Rehberg et al v. Flowers Foods, Inc et al

Filing 164

ORDER granting in part and denying in part 149 Motion for an Order to Protect the Class and Fair Conduct of This Action.. Signed by District Judge Max O. Cogburn, Jr on 07/13/2015. (jlk)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
DOCKET NO. 3:12-cv-00596-MOC-DSC
WILLARD ALLEN RILEY
MARIO RONCHETTI
SCOTT REHBERG,

)
)
)
)
)
)
)
)
)
)
)
)
)

Plaintiffs,
Vs.
FLOWERS BAKING COMPANY OF
JAMESTOWN, LLC
FLOWERS FOODS, INC.,
Defendants.

ORDER

THIS MATTER is before the court on Plaintiffs’ Motion for an Order to Protect the
Class and Fair Conduct of This Action (#149). Having considered Plaintiffs’ motion and
reviewed the pleadings, the court enters the following findings and Order.
I.

Introduction

One of Plaintiff’s central allegations in this lawsuit is that Defendants misclassified them
as independent contractors rather than employees. (Dkt. No. 1.) Several legal claims stem from
that misclassification, including alleged violations of the North Carolina Wage and Hour Act
(“NCWHA”). Id. By their complaint, Plaintiffs argue that Defendants violated the NCWHA by
making improper wage deductions for warehouse and administrative fees. Id. On March 24,
2015, the court certified a class of similarly situated individuals for the NCWHA claim. (Dkt.
No. 129).
In the instant motion, Plaintiffs allege that since the filing of this action, Defendants’

-1-

managers have communicated misrepresentations or representations containing omissions to
Class Members in an effort to settle Class Members’ NCWHA claims. Plaintiffs argue that
Defendants have solicited Class Members to release the NCWHA claims without fully advising
them of the pendency of this class action litigation, their right to participate in this litigation, the
existence of their claims, and the effect on their claims of signing the releases. Plaintiffs argue
that court control of communication with class members is warranted here because Defendants’
communications with class members is coercive and misleading.
Pursuant to their distributor agreements, all Class Members are required to “execute . . . a
general release of claims, in the event of any sale, conveyance or assignment, including any sale,
conveyance or assignment to [Defendant Jamestown].” (Dkt. No. 107-1, p. 8). Thus, at the time
of hire, Defendants bind distributors to sign a general release of claims in the future. (Id.)
Plaintiffs are concerned that the general releases of claims from putative Class Members could
cover the NCWHA claims at issue. Indeed, Defendants cite release of claims as their first
defense in their motion for summary judgment, noting that over 70 individuals in the North
Carolina class signed releases of claims when they sold their distributorships back to the
company. (#147 at p. 46). Plaintiffs argue that Class Members have been forced to sign the
general release of claims under a number of different coercive circumstances, including when
Defendants force Class Members to reorganize their routes and when Class Members quit their
jobs. Essentially, class members must either sign the release forms or forgo the money owed to
them upon their departure from the company (which can be in the tens of thousands of dollars),
or in the case of route reorganization, be required to pay hundreds of dollars a day for the
distributor to operate the route.

-2-

As a result, Plaintiffs are motioning for two specific orders. First, they seek an order
requiring Defendants to disseminate a curative notice to accompany any future solicitations of
releases that fully informs the recipient of the pendency of this action and their rights in relation
to this litigation. Second, Plaintiffs seek an order nullifying all general releases that were signed
by class members since January 24, 2011, when Defendants were first put on notice of
impending litigation.
II.

Discussion

The court will first consider Plaintiffs’ motion in regards to an order for the court to
control communications with class members by requiring Defendants to disseminate curative
notice. District courts have broad discretionary powers under Fed. R. Civ. P. 23(d) to supervise
communications with class members. The court may issue orders that are necessary “to protect
class members and fairly conduct the action” and can “impose conditions on the representative
parties.” Fed. R. Civ. P. 23(d)(1)(B-C). “[A] district court has both the duty and the broad
authority to exercise control over a class action . . . to enter appropriate orders governing the
conduct of counsel and parties.” Gulf Oil Co. v. Bernard, 452 U.S. 89, 100 (1981). From, this,
courts are authorized to “restrict communications that are potentially coercive or misleading.”
Zamboni v. Pepe W. 48th St. LLC, 2013 WL 978935 (S.D.N.Y. 2013) (citing Gulf Oil Co., 452
U.S. 89).
A communication is coercive or misleading when the defendant interferes with
participation by potential class members in the lawsuit or misinforms them by failing to reveal
how some proposed transaction might affect their rights in the litigation. Id. at *3. Courts have
continually held that misleading communications to class members concerning the litigation pose

-3-

a serious threat to the fairness of the litigation proceedings and violate the principle of informed
consent, and the Federal Rules allow the courts to protect class members and putative class
members from such communications. See In Re Sch. Asbestos Litig., 842 F.2d 671, 680 (3d Cir.
1988) (citing Gulf Oil Co., 452 U.S. at 101); In re Currency Conversion Fee Antitrust Litigation,
361 F.Supp.2d. 237, 252 (S.D.N.Y. 2005); Kleiner v. First Nat’l Bank of Atlanta, 751 F.2d 1193,
1203 (11th Cir. 1985).
When a court decides whether to order a limit on communications with class members,
such an order must be based on findings of fact. Specifically, the Supreme Court advises that any
order regulating communications with class members or putative class members needs a basis in
“a clear record and specific findings that reflect a weighing of the need for a limitation and the
potential interference with the rights of the parties.” Gulf Oil Co., 452 U.S. at 101. The burden is
on the plaintiffs, not the defendant, to show that a restricting order would guard against the
likelihood of serious abuses. Id. That said, plaintiffs need not prove actual harm, and a showing
that Rule 23’s protections for class members might be hindered is sufficient to order limitations
on communications with class members. See Jenifer v. Delaware Solid Waste Authority, 1999
WL 117762, at *3 (D. Del. 1999); Hampton Hardware, Inc. v. Cotter & Co., Inc., 156 F.R.D.
630, 633 (N.D. Tex. 1994). Should a court decide to order limitations on communications, the
court must consider only “the narrowest possible relief” that “limits speech as little as possible,
consistent with the rights of the parties under the circumstances.” Gulf Oil Co., 452 U.S. at 102.
Here, Plaintiffs contend that Defendants’ communications with class members and
putative class members are coercive and misleading, and curative notice should accompany these
communications and inform the class members of their rights in this litigation. Plaintiffs consider

-4-

distribution of these releases to be near-extortion on the part of Defendants, as an attempt to
coerce class members and potential class members into waiving their rights to this litigation by
denying them much-needed money.
In their response, Defendants note that distribution of these releases is standard industry
practice: when any independent distributors sign their initial agreements, they explicitly agree to
sign a release of claims if and when they sell their distributorships and distribution rights.
Defendants also point out that their counsel has been communicating with Plaintiffs’ counsel for
over two years concerning release language for various named Plaintiffs and opt-in Plaintiffs, as
they were the only represented parties at the time, and Plaintiffs’ counsel has specifically
approved the releases and even negotiated some of the release language.
Though Defendants believe the conduct of Plaintiffs’ counsel would be sufficient to
constitute a waiver of any complaint over distribution of these releases, Defendants are
nevertheless willing to distribute curative notices. Specifically, they agree to send curative
notices to the nine class members who signed releases after the North Carolina class was
certified and to any distributors who are asked to sign a release from this point forward, now that
the class has been certified. Additionally, they will send notice to class members who signed a
release after the lawsuit was filed, in order to inform them of their right to petition the court to
seek invalidation of the release if they contend they entered into it unknowingly or under duress,
which would give them an opportunity to present evidence at a hearing they set with the court.
Here, the court finds Defendants’ proposal is reasonable and adequately addresses
Plaintiffs’ complaint. Therefore, the court will grant Plaintiffs’ motion on their first count, and
will instruct Defendants’ to distribute curative notice as described above.

-5-

Next, the court considers the second count of Plaintiffs’ motion, in which Plaintiffs
request that the court nullify all general releases signed by class members since January 24,
2011, the date Defendants originally received notice of the instant litigation. The Fourth Circuit
has held that a general release of claims is acceptable and “not only settles enumerated specific
differences, but claims ‘of every kind or character, known or unknown.’” Zandford v. PrudentialBache Sec., Inc., 112 F.3d 723, 727 (4th Cir. 1997) (quoting Virginia Impression Prods. Corp. v.
SCM Corp., 448 F.2d 262, 265 (4th Cir. 1971). Though waivers which “transgress public policy”
are not permitted, Bd. of Managers of James Walker Mem’l Hosp. of Wilmington v. City of
Wilmington, 74 S.E.2d 749, 757 (N.C. 1953), this court and other North Carolina district courts
have consistently allowed parties to waive claims under the NCWHA via private release. See
Simontacchi v. Invensys, Inc., 2008 WL 141905, at *15 (W.D.N.C. 2008) (holding “the claims
raised by [plaintiff] for breach of the covenant of good faith and under the Wage and Hour Act
must be dismissed because he released all such claims”); Wynne v. P.C. Greenville Ltd. P’ship,
190 F.R.D. 399, 400 (E.D.N.C. 1998) (the court granted summary judgment to employer where
plaintiff executed a release of wage claims under the NCWHA); VF Jeanswear Ltd. P’ship v.
Molina, 320 F.Supp.2d 412, 419 (M.D.N.C. 2004) (holding that “[w]hen a release is executed in
exchange for valuable consideration, the release provides a complete defense . . .”).
Plaintiffs argue that the court should find waivers of claims under the NCWHA to violate
public policy, and consequently invalidate all general releases of claims. They also note that the
Supreme Court has held that wage and hour claims cannot be waived since doing so would
violate the Fair Labor Standards Act (“FLSA”). See Brooklyn Savings Bank v. O’Neil, 324 U.S.
697 (1945). Additionally, Plaintiffs argue that the releases should be voided since they were

-6-

executed under threat of duress, as Defendants instructed class members that the money the class
members originally paid to conduct their jobs would not be returned if they did not sign the
general releases. Plaintiffs argue that this constitutes severe economic duress, as the money in
question can number in the tens of thousands of dollars.
In response, Defendants contend that the well-established precedent described above
directly supports the ability for class members and putative class members to waive NCWHA
claims through general releases. Defendants also freely admit that Plaintiffs’ release of claims
under the NCWHA does not affect their ability to proceed with their FLSA claims, but note this
has no bearing to the instant motion and the NCWHA. Defendants also argue that no duress was
present, as anyone signing a release was simply fulfilling their contractual obligations they
agreed to back when the distributors signed their original agreements with the company.
Specifically, Defendants note that the Fourth Circuit has found such circumstances do not
constitute duress. See Wells v. Entre Computer Ctrs., Inc., 915 F.2d 1566 (4th Cir. 1990)
(unpublished). In Wells, plaintiffs were franchisees who owned computer stores and, at the
inception of their relationship with the franchisor, the plaintiffs signed agreements requiring
them to execute a general release of claims upon transfer of the franchise. Wells, 915 F.2d at *1.
When the franchisees sued for fraud and breach of contractual and statutory duties, they argued
that the releases were invalid because they were general releases and did not cover every claim,
and that they signed the releases under duress since they would lose money if they did not sign.
Id., at *3-6. However, the Fourth Circuit found that even if the “dire financial circumstances”
described by the plaintiffs was true, they had originally agreed to the release at a time when they
were under no financial distress, and the franchisor “had the right to condition its consent on the

-7-

execution of a general release” and had “only required the franchisees to do what they already
had agreed to do.” Id. at 6.
Here, the court agrees with Defendants that North Carolina district courts and the Fourth
Circuit unequivocally allow both general releases and releases of claims under the NCWHA
through private parties, and finds that Plaintiffs have failed to demonstrate why this court should
rule differently. Additionally, in regards to Plaintiffs’ charge of duress, the court finds the Fourth
Circuit’s reasoning in Wells to be especially persuasive and consequently finds the releases in
question were not signed under duress. As a result, the court will deny Plaintiffs’ motion on their
second count, and will not invalidate any general releases at this time.
ORDER
IT IS, THEREFORE, ORDERED that Plaintiffs’ Motion for an Order to Protect the
Class and Fair Conduct of This Action (#149) is GRANTED IN PART and DENIED IN
PART. Defendants are ordered to distribute curative notice to the nine class members who
signed releases after the North Carolina class was certified and to any distributors who are asked
to sign a release from this point forward, as well as class members who signed a release after the
lawsuit was filed. However, at this time the court declines to invalidate any general releases
signed since January 24, 2011, and that portion of the motion is denied without prejudice, subject
to further consideration if Defendants seek to enforce such waivers by moving to dismiss, for
summary judgment, or other such relief.
Signed: July 13, 2015

-8-