Two Interesting Wrinkles on Waiver (or Non-Waiver) of Issues Purportedly Not Raised Below

Thompson v. Real Estate Mortgage Network, 748 F.3d 142 (3d Cir. 2014).  This opinion, issued today by Judge Vanaskie, is an important one in that it clarifies the pleading standards in the context of a motion to dismiss a complaint under Rule 12(b)(6).  The panel reversed the dismissal of this Fair Labor Standards Act (“FLSA”) and New Jersey Wage and Hour Law complaint, a putative class action, finding it sufficiently pleaded.  Plaintiffs will find this case to be helpful to them in defending motions to dismiss.

From an appellate practice perspective, the opinion contains two interesting points regarding waiver of arguments purportedly not made below.  First, in connection with an argument as to the liabliity of parties who were alleged to be joint employers of the plaintiff, Judge Vanaskie noted that the Third Circuit had “recently treated this topic in some depth” in In re Enterprise Rent-a-Car Wage & Hour Employment Practices Litig., 683 F.3d 462 (3d Cir. 2012).   Plaintiff had not cited Enterprise in the district court, and defendants suggested that plaintiff could not benefit from that opinion on appeal.  Judge Vanaskie disagreed.  “The Enterprise decision, however, does not constitute a ‘claim’ requiring presentation to the district court.  [Citation].  Thompson’s ‘joint employer’ claims were well established in the record.  We would be remiss if we failed to apply our own binding precedent simply because it was not cited before the District Court.”

Second, plaintiff sought to hold defendants liable on a successor liability theory.  On appeal, plaintiff invoked federal common law on this topic.  Defendants objected that plaintiff had not raised federal common law in the district court, and sought to bar that argument on appeal.  Judge Vanaskie again declined to apply a strict waiver rule against plaintiff.  “The prudential rule that we not consider claims raised for the first time on appeal is at its strongest when a party presents an issue for the first time on appeal and thereby prevents the opposing party from introducing evidence relevant to that issue.  [Citation].  In this case, the proceedings remain at the pleadings stage.  Neither party has introduced evidence of any kind.  Nor is it a surprise to defendants on appeal that Thompson seeks relief on a theory of successor liability.”  Because it was “unlikely” that the panel’s de novo analysis would have been affected if the issue had been squarely presented below, and because the issue of what law governs successor liability under the FLSA “is an open and important question in this Circuit,” the panel declined to find that plaintiff had waived the issue by not raising it below.

Waiver of issues not raised below is not as simple a principle as it is sometimes made to seem.  This case illustrates that anew.