not follow . . . that
[its] content . . . must be wholly the product
of a federal court’s own devising.” Kamen
v. Kemper Fin. Servs., Inc., 500 U.S. 90, 98
(1991). The Supreme Court has instructed
federal courts to “fill the interstices of
federal remedial schemes with uniform
federal rules only when the scheme in
question evidences a distinct need for
nationwide legal standards, or when express
provisions in analogous statutory schemes
embody congressional policy choices readily
applicable to the matter at hand.” Id.
(emphasis added) (internal citations
omitted). Where these circumstances are
not present, “federal courts should
‘incorporat[e] [state law] as the federal rule
of decision,’ unless ‘application of [the
particular] state law [in question] would
frustrate specific objectives of the federal
programs.’” Id. (quoting United States v.
Kimbell Foods, Inc., 440 U.S. 715, 728
(1979)) (alterations in original); see also
Am. Elec. Power Co., Inc. v. Connecticut,
131 S. Ct. 2527, 2536 (2011) (“Recognition
that a subject is meet for federal law
governance . . . does not necessarily mean
that federal courts should create the
controlling law.”); Kimbell, 440 U.S. at
727–28 (“Controversies directly affecting
the operations of federal programs, although
governed by federal law, do not inevitably
require resort to uniform federal rules.”); De
Sylva v. Ballentine, 351 U.S. 570, 580
(1956) (“The scope of a federal right is, of
course, a federal question, but that does not
A. Incorporation of State Standards in
Federal Common Law
In applying a federal regulation like 29
C.F.R. § 541.304, the Court would normally
defer to an interpretation given by the
promulgating
agency,
unless
that
interpretation was “plainly erroneous or
inconsistent with the regulation.” Auer v.
Robbins, 519 U.S. 452, 461 (1997) (citations
and internal quotation marks omitted). The
Court cannot take that course here, since the
parties have not cited – and the Court is
unaware of – any DOL interpretive guidance
about what it means for an employee to be
“the holder of a valid license . . . permitting
the practice of law . . . [who] is actually
engaged in the practice thereof.” Moreover,
no United States Court of Appeals has yet
addressed this question, which, so far as the
Court is aware, has only been presented in
two other federal cases, one of them in this
District. See Henig v. Quinn Emanuel
Urquhart & Sullivan, LLP, No. 13-cv-1432
4
the entire field, the adoption of state
standards is particularly appropriate. De
Sylva, 351 U.S. at 580; Reconstruction Fin.
Corp., 328 U.S. at 210.
mean that its content is not to be determined
by state, rather than federal law.”).
The Supreme Court has explained that
“[t]he presumption that state law should be
incorporated into federal common law is
particularly strong in areas in which private
parties have entered legal relationships with
the expectation that their rights and
obligations would be governed by state-law
standards.” Kamen, 500 U.S. at 98. Thus,
in De Sylva v. Ballentine, the Supreme Court
held that the term “children,” as used in the
federal Copyright Act, must be interpreted
according to state law, since “there is no
federal law of domestic relations, which is
primarily a matter of state concern.” 351
U.S. at 580; see also Reconstruction Fin.
Corp. v. Beaver Cnty., Pa., 328 U.S. 204,
210 (1946) (holding that federal statute’s use
of term “real property” adopts state law
because “[c]oncepts of real property are
deeply rooted in state traditions, customs,
habits, and laws”).
Second, the DOL rule itself explicitly
links the term “practice of law” with state
licensing requirements.
The exemption
applies to “the holder of a valid license . . .
permitting the practice of law . . . [who] is
actually engaged in the practice thereof.” 29
C.F.R. § 541.304(a)(1). Thus, the “practice”
contemplated by the rule is practice pursuant
to a valid license. 3 Since the licensing of
lawyers is, as discussed, the exclusive
province of the states, state law should also
furnish the rule for whether an employee’s
work constitutes the practice of law pursuant
to a license. This interpretation of the rule
has been strongly implied by the DOL itself.
In 1949, when it was considering revising
the rules implementing the professional
exemption, the DOL rejected a proposal to
include architects and engineers in the
exemption, reasoning that:
Here, it is clear that the Court must
adopt state law standards in interpreting the
term “practice of law” under 29 C.F.R.
§ 541.304. First, the definition of the
practice of law is, like the definition of
domestic relations in De Sylva and the
definition of real property in Reconstruction
Finance Corp., “primarily a matter of state
concern.” 351 U.S. at 580. States regulate
almost every aspect of legal practice: they
set the eligibility criteria and oversee the
admission process for would-be lawyers,
promulgate the rules of professional ethics,
and discipline lawyers who fail to follow
those
rules,
among
many
other
responsibilities. Importantly, states also
define and punish the unauthorized practice
of law – that is, the practice of law by nonlawyers in circumstances where such
practice is unlawful.
Given that the
regulation of lawyers and legal practice is an
area in which state law occupies virtually
The practice of law and medicine has
a long history of state licensing and
certification; the licensing of
engineers and architects is relatively
recent. While it is impossible for a
doctor or lawyer legally to practice
his profession without a certificate or
license, many architects and
engineers perform work in these
fields without possessing licenses,
although failure to hold a license
may limit their permissible activities
to those of lesser responsibilities.
Wage and Hour and Public Contracts
Divisions, U.S. Department of Labor,
Report and Recommendations of the
3
As discussed in greater detail below at Part III.B.2,
it is possible to practice law pursuant to a law license
outside of the jurisdiction that issued that license.
5
Presiding Officer at Public Hearings on
Proposed Revisions of Regulations, Part
541, at 77 (1949) 4; see also Belt v. EmCare,
Inc., 351 F. Supp. 2d 625, 629 (E.D. Tex.
2005) (recounting history of DOL revisions
to professional exemption regulations). In
other words, it is a lawyer’s license and his
or her practice pursuant to that license that
triggers the professional exemption. That
the former is governed by state law strongly
suggests that the latter should be as well.
29 C.F.R. § 541.304. (Mem. at 9–10; Opp.
at 7.) However, Willcox does not stand for
this proposition, and the Court respectfully
disagrees with the approaches taken in
Henig and Oberc.
The question presented in Willcox was
whether the FLSA professional exemption
applied to a state prosecutor even though she
never engaged in the private practice of law.
2009 WL 78436, at *3. In a prior opinion,
the Willcox court assumed that the
exemption reached only the private practice
of law and ruled that because under
Tennessee law prosecutors are not permitted
to engage in private practice, the exemption
did not apply. Id. On reconsideration, the
court reversed itself, recognizing that as a
matter of federal law, the FLSA reaches
both the private and governmental practice
of law. Id. The Willcox court was not
presented with, and thus did not address,
whether federal courts should adopt state
law definitions of the practice of law.
Third, none of the factors that the
Supreme Court has identified as warranting
the creation of a nationwide federal standard
applies here. The Court can identify no
“distinct need for nationwide legal
standards” on this issue, and the parties have
cited no “express provisions in analogous
statutory
schemes
[that]
embody
congressional policy choices readily
applicable to the matter at hand.” Kamen,
500 U.S. at 98. Nor would the adoption of
state standards for the practice of law
“frustrate [any] specific objectives” of the
FLSA or its implementing regulations,
since, as discussed, the rule implicitly
contemplates adopting state law standards.
Oberc and Henig both confronted the
issue of whether a licensed attorney who
performs document review is engaged in the
practice of law – the very question presented
here. Oberc, 2013 WL 6007211 at *6;
Henig, No. 13-cv-1432, Doc. No. 45. In
Oberc, the court concluded that document
review, as performed by the plaintiff in that
case, was the practice of law because it
required the use of “legal judgment” by the
plaintiff. 2013 WL 6007211, at *6. In
reaching this result, the Oberc court cited no
authority, state or federal, for the standard it
was applying, and did not articulate why the
exercise of legal judgment was the standard
for the practice of law. In light of the clear
Supreme Court case law prescribing a
different approach, see, e.g., Kamen, 500
U.S. at 98, the Court declines to follow the
approach of Oberc.
The parties cite Oberc, 2013 WL
6007211, Henig, No. 13-cv-1432 (RA)
(S.D.N.Y. Dec. 11, 2013), and Willcox v.
Kirby, No. 07-cv-359 (TWP), 2009 WL
78436 (E.D. Tenn. Jan. 9, 2009) for the
proposition that the Court should formulate
and apply a nationwide federal standard for
what constitutes the “practice of law” under
4
In 1949, the rule was codified at 29 C.F.R.
§ 541.3(b), but used language nearly identical to what
now appears at 29 C.F.R. § 541.304. The rule
provided that the professional exemption applied,
irrespective of salary, to “any employee who is the
holder of a valid license or certificate permitting the
practice of law or medicine or any of their branches
and who is actually engaged in the practice thereof.”
29 C.F.R. § 541.3.
6
Court must decide whether to apply the
definition of “practice of law” prevailing in
North Carolina (where Lola worked), Ohio
(where the MDL Litigation was pending),
California (where Lola apparently was
licensed), or New York (where Defendants
reside). To answer this question, the Court
must address (1) whether federal law or state
law furnishes the relevant choice-of-law
principles and (2) on those principles, which
state’s substantive law applies. The Court
concludes that federal choice-of-law
principles apply and that, on those
principles, the Court must adopt the law of
the state where Lola performed the work –
that is, North Carolina.
In Henig, a case pending in this District,
Judge Abrams consulted state authority in
formulating a standard for the practice of
law. Henig, No. 13-cv-1432, Doc. No. 45 at
5:12–7:12. However, instead of adopting
the law of any particular state, Judge
Abrams created a three-pronged federal test
based on general principles gleaned from the
state law she examined. Id. at 7:12–20. The
Court respectfully declines to take this
approach. While there may well be some
common principles that animate every
state’s definition of “practice of law,”
differences exist as well. See, e.g., Pamela
A. McManus, Have Law License; Will
Travel, 15 GEO. J. LEGAL ETHICS 527, 538
(2002) (“As simple as it sounds to limit the
practice of law to lawyers, states have wildly
varying definitions of what activities
constitute the practice of law.”). Thus, the
approach taken by Henig creates the
possibility that a federal court could apply a
definition of “practice of law” that does not
track the standard of any particular state. As
a result, the three-pronged test articulated in
Henig, or any federal standard the Court
might fashion based on its own review of the
legal authority, could differ from the
standards that would apply in any of the
states related to this case. The Court is not
convinced that this approach is preferable to
the one contemplated by Kamen, Kimbell,
and De Sylva, which is simply to adopt the
relevant state standard.
1. State or Federal Choice-of-Law
Principles
Before the Court considers which state’s
definition of “practice of law” to adopt, it
must first consider whether the choice-oflaw question should itself be resolved by
state or federal law. If this were a case
predicated on diversity jurisdiction, the
answer would be clear: the Court would be
required to apply the choice-of-law
principles of the forum state, that is, New
York. Corporacion Venezolana de Fomento
v. Vintero Sales Corp., 629 F.2d 786, 795
(2d Cir. 1980) (“Were this a diversity case,
Klaxon Co. v. Stentor Elec. Mfg. Co., Inc.,
313 U.S. 487 (1941), would require that we
look to the choice of law doctrines of the
forum state.”). Because Lola asserts a
federal claim, however, the analysis is more
complicated: the Second Circuit has applied
both state and federal choice-of-law
principles to federal question cases.
Compare id., 629 F.2d at 795 (“This is a
federal question case, however, and it is
appropriate that we apply a federal common
law choice of law rule in order to decide
which of the concerned jurisdiction’s
substantive law of fraud . . . should
govern.”), with Barkanic v. Gen. Admin. of
For these reasons, the Court concludes
that although interpretation of the term
“practice of law” as used in 29 C.F.R.
§ 541.304 is an issue of federal law, the
content of the federal rule should be
determined in accordance with state law.
B. Choice of Law
The Court must next address which
state’s law supplies the relevant standard for
the “practice of law.” Specifically, the
7
Civil Aviation of the People’s Republic of
China, 923 F.2d 957, 961 (2d Cir. 1991)
(“However, the fact that we are not
compelled to apply state choice of law
principles in this federal question case does
not preclude us from relying on state law if
we believe that doing so would best
effectuate Congress’ overall intent.”).
The Court finds that although federal
law should adopt state standards for what
constitutes the “practice of law,” there are
compelling reasons not to adopt state
choice-of-law principles in deciding which
state’s definition of “practice of law” to
apply. First, although the former question
(what is the “practice of law”) falls squarely
within the province of the states, the latter
question (which state’s definition to apply)
does not. Put another way, although states
are in the business of defining what
constitutes the practice of law in their state,
they are not in the business of determining
which state’s definition of practice of law
should control the application of the FLSA
in cases, like this one, where an employee’s
work is connected to several different states.
The Second Circuit offered some
guidance in this area in In re Gaston &
Snow, 243 F.3d 599 (2d Cir. 2001). In
Gaston, a bankruptcy case, the Circuit
explained that “federal choice of law rules
are a species of federal common law” and
that “the framework the Supreme Court has
established for determining whether the
creation of federal common law is
appropriate must be utilized” to determine
whether federal courts should apply federal
choice-of-law principles. Id. at 605–06. 5
Specifically, federal courts should apply
federal choice-of-law principles only if there
is “‘a significant conflict between some
federal policy or interest and the use of state
law.’” Id. (quoting Atherton v. FDIC, 519
U.S. 213, 218 (1997)). The inquiry here is
thus similar to the one discussed in Part
III.A: is there a significant federal policy or
interest that would counsel against the
adoption of state choice-of-law rules? If so,
the Court should apply the federal choice-oflaw standard; if not, the Court should adopt
state choice-of-law principles.
Second, applying state choice-of-law
principles would require the Court to
address a logically anterior question: which
state’s choice-of-law principles should
apply? In the diversity context, there is a
ready answer: the forum state’s choice-oflaw principles apply.
Corporacion
Venezolana, 629 F.2d at 795. That solution
is unworkable here, however, because it
would make the content of the FLSA
dependent on the forum in which an FLSA
claim is brought. In this case, for example,
Lola could have brought his FLSA claim in
federal court in North Carolina, rather than
in this district.
Conceivably, North
Carolina’s choice-of-law principles could
lead to different results than New York’s:
for example, North Carolina’s choice-of-law
rules might point to the substantive law of
the employer’s principal place of business
(New York), whereas New York’s choiceof-law rules might point to the substantive
law of the employee’s place of work (North
Carolina). 6 If the definitions of “practice of
5
Although the narrow question in Gaston was
whether bankruptcy courts “confronting state law
claims that do not implicate federal policy concerns”
should apply state or federal choice-of-law principles,
243 F.3d at 601–02, the discussion in Gaston extends
beyond the bankruptcy context. Notably, Gaston did
not rely solely on bankruptcy cases to support its
analysis, and its “recognition that federal choice of
law rules are a species of federal common law” does
not appear to be limited to bankruptcy cases. Id. at
605–06.
6
The Court takes no position on the actual content or
application of these states’ choice-of-law principles.
8
rule to decide which state’s definition of
“practice of law” should control.
law” prevailing in New York and North
Carolina differ – such that Lola practiced
law under one definition, but not the other –
then the merits of Lola’s claim would
depend on the federal forum in which he
chose to proceed. In other words, adopting
forum-state choice-of-law principles opens
up the possibility that an employer’s liability
under the FLSA would depend on where the
employee chose to sue. Such a rule would
surely lead to chaos, since employers would
be unable to predict ex ante whether they
were, in fact, complying with the
requirements of the FLSA, and parties
would have every incentive to forum shop.
2. Application of Federal Choice-of-Law
Principles
It is well established that “[t]he federal
common law choice-of-law rule is to apply
the law of the jurisdiction having the
greatest interest in the litigation.” Eli Lilly
Do Brasil, Ltda. v. Fed. Express Corp., 502
F.3d 78, 81 (2d Cir. 2007) (citation and
internal quotation marks omitted).
In
conducting this analysis, “absent guidance
from Congress, [federal courts] may consult
the Restatement (Second) of Conflict of
Laws.” Id.
It is important to note that adopting state
substantive rules, as discussed at Part III.A,
creates no analogous problem. Just as there
is nothing wrong with saying that the ability
to inherit federal intellectual property rights
depends on the state law of domestic
relations, which may vary from state to
state, see De Sylva, 351 U.S. at 580, there is
nothing wrong with saying that whether an
employee qualifies for the professional
exemption depends on the state in which he
worked. It is perfectly workable to say that
an employee working in North Carolina is
entitled to FLSA overtime, while someone
doing the same work in New York is not.
Employers can predict in advance where
their employees are working. It is not
workable to say that whether an employee
working in North Carolina is entitled to
overtime – that is, whether the FLSA
required the employer to pay overtime –
depends on the federal court in which the
employee chose to sue. There must be a
determinate answer to whether a particular
individual doing particular work in a
particular state for a particular employer was
entitled to overtime under the FLSA.
Here, it is clear that of the four states
touching upon Lola’s claim – North
Carolina (where Lola worked), Ohio (where
the MDL Litigation was pending),
California (where Lola was licensed), and
New York (where Defendants had their
principal places of business) – North
Carolina is the jurisdiction with the greatest
interest in the litigation because Lola
performed all of the work in North Carolina,
and North Carolina is the state with the most
interest in regulating the legal practice of
individuals within its borders.
This
conclusion is supported by the Restatement,
which provides:
The validity of a contract for the
rendition of services and the rights
created thereby are determined, in
the absence of an effective choice of
law by the parties, by the local law
of the state where the contract
requires that the services, or a major
portion of the services, be rendered,
unless, with respect to the particular
issue, some other state has a more
significant relationship under the
principles stated in § 6 to the
transaction and the parties, in
For these reasons, the Court finds that
there is a significant federal interest in
fashioning a uniform federal choice-of-law
9
which[] event the local law of the
other state will be applied.
principal objective of the contract,
and the place where the services, or a
major portion of the services, are to
be rendered will naturally loom large
in the minds of the parties. Indeed, it
can often be assumed that the parties,
to the extent that they thought about
the matter at all, would expect that
the local law of the state where the
services, or a major portion of the
services, are to be rendered would be
applied to determine many of the
issues arising under the contract.
The state where the services are to be
rendered will also have a natural
interest in them and indeed may have
an overriding interest in the
application to them of certain of its
regulatory rules. The rule of this
Section also furthers the choice-oflaw values of certainty, predictability
and uniformity of result and, since
the place where the contract requires
that the services, or a major portion
of the services, are to be rendered
will be readily ascertainable, of ease
in the determination of the applicable
law.
Restatement (Second) of Conflict of Laws
§ 196 (1971) (emphasis added). 7
Of course, an FLSA claim is not the
same as a breach of contract claim under a
services contract: the former arises under a
statute that mandates a floor that all
employers must meet, whereas the latter
arises out of private negotiations between
employers and employees. Nevertheless,
the
rationales
that
motivate
the
Restatement’s choice-of-law rule apply with
equal force to the FLSA:
Several factors serve to explain the
importance attributed by the rule to
the place where the contract requires
that the services, or a major portion
of the services, be rendered. The
rendition of the services is the
7
Section 6 of the Restatement sets forth general
choice-of-law principles and reads, in its entirety:
(1) A court, subject to constitutional
restrictions, will follow a statutory directive
of its own state on choice of law.
Id. § 196 cmt. c. Each of these rationales –
the expectation of the parties, the regulatory
interests of the state in which the
employment is performed, and the interest in
predictability – supports the application of a
services-rendered rule in the FLSA context.
(2) When there is no such directive, the
factors relevant to the choice of the
applicable rule of law include: (a) the needs
of the interstate and international systems,
(b) the relevant policies of the forum, (c) the
relevant policies of other interested states
and the relative interests of those states in
the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the
particular field of law, (f) certainty,
predictability and uniformity of result, and
(g) ease in the determination and application
of the law to be applied.
To be sure, a reasonable argument could
be made that the definition of “practice of
law” should be governed by the law of the
state that issued the law license. After all,
the exemption applies to “the holder of a
valid license or certificate permitting the
practice of law . . . [who] is actually engaged
in the practice thereof,” 29 C.F.R. §
541.304, so the “practice” contemplated is
clearly practice pursuant to the license.
Nevertheless, while there may be some
Restatement (Second) of Conflict of Laws § 6. These
principles each bolster the Court’s conclusion that the
state with the greatest interest in determining whether
work constitutes the practice of law is the state where
that work is performed.
10
superficial appeal to this argument, it is
ultimately unpersuasive. First, it is clear
that the holder of a law license can practice
law pursuant to that license outside of the
jurisdiction that issued it.
Here, for
example, although Lola holds a license from
California, he may practice law pursuant to
that license in North Carolina. See N.C.
Admin. Code 2.5 Rule 5.5(c) (“A lawyer
admitted to practice in another jurisdiction,
but not in this jurisdiction, does not engage
in the unauthorized practice of law in this
jurisdiction if the lawyer’s conduct is in
accordance with these Rules and . . . the
lawyer provides legal services to the
lawyer’s employer or its organizational
affiliates and the services are not services
for which pro hac vice admission is
required.”). Thus, any legal work Lola
might do in North Carolina still constitutes
the practice of law pursuant to his California
license: but for his out-of-state license, Lola
could not practice law in North Carolina.
See Part III.C. Second, a choice-of-law rule
choosing the law of the state of licensure
would prove unworkable where – as is often
the case – an employee holds law licenses in
more than one state. 8 Finally, as both
common sense and the Restatement make
clear, California’s interest in the treatment
of its licensees who work out-of-state is far
outweighed by North Carolina’s interest in
regulating employment – including the
authorized and unauthorized practice of
law – within its own borders.
Accordingly, the Court concludes that,
for purposes of the FLSA’s professional
exemption, as implemented by 29 C.F.R.
§ 541.304(a)(1), federal courts should look
to the definition of “practice of law” that is
prevailing in the jurisdiction where the work
is performed. Since Lola performed all of
his work in North Carolina (FAC ¶ 30),
whether he practiced law must be examined
using the standard prevailing in North
Carolina.
C. Practice of Law in North Carolina
In North Carolina, the term “practice of
law” is defined by statute. Section 84-2.1 of
the North Carolina General Statutes
provides:
The phrase “practice law” as used in
this Chapter is defined to be
performing any legal service for any
other person, firm or corporation,
with or without compensation,
specifically including . . . the
preparation and filing of petitions for
use in any court, including
administrative tribunals and other
judicial or quasi-judicial bodies, or
assisting by advice, counsel, or
otherwise in any legal work; and to
advise or give opinion upon the legal
8
Admittedly, any choice of law rule might be
stretched to its limits in the context of multi-district
litigation.
For example, if an employee’s job
required him to work in two or three different states,
application of the services-rendered rule would point
to multiple jurisdictions, each with potentially
different definitions of the practice of law. Under
those circumstances, it is unclear whether the
appropriate course would be to apply the professional
exemption separately to the work performed in each
state, or whether it would be necessary to fashion
some further principle for selecting a single
jurisdiction. Similarly, choice-of-law rules adopting
the law of the state where an employee’s work is to
be used or where the employers have their principal
places of business would prove equally if not more
problematic in situations where the employee’s work
was to be used in more than one state or where the
employee had multiple employers with principal
places of business in different states. Such is the
nature of the endeavor, and it is always possible for
creative lawyers and litigants to conjure elaborate and
vexing hypotheticals. Nevertheless, while there may
be scenarios in which the services-rendered rule
could be tested, it can hardly be said that the
alternative rules are in any way superior.
11
rights of any person, firm or
corporation . . .
formal ethics opinion, the Bar’s Ethics
Committee responded:
N.C. Gen. Stat. § 84-2.1 (emphases added).
North Carolina courts typically read section
84-2.1 in conjunction with section 84-4,
which defines the unauthorized practice of
law as follows:
A lawyer may use foreign assistants
for administrative support services
such as document assembly,
accounting, and clerical support. A
lawyer may also use foreign
assistants for limited legal support
services
such
as
reviewing
documents;
conducting
due
diligence;
drafting
contracts,
pleadings, and memoranda of law;
and conducting legal research.
Foreign assistants may not exercise
independent legal judgment in
making decisions on behalf of a
client. . . . The limitations on the type
of legal services that can be
outsourced, in conjunction with the
selection
and
supervisory
requirements associated with the use
of foreign assistants, insures that the
client is competently represented.
See Rule 5.5(d). Nevertheless, when
outsourcing legal support services,
lawyers need to be mindful of the
prohibitions
on
unauthorized
practice of law in Chapter 84 of the
General Statutes and on the
prohibition
on
aiding
the
unauthorized practice of law in Rule
5.5(d).
Except as otherwise permitted by
law, . . . it shall be unlawful for any
person or association of persons
except active members of the Bar,
for or without a fee or consideration,
to give legal advice or counsel, [or]
perform for or furnish to another
legal services . . .
N.C. Gen. Stat. § 84-4 (emphasis added);
see N.C. State Bar v. Lienguard, Inc., No.
11-cvs-7288, 2014 WL 1365418, at *6 (N.C.
Super. Apr. 4, 2014).
Thus, North
Carolina’s definition of the practice of law
encompasses, at the very least, the provision
of “legal services.”
Of course, to say that the practice of law
encompasses the performance of legal
services is not, on its face, very helpful.
Fortunately, the North Carolina State Bar
(the “Bar”), which exercises disciplinary
authority over attorneys licensed in North
Carolina, see N.C. Gen. Stat. § 84-28(a), has
issued a formal ethics opinion elaborating on
the term “legal services.” 9 In 2007, the Bar
addressed the question: “May a lawyer
ethically outsource legal support services
abroad, if the individual providing the
services is either a nonlawyer or a lawyer
not admitted to practice in the United States
(collectively ‘foreign assistants’)?” In a
N.C. State Bar Ethics Committee, 2007
Formal Ethics Op. 12 (“Ethics Op. 12”)
(Apr. 25, 2008) (emphases added).
Three aspects of the ethics opinion are
significant here. First, the opinion groups
document review under the class of tasks
considered to be “legal support services,”
along with other quintessentially legal tasks
like “drafting contracts, pleadings, and
memoranda of law[,] and conducting legal
research.” Ethics Op. 12. Lola does not
dispute – nor could he – that these other
9
A “formal ethics opinion” is “a published opinion
issued by the council [of the Bar] to provide ethical
guidance for attorneys and to establish a principle of
ethical conduct.” 27 N.C. Admin Code 1D.0101(j).
12
conducting legal research” – so long as they
perform those tasks under the supervision of
a licensed attorney. Ethics Op. 12. Lola’s
contention that “document review can be of
such a nature that it is obviously not the
practice of law, regardless of who conducts
it” is thus backward: in the view of the
Ethics Committee, document review is the
practice of law, regardless of who conducts
it. The only difference between lawyers and
non-lawyers is that the former can lawfully
perform
document
review
without
supervision, while the latter cannot.
tasks fall comfortably within the heartland
of legal practice. (See PMC Tr. at 8:17–25;
Opp. at 14.) Document review, in the view
of the Ethics Committee, belongs in the
same category.
Second, the ethics opinion draws an
explicit distinction between legal support
services, like document review, and
“administrative support services,” like
“document assembly, accounting, and
clerical support.” Ethics Op. 12. Thus,
contrary to Lola’s suggestion, document
review is not comparable to “copying and
collating documents for [discovery]
production.” (Opp. at 17.) In the view of
the Ethics Committee, the former is legal
work, while the latter is administrative or
clerical work.
Of course, in this case, Lola was
supervised, and in light of that supervision,
his job presumably could have been
performed by a non-lawyer. That, however,
does not change the analysis. After all,
whether or not document review is
supervised does not change whether it is the
practice of law; it only changes whether it is
the authorized practice of law. A nonlawyer performing document review under
supervision is still providing a legal service.
Ethics Op. 12. Needless to say, a lawyer
performing the same work is also providing
a legal service.
Third and finally, the ethics opinion
emphasizes that lawyers must not permit
non-lawyers to perform legal support
services, like document review, without
supervision, lest they aid the unauthorized
practice of law. In other words, document
review, like other legal support services,
constitutes the practice of law and may be
lawfully performed by a non-lawyer only if
that non-lawyer is supervised by a licensed
attorney.
Lola further argues that the practice of
law encompasses only those tasks that
require “the exercise of legal judgment and
discretion.” (Opp. at 12.) Lola cites no
North
Carolina authority for this
proposition, which appears nowhere in
North Carolina’s statutory definition of the
practice of law. See N.C. Gen. Stat. §§ 842.1, 84-4. Likewise, nothing in the Bar’s
ethics opinion suggests that whether
document review constitutes a legal service
depends on the amount of judgment and
discretion it requires. See Ethics Op. 12. To
be sure, there is some North Carolina
authority for the proposition that the
exercise of legal judgment is sufficient for
an activity to constitute the practice of law.
Cf. Lienguard, 2014 WL 1365418, at *10;
Lola argues that although certain kinds
of document review might constitute the
practice of law, the document review he
performed was not the practice of law
because it was so “mechanical” that a
paralegal could have done it. (Opp. at 15–
17.)
Implicit in this argument is the
assumption that the practice of law
encompasses exclusively those tasks that
only lawyers can lawfully perform. The
Ethics Committee makes clear that this
assumption is false: non-lawyers can
perform limited legal services – including
document review, “drafting contracts,
pleadings, and memoranda of law[,] and
13
LegalZoom.com, Inc. v. N. Carolina State
Bar, No. 11-cvs-15111, 2014 WL 1213242,
at *13 (N.C. Super. Mar. 24, 2014). But
these cases do not suggest that the exercise
of legal judgment is necessary for the
practice of law or that the absence of such
an exercise of legal judgment takes the
activity outside of the practice of law. 10
The standard that Lola urges is also at
odds with the regulatory framework
promulgated by the DOL.
The basic
regulation
defining
the professional
exemption extends the exemption to any
employee who is compensated at a baseline
amount and
[w]hose primary duty
performance of work:
More generally, the Court is not
persuaded that the exercise of legal
judgment and discretion is a sine qua non of
legal practice. Even undisputedly legal
services like the drafting of motion briefs
and the negotiating of documents require the
performance of tasks – checking cases to
make sure quotations are accurately
reproduced, conforming citations to the
stylistic dictates of the Bluebook, ensuring
that documents are free of grammatical and
typographical errors – that require little to
no legal judgment. As junior associates at
law firms well know, these tasks are the
bread and butter of much legal practice and
essential to the competent representation of
clients.
is
the
(i) Requiring knowledge of an
advanced type in a field of science or
learning customarily acquired by a
prolonged course of specialized
intellectual instruction; or
(ii)
Requiring
invention,
imagination, originality or talent in a
recognized field of artistic or
creative endeavor.
29 C.F.R. § 541.300. The first of these
categories is further defined at 29 C.F.R.
§ 541.301, which provides that an employee
performs “work requiring advanced
knowledge” if the work “is predominantly
intellectual in character, and . . . [requires]
the consistent exercise of discretion and
judgment, as distinguished from . . . routine
mental, manual, mechanical or physical
work.” Id. § 541.301(a)(1), (b). Thus, when
applying the basic regulation, courts must
inquire into the primary duties of the
employee and whether those duties involve
the exercise of judgment and discretion.
10
Lienguard and LegalZoom address the “scrivener’s
exception” to the unauthorized practice of law, which
provides that “[the] mere[] typing or scrivening [of] a
petition or legal document does not constitute the
practice of law, so long as the non-attorney does not
create the document, or advise on how the document
should be prepared.” Lienguard, 2014 WL 1365418,
at *10; see also LegalZoom.com, 2014 WL 1213242,
at *13. These cases make clear that the exception
does not apply if the non-attorney takes any action
beyond simply typing out a client’s information
exactly as the client provides it. Lienguard, 2014
WL 1365418, at *10; LegalZoom.com, 2014 WL
1213242, at *13. Nothing in the First Amended
Complaint supports the application of the scrivener’s
rule to this case.
Even if Lola’s work was
uninteresting and mechanical, he did more than
simply type out information provided by others. (See
FAC ¶¶ 27–28 (alleging that Lola applied “specific
protocols that Defendants provided” in determining
what to redact and how to categorize documents).)
The regulation pertaining to lawyers and
doctors, however, specifically provides that
“[t]he requirements of § 541.300 and
subpart G (salary requirements) of this part
do not apply to the employees described in
this section.”
29 C.F.R. § 541.304(d)
(emphasis added). Thus, the professional
exemption for licensed attorneys and doctors
applies regardless of whether those
individuals meet the salary baseline and
14
regardless of whether they would otherwise
qualify as professionals under the primary
duty test.
the definition of "practice of law" that is
prevailing in the relevant state - here, North
Carolina.
The approach urged by Lola - under
which the Court should scrutinize his precise
job responsibilities to determine whether
they
required
legal judgment and
discretion - is at odds with this regulatory
framework.
The upshot of 29 C.F .R.
§ 541.304(d) is that licensed attorneys and
doctors fall in a special class of workers that
may be deemed to be professionals even
without a fact-intensive inquiry into the
nature of their job duties. To nevertheless
engage in such an inquiry under the guise of
parsing the "practice of law" would be to
ignore the plain meaning of 29 C.F.R.
§ 541.304(d) and the intent of the DOL.
For these reasons, the Court concludes
that, taking the First Amended Complaint to
be true, Lola engaged in the practice of law
during his employ with Defendants.
Because a licensed attorney engaged in the
practice of law is exempt from the FLSA's
overtime provision, Lola's claim fails as a
matter of law.
IV. CONCLUSION
IT IS HEREBY ORDERED THAT
Defendants' motion to dismiss the First
Amended Complaint is GRANTED. The
Clerk of the Court is respectfully directed to
terminate the motion pending at Doc. No. 22
and to close the case.
The Court is mindful that it appears
unfair for an attorney not to receive
overtime when performing a job that a nonattorney (properly supervised) might also
perform. That result, however, is within the
express contemplation of 29 C.F.R.
§ 541.304, which extends the FLSA
exemption to employees who are both "the
holder[ s] of a valid license or certificate
permitting the practice of law" and "actually
engaged in the practice thereof." 29 C.F.R.
§ 541.304. The plain language of the
regulation makes clear that the possession of
a law license sets attorneys like Lola apart
from non-attorneys engaged in the same
work, so long as the work performed is, in
fact, the practice oflaw.
SO ORDERED.
United States District Judge
Dated: September 16, 2014
New York, New York
*
*
*
Plaintiffs are represented by D. Maimon
Kirschenbaum, Denise A. Schulman, and
Charles E. Joseph of Joseph, Herzfeld,
Hester, & Kirschenbaum, 233 Broadway,
5th Floor, New York, NY 10017.
To the extent that this result is unwise or
unfair, especially in light of the employment
prospects that many licensed attorneys now
face, Congress and the DOL remain free to
revisit the regulation or to promulgate a
uniform federal standard that more narrowly
defines the "practice of law." Until they do
so, however, the Court is constrained to
apply the regulation as written and to apply
Defendants are represented by Stephanie
L. Aranyos, Brian Gershengorn, and Edward
Cerasia, II of Ogletree, Deakins, Nash,
Smoak & Stewart, P.C., 1745 Broadway,
22nd Floor New York, NY 10019.
USDSSDNY
DOCUMENT
ELECTRONICALLY FILED
15
DOC#:~~~~~~~
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