Class Action

Sprint Class Action Defense Cases–Harlow v. Sprint: Kansas Federal Court Denies Motion To Dismiss Class Action Holding Kansas Wage Payment Act Class Action Claim May Be Brought By Employees Who Neither Live Nor Work In Kansas

By Michael J. Hassen

Class Action Alleging Violations of Kansas Wage Payment Act may be Brought by Plaintiffs who do not Live or Work in Kansas because State Law Contains no Express Geographical Limitation and Employment Agreement Expressly Contained Kansas Choice of Law Provision Federal Court Holds

Plaintiffs filed a class action against their employer, Sprint Nextel and Sprint/United Management (collectively “Sprint”) alleging violations of federal securities law; specifically, the class action claimed that “Sprint failed to pay [plaintiffs] proper commissions.” Harlow v. Sprint Nextel Corp., 574 F.Supp.2d 1224, 1225 (D. Kan. 2008). According to the class action, plaintiffs were to be paid according to a “Business Incentive Compensation Plan that governed commissions they would receive based on sales of various products and services”; however, due to computer problems plaintiffs were not paid the proper amount of commissions. Id. None of the plaintiffs lived or worked in Kansas, id., at 1226, but the class action was filed in Kansas because the Plan provides that Kansas law governs the employment agreement and that any disputes under the Plan must be brought in Kansas, id., at 1225. The class action complaint alleged violations of Kansas’s Wage Payment Act, and sought relief also under theories of breach of contract, quantum meruit, promissory estoppels, and unjust enrichment. Id., at 1225. Defense attorneys filed a motion to dismiss the class action, which the district court treated as a motion for judgment on the pleadings because Sprint had already filed an answer to the class action complaint. Id. At the time the district court ruled on the motion, the only issue that remained open for resolution was the viability of the Wage Payment Act claim, id. The district court denied the motion as to that claim, holding that it could not determine as a matter of law that the Kansas Wage Payment Act could not be brought by employees who neither lived nor worked in the state.

After discussing the applicable standard of review, see Harlow, at 1225-26, the district court turned to Sprint’s argument that “the named Plaintiffs cannot seek protection under the Kansas Wage Payment Act (KWPA) because none of them live or work in Kansas,” id., at 1226. The district concluded that the Seventh Circuit opinion relied upon by the defense – Glass v. Kemper Corp., 133 F.3d 999 (7th Cir. 1998), which held that “the Illinois Wage Payment and Collection Act does not apply to employees outside of Illinois” – was distinguishable from the class action before it because (1) the Illinois Wage Payment Act expressly limits its reach to “employers and employees in this state,” and (2) the employment agreement in Glass did not include a choice of law provision, whereas the Sprint employment agreement expressly provided that “Kansas law governs the Plan.” Id. Defense attorneys argued that the choice of law provision in the Plan could not give “extraterritorial effect” to Kansas’s Wage Payment Act, id. In the absence of Tenth Circuit authority on the subject, the district court adopted the reasoning of the Ninth Circuit, which held that “where a state law includes no express geographical limitation, courts may apply it to a contract that, because of a choice of law provision, falls under that state's law,” but that “[if] the state law contains limits on its geographical scope, ‘courts will not apply it to parties falling outside those limitations, even if the parties stipulate that the law should apply.’” Id. (quoting Gravquick A/S v. Trimble Navigation Int'l Ltd., 323 F.3d 1219, 1223 (9th Cir. 2003)). Following Ninth Circuit authority, then, the federal court concluded that the Kansas Wage Payment Act could be applied “with no geographical restriction” because of the Plan’s choice of la provision. Id., at 1226-27. The district court held, further, that the Kansas Wage Payment Act “is not limited to employees who live and work in Kansas, and the choice of law provision contained in the Plan allows Plaintiffs to seek relief under Kansas law, including the KWPA.” Id., at 1227. Accordingly, it denied the motion to dismiss.

Full post as published by Class Action Defense Blog on November 20, 2008 (boomark / email).