7th Circuit: California Claims Adjuster’s Wage Suit Must be Decided in Indiana

A former claims adjuster who says Ryze Claims Solutions violated his rights by paying him a base salary of $455 per week won’t be able to make that argument in his home state of California.

The 7th Circuit Court of Appeals on Monday overturned a decision by a federal judge in Indianapolis to transfer Leslie Billing’s putative class-action to California, even though all of the surviving complaints involve questions of California state law.

The three-judge panel said Billings had signed an employment agreement that required him to resolve any disputes in Indiana, Forum-selection clauses can be overruled only under “extraordinary circumstances,” the opinion says.

“This is not an exceptional case,” the 7th Circuit said.

The Billings case has bounced from California to Indiana like a hot potato.

Billings in 2017 filed the action in Kern County Superior Court in Bakersfield, where he lives and where he worked for Eagle Adjusting Services and later Ryze, which acquired the company. He said Eagle and Ryze did not provide uninterrupted meal breaks, improperly required him to pay business expenses, made illegal deductions from his paychecks and improperly classified him as salaried employee exempt from the state’s minimum wage law. Billings said he covered a district that required him to travel as much as 400 miles and he spent many hours on the road without being paid for it.

Later, the complaint was amended to add alleged violations of the Fair Labor Standards Act.

Ryze removed the case to federal court and then persuaded the Eastern District of California to transfer it to the Southern District of Indiana. Ryze is headquartered in Indianapolis and its employment agreement required any disputes to be resolved by Indiana state court or in the U.S. District Court for Southern Indiana.

In June 2019, Magnus-Stinson dismissed two of the eight counts in Billings’ complaint, both of which alleged violations of the federal Fair Labor Standards Act. The judge noted that Ryze always paid Billings at least $910 biweekly and had paid as much as $2,000 for one bi-weekly pay period.

Although Ryze deducted that $910 salary from the commissions it paid Billings, in no instance did the company pay him less than $910 biweekly. The judge said the evidence showed that if Billings earned less than his base salary in commissions, Ryze carried the negative balance forward and deducted the salary payments only from future commissions that were greater than $910.

The judge said that the pay arrangement complied with federal labor law, but she reached no decision on whether any California state laws were violated and made no decision on whether to certify a class of plaintiffs.

Instead, she transferred the case back to the Eastern District of California. She said federal judges in California are more familiar with California laws, that the citizens of California have a strong interest in how the state’s laws are interpreted and that the docket of the Southern Indiana district is far more congested than the Eastern California district’s docket.

The Eastern California court did not welcome the case back with open arms. Instead, it scheduled a hearing to give the parties a chance to show why the case shouldn’t be transferred back to Indiana.

Ryze filed a petition asking the 7th Circuit to order the Indiana court to hear the case.

The 7th Circuit said Magnus-Stinson used a flawed methodology when deciding to transfer Billings’ lawsuit. Instead of requiring Billings to show why the case belonged in California, she required Ryze to show why it should remain in Indiana.

The appellate judges said it makes no difference that federal judges in California might be more familiar with California law. None of the state laws in question are “particulary arcane,” the panel said, and federal judges frequently decide cases under the laws of states where they don’t sit.

The panel said that the Supreme Court has ruled that forum-selection clauses “go a long way toward establishing predictability and certainty in legal transactions.” The opinion said appellate courts rarely allow such contract language to be ignored.

“We have identified several other cases where courts have found extraordinary circumstances. Each of these cases presented a significantly more serious and unusual situation than the one here,” the opinion says.