A federal appeals panel on Tuesday voided a Texas trial judge's order that said three plaintiffs firms were in contempt for allegedly violating the nationwide injunction blocking enforcement of an Obama-era U.S. Labor Department rule.

U.S. District Judge Amos Mazzant of the Eastern District of Texas said the firms—Cohen Milstein Sellers & Toll, Outten & Golden, and New Jersey's Green Savits—violated the injunction when they brought a wage-and-hour suit in New Jersey federal court. Mazzant's injunction, issued against the Labor Department, had earlier paused a rule that would have made millions of more workers eligible for overtime compensation.

“This appeal concerns the district court's extraordinary and concededly unprecedented use of the contempt power to dictate the legal arguments that a stranger to that court may advance in another federal court,” a Jenner & Block team argued on behalf of the plaintiffs firms in the U.S. Court of Appeals for the Fifth Circuit last year.

The Fifth Circuit panel on Tuesday unanimously concluded Mazzant did not have authority to hold the firms, and their client, in contempt.

In the New Jersey court, the firms had sued Chipotle Mexican Grill in a private civil action. The suit, filed under the Fair Labor Standards Act and New Jersey state law alleged Mazzant's injunction had not stopped the effective date of the Labor Department overtime rule. The plaintiffs also argued they were not parties to the injunction.

Chipotle's lawyers at Sheppard, Mullin, Richter & Hampton, Messner Reeves and Cantey Hanger urged Mazzant to hold the firms in contempt. The Sheppard Mullin team said the suit in New Jersey against Chipotle represented a “dismissive attitude” toward Mazzant's injunction.

Mazzant determined the three law firms “acted in privity” with the Labor Department—that is, the firms and the agency, with interests aligned, were both bound by the injunction. The plaintiffs firms “sued to enforce the final rule in direct violation of the court's order,” Mazzant said. “In doing so, they recklessly disregarded a duty owed to the court—the long-standing and elementary duty to obey its orders, including a nationwide injunction.”

The appeals panel said Mazzant mistakenly concluded the firms were in “privity” with the Labor Department. The law firms “submitted uncontradicted declarations attesting that they had not in any way participated, coordinated, or acted in concert with the federal defendants” to violate Mazzant's injunction, the appeals court said.

More broadly, the appeals court said, “Chipotle's theory that the DOL represents every worker's legal interests through its enforcement of the FLSA so as to bind every worker in the United States to an injunction where the DOL is the only bound party lacks authoritative support.”

The court's ruling is posted below:

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