Decertification reversal in suitable seating case

Rage, rage against the dying of the light. Chastise the universe for failing you, and sometimes it responds. Just earlier today I decried the absence of any decisions having anything to do with the subjects usually covered here. But soft! what light through yonder window breaks? It is an opinion, and suitable seating is the sun. In Hall v. Rite Aid Corporation (May 16, 2014), the Court of Appeal (Fourth Appellate District, Division One) reversed a trial court order decertifying a suitable seating claim.

The plaintiff successfully certified a class action alleging failure to provide suitable seating. Later, defendant Rite Aid moved for decertification, citing to other decisions and to evidence it offered. The trial court granted the motion to decertify and denied the cross-motion to permit the matter to proceed as a non-class representative action. (Oh my gosh, this is already exciting!) Based on the analytic framework of Brinker ("O, speak again, bright angel! for thou art As glorious to this night, being o'er my head As is a winged messenger of heaven Unto the white-upturned wondering eyes Of mortals that fall back to gaze on him When he bestrides the lazy-pacing clouds And sails upon the bosom of the air."), the Court of appeal concluded that the trial court erroneously considered the merits of the action, rather than whether the action was amenable to class treatment.

The decertification train got rolling after Rite Aid cited the recently decided matter of Duran v. U.S. Bank Nat. Assn., 203 Cal. App. 4th 212 (2012) (review granted).  Rite Aid then pounced, asking the trial court to sua sponte decertify.  The trial court declined, but briefing was requested. Rite Aid then submitted federal court decisions and declarations from cashiers that had opted out of the action, along with other evidence. In spite of numerous bases for opposition, the trial court granted the motion to decertify and denied the motion to permit the case to proceed as a representative action.

The Court began its review by thoroughly analyzing Brinker and its progeny. Describing several of those subsequent decisions, the Court said:

Subsequent cases have concluded, considering Brinker, that when a court is considering the issue of class certification and is assessing whether common issues predominate over individual issues, the court must "focus on the policy itself" and address whether the plaintiff's theory as to the illegality of the policy can be resolved on a class-wide basis. (Faulkinbury v. Boyd & Associates, Inc. (2013) 216 Cal.App.4th 220, 232 (Faulkinbury); accord, Bradley, supra, 211 Cal.App.4th at pp. 1141-1142 ["[o]n the issue whether common issues predominate in the litigation, a court must 'examine the plaintiff's theory of recovery' and 'assess the nature of the legal and factual disputes likely to be presented' "]; Benton v. Telecom Network Specialists, Inc. (2013) 220 Cal.App.4th 701, 726 (Benton) ["under Brinker . . . for purposes of certification, the proper inquiry is 'whether the theory of recovery advanced by the plaintiff is likely to prove amenable to class treatment' "].) Those courts have also agreed that, where the theory of liability asserts the employer's uniform policy violates California's labor laws, factual distinctions among whether or how employees were or were not adversely impacted by the allegedly illegal policy does not preclude certification. (See, e.g., Bradley, supra, at pp. 1150-1153 [where theory of liability was employer's uniform policy violated labor laws by not authorizing employees to take meal and rest breaks, class certification is proper and fact some employees in fact took meal and rest breaks is a damage question that " 'will rarely if ever stand as a bar to certification' "].)

Slip op., at 13. Once the Court turned to plaintiff's theory, it wasted no time in applying the mandates of Brinker (and I sense no trace of bitterness):

Our review of Brinker, which is binding on this court (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450), compels the conclusion the trial court erroneously based its decertification order on its assessment of the merits of Hall's claim rather than on the theory of liability advanced by Hall. We are instructed under Brinker that the starting point for purposes of class certification commences with Hall's theory of liability because, "for purposes of certification, the proper inquiry is 'whether the theory of recovery advanced by the plaintiff is likely to prove amenable to class treatment.' " (Benton, supra, 220 Cal.App.4th at p. 726.) Here, as in Brinker and its progeny, Hall alleged (and Rite Aid did not dispute) that Rite Aid had a uniform policy of the type envisioned by Brinker: Rite Aid did not allow its Cashier/Clerks to sit (and therefore provided no suitable seats for its Cashier/Clerks) while they performed check-out functions at the register. Hall's theory of liability is that this uniform policy was unlawful because section 14 mandates the provision of suitable seats when the nature of the work reasonably permits the use of seats, and the nature of the work involved in performing check-out functions does reasonably permit the use of seats. Hall's proffered theory of liability is that, regardless of the amount of time any particular Cashier/Clerk might spend on duties other than check-out work, Rite Aid's uniform policy transgresses section 14 because suitable seats are not provided for that aspect of the employee's work that can be reasonably performed while seated.

Slip op., at 18-19. The Court then dismissed Rite Aid's arguments on appeal:

Rite Aid's arguments on appeal largely ignore the analysis of Bradley, Benton and Faulkinbury. Instead, Rite Aid asserts the trial court properly reached the merits of (and correctly rejected) Hall's theory of liability when it ruled on the decertification motion because Brinker cannot be read to permit a plaintiff to "invent a class action by proposing an incorrect rule of law and arguing, 'If my rule is right, I win on a class basis.' "

Slip op., at 20.

The Court found it unnecessary to address the representative action theory and declined the plaintiff's request to address the correct standard applicable to section 14's seating mandate.

I remarked on a number of occasions during Class Re-Action podcast episodes that Brinker's true impact was in the certification sphere, not the wage & hour issues it addressed. Q.E.D. Well, that's insanely smug and pretentious. But, you know, scoreboard.

Court of Appeal delivers stunnig rebuke of misclassification certification opinions based on Brinker

I was pretty confident that you would need to have an unhealthy love of pain to take on a manger misclassification class action after the long line of bad outcomes for those cases (Dunbar, Mora, Arenas, Tuesday Morning, etc.).  But Martinez v. Joe's Crab Shack Holdings, 221 Cal. App. 4th 1148 (pub. ord. Dec. 4, 2013), once again channeling the ghost of Brinker, makes me think that we are back to wait-and-see time.  And, yes, another case that deserved attention a lot sooner than this.  That's what I get for starting my own firm.  Anyhow, on to our story...

In Martinez, employees of different Joe's Crab Shack (JCS) restaurants in California filed suit, seeking to represent a class of salaried managerial employees who worked at JCS restaurants in California.  The parties submitting conflicting groups of declarations.  Presented with this evidence, the trial court denied the motion for class certification on the grounds plaintiffs had failed to establish (1) their claims were typical of the class, (2) they could adequately represent the class, (3) common questions predominated the claims, and (4) a class action is the superior means of resolving the litigation.  The first two findings were based on plaintiffs' inability to estimate the number of hours spent on individual exempt and nonexempt tasks and their admission that the amount of time spent on particular tasks varied from day to day. As to the third and fourth findings, the trial court acknowledged the existence of common questions of law and fact, but concluded there remained significant individual disputed issues of fact relating to the amount of time spent by individual class members on particular tasks. The variability among individual members of the putative class would require adjudication of the affirmative defense of exemption for each class member, “a time- and resource-consuming process.” The trial court rejected as unfair plaintiffs' proffered trial plan, under which their expert proposed to assess the rate at which managerial employees are engaged in nonexempt tasks through statistical sampling methods. Under these circumstances, the court concluded, a class action would not be the superior means of resolving the litigation.

Examining the trial court’s reasoning, the Court began with a discussion of its typicality and adequacy findings, rejecting the narrow analysis supplied by the trial court:

With respect to typicality, this analysis suffers from an overly focused examination of the facts that looked toward individual differences rather than commonality. In essence, the trial court resolved the factual conflict between plaintiffs' declarations, in which they stated nonexempt tasks routinely occupied more than 50 percent of their time, and their deposition testimony that they could not estimate the number of hours they spent on individual tasks because those tasks varied day to day. The inability of the witnesses to specify time spent on particular tasks is hardly surprising, however, and does not create an issue that must be resolved on a motion for class certification. What was common to plaintiffs, in addition to the standard policies implemented by CAI at each of their restaurants, were their assertions their tasks did not change once they became managers; they performed a utility function and routinely filled in for hourly workers in performing nonexempt tasks; and they worked far in excess of 40 hours per week without being paid overtime wages. Their claims—and the defense of executive exemption to those claims—are thus typical of the class.

Martinez, 221 Cal. App. 4th at 1159.  Turning to the conflict between general managers and assistant manager, the Court agreed that antagonism existed but found it non-fatal:  “This apparent conflict, however, is not fatal. In the interest of preserving the claims of subordinate managerial employees, the trial court may on remand exercise its discretion to create a general managers subclass or to exclude general managers entirely from the class definition.” Martinez, 221 Cal. App. 4th at 1160.

Next, the Court found that the trial court’s reasoning regarding commonality shifted the burden of proof improperly onto the plaintiffs:

The trial court's failure here to focus on the impact of JCS policies and practices on its managerial employees essentially shifted the burden of disproving the executive exemption to plaintiffs. Indeed, although the court recognized the evidence established the existence of a finite task list that could aid in the identification of common issues among the putative class members, its analysis effectively omitted any consideration of this potential class-wide proof.

A recent decision from our colleagues in Division Two of this court simplifies this endeavor and illustrates the enormous cost of resolving these claims on an individual, rather than a class-wide basis. (See Heyen v. Safeway Inc. (2013) 216 Cal.App.4th 795, 157 Cal.Rptr.3d 280 (Heyen ).)21 After reviewing analogous regulations for mercantile workers, Heyen articulated the appropriate manner of evaluating an employer's duties: “Several general principles emerge from these regulations. First, work of the same kind performed by a supervisor's nonexempt employees generally is ‘nonexempt,’ even when that work is performed by the supervisor. If such work takes up a large part of a supervisor's time, the supervisor likely is a ‘nonexempt’ employee. [Citations.] [¶] Second, the regulations do not recognize ‘hybrid’ activities—i.e., activities that have both ‘exempt’ and ‘nonexempt’ aspects. Rather, the regulations require that each discrete task be separately classified as either ‘exempt’ or ‘nonexempt.’ [Citations.] [¶] Third, identical tasks may be ‘exempt’ or ‘nonexempt’ based on the purpose they serve within the organization or department. Understanding the manager's purpose in engaging in such tasks, or a task's role in the work of the organization, is critical to the task's proper categorization. A task performed because it is ‘helpful in supervising the employees or contribute[s] to the smooth functioning of the department’ is exempt, even though the identical task performed for a different, nonmanagerial reason would be nonexempt. [Citations.] [¶] Finally, in a large retail establishment where the replenishing of stocks of merchandise on the sales floor ‘is customarily assigned to a nonexempt employee, the performance of such work by the manager or buyer of the department is nonexempt.’ [Citation.] Similarly, in such a large retail establishment, a manager's participation in making sales to customers is nonexempt, unless the sales are made for ‘supervisory training or demonstration purposes.’ ” (Id. at pp. 822–823, 157 Cal.Rptr.3d 280.)

Applying these principles to the tasks identified by CAI and Landry's, inventory, restocking, serving, cooking, bussing tables, cleaning and other tasks ordinarily performed by nonexempt employees remain nonexempt when performed by a managerial employee. Likewise, when a managerial employee fills in for a nonexempt employee, the task remains nonexempt. On the other hand, if the managerial employee is performing the task for the purpose of supervisory training or demonstration, the task is exempt. California law does not recognize a hybrid category in which the employee is deemed to be performing an exempt task at the same time he or she is performing a nonexempt task. (Heyen, supra, 216 Cal.App.4th at p. 826, 157 Cal.Rptr.3d 280.)

Martinez, 221 Cal. App. 4th at 1163-64.

Finally, in a stunning, but subtle rebuke of prior decisions on misclassification, the Court identified a new mandate from Brinker, saying:

We have not ignored the substantial case authority, including our own, upholding trial court decisions not to certify class actions for claims similar to those raised here (see, e.g., Dailey v. Sears, Roebuck & Co. (2013) 214 Cal.App.4th 974, 154 Cal.Rptr.3d 480; Mora v. Big Lots Stores, Inc., supra, 194 Cal.App.4th 496, 124 Cal.Rptr.3d 535; Arenas v. El Torito Restaurants, Inc. (2010) 183 Cal.App.4th 723, 108 Cal.Rptr.3d 15); nor do we express any disagreement with the outcome of those cases. However, we understand from Brinker, supra, 53 Cal.4th 1004, 139 Cal.Rptr.3d 315, 273 P.3d 513, a renewed direction that class-wide relief remains the preferred method of resolving wage and hour claims, even those in which the facts appear to present difficult issues of proof. By refocusing its analysis on the policies and practices of the employer and the effect those policies and practices have on the putative class, as well as narrowing the class if appropriate, the trial court may in fact find class analysis a more efficient and effective means of resolving plaintiffs' overtime claim.

Martinez, 221 Cal. App. 4th at 1165.

At least until Duran is decided, there appears to be a change of direction in the pendulum following Brinker.  I would note that in the last Class Re-Action Podcast, we discussed with our mediator panel whether there was something akin to a market correction to the overly hostile treatment class actions received in recent years.  The panel generally though it was too soon to tell.  It's looking less anecdotal with every decision.

Wal-Mart Stores, Inc. v. Dukes receives some analysis from a California Court of Appeal

While Wal-Mart Stores, Inc. v. Dukes was quickly applied by lower federal courts, it took some time to see how California courts would apply Dukes.  (Heck, it took quite some time for me to get around to writing this post, so I suppose we can excuse others for not racing their appeals up the ladder just to generate opinions for us to dwell upon.)  In Williams v. Superior Court (Allstate Ins. Co.), 221 Cal. App. 4th 1353 (Dec. 6, 2013), the Court of Appeal (Second Appellate District, Division Eight) offered us our first look at how a California Court of Appeal views the relevance of Dukes in a state class action, outside the Title VII context.

The background of the case generated some additional interesting points, so it's worth a quick summary.  The trial court initally certified a class. After Wal–Mart Stores, Inc. v. Dukes was decided, the parties and trial court discussed Dukes. The trial court thereafter permitted Allstate to file a motion based on Dukes for decertification of the Off–the–Clock class. In its decertification motion, Allstate emphasized two points from Dukes. First, “there must be some ‘glue’ holding the class members' claims together, such that common facts can resolve the claims for everyone in the class.” And, second, “a trial-by-formula using statistical sampling is an improper means to try class claims, as it deprives a defendant of due process by precluding a defendant from proving its individual defenses against each class member.” Allstate told the trial court, “In light of the U.S. Supreme Court's decision in Wal–Mart Stores, Inc. v. Dukes [, supra,] 131 S.Ct. 2541, which the Court admitted changed the relevant legal landscape for this case, and additional discovery since the class certification order, it is apparent that the close call on certification must be reversed.”  The trial court agreed, and decertified the Off–the–Clock class and the corresponding Unfair Competition Claim.

The Court of Appeal began its discussion by addressing the standard applicable to decertification motions generally:

We review a decertification order for an abuse of discretion. (Brinker, supra, 53 Cal.4th at p. 1022, 139 Cal.Rptr.3d 315, 273 P.3d 513; Sav–On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326, 17 Cal.Rptr.3d 906, 96 P.3d 194; Ghazaryan v. Diva Limousine, Ltd. (2008) 169 Cal.App.4th 1524, 1530, 87 Cal.Rptr.3d 518.) Decertification requires new law or newly discovered evidence showing changed circumstances. (Weinstat v. Dentsply Internat., Inc. (2010) 180 Cal.App.4th 1213, 1225, 103 Cal.Rptr.3d 614.) A motion for decertification is not an opportunity for a disgruntled class defendant to seek a do-over of its previously unsuccessful opposition to certification. “Modifications of an original class ruling, including decertifications, typically occur in response to a significant change in circumstances, and ‘[i]n the absence of materially changed or clarified circumstances ... courts should not condone a series of rearguments on the class issues.’ [Citation.].” (Driver v. AppleIllinois, LLC N.D.Ill., Mar. 2, 2012, No. 06 C 6149) 2012 WL 689169, *1 (Driver ).) “A class should be decertified ‘only where it is clear there exist changed circumstances making continued class action treatment improper.’ ” (Green v. Obledo (1981) 29 Cal.3d 126, 147, 172 Cal.Rptr. 206, 624 P.2d 256.)

Williams, 221 Cal. App. 4th at 1360-61.  Frankly, the point that a decertification motion is not a "do-over" was a point long overdue.  Talk about motions that are nothing but billing opportunities and time wasters.

Then the Court turned its attention to Dukes, giving it all the love it richly deserves.  Since Dukes was effectively the only reason for decertification, essentially all of the discussion was about Dukes.  The Court began by addressing the unique factual background:

The trial court erred in concluding Dukes required decertification. In Dukes, a nationwide class of 1.5 million current and former female employees from 3,400 stores sued Wal–Mart, alleging that the company engaged in a pattern or practice of gender discrimination in violation of Title VII of the Civil Rights Act of 1964. The female plaintiffs were required to prove that thousands of store managers shared the same discriminatory animus toward women in denying them promotions and pay raises. The Supreme Court reversed the district court's certification order on the grounds that the plaintiffs could not offer “significant proof that Wal–Mart operated under a general policy of discrimination.” In reversing class certification, the Court found that there was no unifying theory holding together “literally millions of employment decisions” that turned on the subjective intents of thousands of supervisors in thousands of stores to explain for each class member the “crucial question why was I disfavored” for a promotion or pay raise. (Italics original.) (Dukes, supra, 131 S.Ct. at p. 2552; see e.g. Espinoza v. 953 Assocs. LLC (S.D.N.Y.2011) 280 F.R.D. 113, 130 [distinguished Dukes where “claims were based on the countless subjective decisions made by Wal–Mart's local supervisors regarding compensation and promotions” from worker's overtime claims where workers alleged employer “failed to pay minimum wages and overtime compensation as a result of certain policies and practices.”]; see also Ross v. RBS Citizens, N.A. (7th Cir.2012) 667 F.3d 900, 908–910judgment vacated and matter remanded for further reconsideration in light of Comcast Corp. v. Behrend (2013) ––– U.S. –––, 133 S.Ct. 1426, 185 L.Ed.2d 5153 [distinguishing Dukes in case involving 1,129 class members who alleged they were unlawfully denied overtime because of the employer's “unofficial policy” which was “the glue holding together [the class members] based on the common question of whether an unlawful overtime policy prevented employees from collecting lawfully earned overtime compensation.”].)

Williams, 221 Cal. App. 4th at 1361-62.  The Court then discussed the inapplicability of the Rule 23(b)(2) standard to the case before it:

Despite the trial court's turning to Dukes' analysis of the restrictions on, if not outright unavailability of, money damages under rule 23(b)(2) to explain the trial court's decertification order, appellant was not pursuing a 23(b)(2) type of class action. Appellant instead sought class certification under California's class action statute, Code of Civil Procedure section 382.5 Section 382 is analogous to subpart (a) of Rule 23, which establishes the four requirements of a class action. (In re Tobacco II Cases (2009) 46 Cal.4th 298, 318, 93 Cal.Rptr.3d 559, 207 P.3d 20.) The trial court's reliance on Dukes' analysis of subpart (b)(2) of Rule 23—a class action seeking injunctive relief—was thus misplaced because appellant's class members here were seeking principally, if not exclusively, monetary damages, that the federal rules establish is a different type of class action. (Compare Rule 23(b)(2) with 23(b)(1) and 23(b)(3); Dukes, supra, 131 S.Ct. at p. 2558 [“monetary claims belong in Rule 23(b)(3)”].) More fundamentally, the concern expressed in Dukes about the unmanageability of trying 1.5 million claims which depended on proof of the subjective intents of thousands of individual supervisors is not present here. Appellant asserts there is a companywide policy to deny overtime pay. The resolution of that issue does not involve the subjective intents of countless supervisors.

Williams, 221 Cal. App. 4th at 1363-64.

Next, the Court explained that the Dukes discussion of the right to assert statutory defenses under Title VII did not have a corresponding analogue in the Williams matter:

The Supreme Court's second area of focus in Part III of Dukes involved the statutory affirmative defenses in the anti-discrimination statute Title VII. Because the affirmative defenses were statutory, Dukes concluded a class proceeding could not deprive Wal–Mart of its right to present those defenses. (Dukes, supra, 131 S.Ct. at pp. 2560–2561.) As those affirmative defenses required individualized evidence, Dukes disapproved a “Trial by Formula” of Wal–Mart's affirmative defenses because it prevented Wal–Mart from offering its individualized evidence.

Williams, 221 Cal. App. 4th at 1364.

Finally, the Court concluded that nothing in Dukes rendered the original certification order of the trial court incorrect, which necessarily rendered decertification inappropriate.  There is one major lesson here: you can't predict with very much accuracy the ultimate impact of a big decision when it is first released.  This opinion stems from Brinker, which is having a much more far reaching impact than the subject matter of that case initially suggested.  Dukes is having less of an impact at the state level.

Class certification in California is still actually a "procedure"

What to make of this one?  I should have commented on it long ago, I know, but that start-your-own-law-firm thing is fairly time consuming, so I get to writing when I can.   So while I was doing some show prep for this upcoming weekend's podcast, I finally took a look at Benton v. Telecom Network Specialists, Inc. (Oct. 16, 2013) to see for myself what the Court of Appeal (Second Appellate District, Division Seven) did that has many plaintiff-side practitioners so excited.

In Benton, the plaintiffs, cell-phone tower technicians, filed a wage and hour class action lawsuit against Telecom Network Services (TNS) alleging, among other things, violation of meal and rest break requirements and failure to pay overtime.  Most of the proposed class of technicians were hired and paid by staffing companies that contracted with TNS. The remainder of the technicians were hired and paid by TNS directly.  Plaintiffs alleged that TNS was the employer of both categories of technicians and moved to certify their claims.  The trial court denied certification, holding that TNS’s liability could not be established “through common proof because: (1) the technicians worked under ‘a diversity of workplace conditions’ that enabled some of them to take meal and rest breaks; and (2) the staffing companies that hired and paid many of the TNS technicians had adopted different meal, rest break and overtime policies throughout the class period.”

The Court of Appeal reversed, remanding for further proceedings.  In an extensive opinion tracking development of the certification standards as applied to wage and hour cases beginning primarily with Brinker, the Court also examined decisions in Bradley v. Networkers International, 211 Cal. App. 4th 1129 (2012) and Faulkinbury v. Boyd & Associates, 216 Cal. App. 4th 220 (2013).

Discussing Bradley, the Court said:

On remand from the Supreme Court, however, the Court of Appeal concluded that, under the analysis set forth in Brinker, the trial court had improperly focused on individual issues related to damages, rather than on the plaintiffs’ theory of liability. (Bradley, supra, 211 Cal.App.4th at p. 1151.) According to the court, Brinker had clarified that “in ruling on the predominance issue in a certification motion, the court must focus on the plaintiff’s theory of recovery and assess the nature of the legal and factual disputes likely to be presented and determine whether individual or common issues predominate.” (Id. at p. 1150.) The court further explained that “plaintiffs’ theory of recovery [wa]s based on Networkers’ (uniform) lack of a rest and meal break policy and its (uniform) failure to authorize employees to take statutorily required rest and meal breaks. The lack of a meal/rest break policy and the uniform failure to authorize such breaks are matters of common proof. Although an employer could potentially defend these claims by arguing that it did have an informal or unwritten meal or rest break policy, this defense is also a matter of common proof.” (Id. at p. 1150.)

Slip op., at 22-23.  Notice that, at least in the context of these wage particular wage & hour claims, which have a natural tendency to be governed by some set of implementing policies, the certification question endorsed in this case is the question of whether the defendant's policy is legal, not whether any particular employee stumbled into compliant behavior.  Similarly, discussing Faulkinbury, the Court said:

Upon remand from the Supreme Court, the appellate court concluded that Brinker had rejected the mode of analysis set forth in its original opinion. As to plaintiffs’ meal break claim, the appellate court explained that Brinker clarified that the defendant’s liability would attach “upon a determination that [defendant’s] uniform on-duty meal break policy was unlawful . . . . Whether or not the employee was able to take the [off-duty] required break goes to damages, and ‘[t]he fact that individual [employees] may have different damages does not require denial of the class certification motion.’ [Citation.]” (Faulkinbury, supra, 216 Cal.App.4th at p. 235.)

Slip op., at 24-25.  This line of cases appears to strongly emphasize what was, for a time, an argument receiving less traction: variations in damages does not require denial of certification.

After establishing the framework for its analysis, the Court examined the trial court’s ruling:

The written order (as well as statements made at the motion hearing) make clear that the trial court did not believe TNS would be liable upon a determination that its lack of a meal and rest policy violated applicable wage and hour requirements; rather, it concluded that TNS would become liable only upon a showing that a technician had missed breaks as a result of TNS’s policies.

Slip op., at 27.  The Court then rejected the trial court’s mode of analysis, holding that Brinker, and then Bradley and Faulkinbury clarified the correct approach:

As explained in Bradley and Faulkinbury, however, Brinker “expressly rejected” this mode of analysis. (Bradley, supra, 211 Cal.App.4th at pp. 1143, 1151; Faulkinbury, supra, 216 Cal.App.4th at pp. 235, 237.) As succinctly stated in Faulkinbury: “the employer’s liability arises by adopting a uniform policy that violates the wage and hour laws. Whether or not the employee was able to take the required break goes to damages, and ‘[t]he fact that individual [employees] may have different damages does not require denial of the class certification motion.’ [Citation.]” (Faulkinbury, supra, 216 Cal.App.4th at p. 235; see also Bradley, supra, 211 Cal.App.4th at p. 1151 [“under the logic of [Brinker],when an employer has not authorized and not provided legally-required meal and/or rest breaks, the employer has violated the law and the fact that an employee may have actually taken a break or was able to [take a break] during the work day does not show that individual issues will predominate in the litigation”].) Indeed, Bradley and Faulkinbury both specifically concluded that evidence showing that some class members’ working conditions permitted them to take breaks, while others did not, was not a sufficient basis for denying certification. (See Faulkinbury, supra, 216 Cal.App.4th at pp. 236-237 [evidence that some employees were able to “take breaks at [their] posts”, while others “could not leave the assigned post for a rest break” does not “establish individual issues of liability”]; Bradley, supra, 211 Cal.App.4th at p. 1150 [evidence that some employees worked “alone for long periods of time” or “took the authorized rest or meal break” was insufficient to show individual issues predominated.)

Slip op., at 27.  The Court continued in this same vein, thoroughly rejecting both the defendant’s theories and trial court’s method of analysis, repeatedly holding that variations in experiences by class members impacted their damages, not the plaintiffs’ theory of the case, which challenged the absence of lawful policies required by the Wage Order.

You can, at least in this context, certify the question of whether the defendant did the right thing, not the question of whether the plaintiffs always received the right thing.  In other words, luck won't save you; legal policies, implemented as written, will.  Somehow, I think the wage & hour defense bar is celebrating this just as much... 

On remand after Brinker, Court of Appeal reconsiders prior decision and orders certificaiton in Faulkinbury

The press of obligations at work left little time for my blogging, which I regret.  And, I haven't seen anything all that interesting in the class action/complex litigation arena ​in the last few weeks.  That did change last week when, in Faulkinbury v. Boyd & Associates, Inc. (May 10, 2013), the Court of Appeal (Fourth Appellate District, Division Three) [What?!?] reconsidered its prior decision following remand after Brinker​.  The Court concluded that, along with the overtime class it previously ordered certified, the meal period and rest break claims should also have been certified.

Just to summarize, if my prose above was too painful to follow, the trial court denied class certification as to all claims, covered by three subclasses referred to as the Meal Break Class, the Rest Break Class and the Overtime Class.  The Court of Appeal, in a decision previously published as Faulkinbury v. Boyd & Associates, Inc., 185 Cal. App. 4th 1363 (2010), review granted Oct. 13, 2010, S184995 (Faulkinbury I), reversed the order denying certification of the overtime class but affirmed the order denying certification of the Meal Break Class and the Rest Break Class.  Then Brinker​.  Then review granted.  Then remand with an order to vacate Faulkinbury I and reconsider in light of Brinker.

Summarizing the Supreme Court's guidance regarding the consideration of merits at the certification stage, the Court said:​

The Supreme Court confirmed a class certification motion should not be a vehicle for resolving the merits of a claim, but recognized too that “[w]hen evidence or legal issues germane to the certification question bear as well on aspects of the merits, a court may properly evaluate them.”  (Brinker, supra, 53 Cal.4th at pp. 1023‑1024.)  The court concluded:  “Presented with a class certification motion, a trial court must examine the plaintiff’s theory of recovery, assess the nature of the legal and factual disputes likely to be presented, and decide whether individual or common issues predominate.  To the extent the propriety of certification depends upon disputed threshold legal or factual questions, a court may, and indeed must, resolve them.  Out of respect for the problems arising from one-way intervention, however, a court generally should eschew resolution of such issues unless necessary.  [Citations.]  Consequently, a trial court does not abuse its discretion if it certifies (or denies certification of) a class without deciding one or more issues affecting the nature of a given element if resolution of such issues would not affect the ultimate certification decision.”  (Id. at p. 1025.)

Slip op., at 6.​  Continuing, the Court observed that the Supreme Court "emphasized that '[c]laims alleging that a uniform policy consistently applied to a group of employees is in violation of the wage and hour laws are of the sort routinely, and properly, found suitable for class treatment.'"  Slip op., at 7.  The support for that last proposition was summarized as follows:

Brinker court cited three Court of Appeal cases:  Jaimez v. Daiohs USA, Inc. (2010) 181 Cal.App.4th 1286 (Jaimez); Ghazaryan v. Diva Limousine, Ltd. (2008) 169 Cal.App.4th 1524 (Ghazaryan); and Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193 (Bufil).  In Jaimez, Ghazaryan, and Bufil, the Court of Appeal held the trial court abused its discretion by denying class certification.  (Jaimez, supra, at pp. 1299‑1307; Ghazaryan, supra, at pp. 1534‑1538; Bufil, supra, at pp. 1205‑1206.)  These courts reasoned that the plaintiffs were challenging a uniform employment policy that allegedly violated California law, and, therefore, this violation could be proved (or disproved) through common facts and law.  (Jaimez, supra, at pp. 1299‑1300; Ghazaryan, supra, at pp. 1536‑1538; Bufil, supra, at p. 1206.)  The courts in Jaimez and Ghazaryan also concluded that common issues predominated even if the employment policy did not affect each employee in the same way and damages would need to be proved individually.  (Jaimez, supra, at pp. 1301, 1303‑1305; Ghazaryan, supra, at p. 1536.)

Slip op., at 7, n. 1.

​This is one area in which California certification procedural law appears to track somewhat more favorably for certification than does federal law applying Rule 23.  At the very least, it appears to conceptually negate the flavor-of-the-month argument, magically extracted from Wal-Mart​, that a defendant is entitled to assert individual defenses in every case against every class member, thereby defeating class certification in virtually every conceivable case (which, logically, could not be true or someone might have noticed this over the decades upon decades of class action jurisprudence, but I digress as I so often do).  Wal-Mart​, a case about a specific intent type of violation, says nothing of the sort, absent very creative quote extraction, coupled with very creative editorial content used to describe that very creative quote extraction. But stated another way, Brinker​ doesn't diverge from the federal track so much as hold the line that California has charted for some time, while cagey defense counsel try to move the tracks over on the federal side.  I suspect that, when the dust settles, the tracks will have moved back to a point closer to convergence, but not until there isn't much left of that Wal-Mart horse to beat.

Turning back to the Faulkinbury II decision, ​other observations of note include:

• Justice Werdegar's concurrence in Brinker is identified as providing guidance on the question of missed meal breaks, Slip op., at 10.​
• ​The Court agreed with the analysis of Brinker supplied by Bradley v. Networkers Internat., LLC, 211 Cal. App. 4th 1129 (2012), Slip op., at 16.
• Without deciding the lawfulness of the policy, the Court concluded that the question of whether the on-duty meal period policy was legal was a question suitable for certification, even if questions existed as to the frequency that meal periods were missed or the reasons as to why they were missed.  Slip op., at 15-16.
  

I can't promise that work obligations won't steal blogging time, but I will keep doing my best to highlight major decisions and events, intermingled with my brand of commentary.

In Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, Supreme Court holds that proof of materiality not required to certify securities fraud class

The fraud-on-the-market theory, first accepted by the U.S. Supreme Court in Basic Inc. v. Levinson, 485 U. S. 224 (1988), and recently endorsed in Erica P. John Fund, Inc. v. Halliburton Co., 563 U. S. ___ (2011), presumes that the price of a security traded in an efficient market will reflect all publicly available information about a company.  With that presumption, a buyer of the security may be presumed to have relied on that information in purchasing the security, including misrepresentations in public communications.  In Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds (Feb. 27, 2013), the U.S. Supreme Court took up the question of whether, at the certification stage, materiality must be proven.  Affirming the Ninth Circuit, the majority concluded that materiality need not be proven at the certification stage.

Summarizing the holding of the Court, Justice Ginsburg wrote:

While Connecticut Retirement certainly must prove materiality to prevail on the merits, we hold that such proof is not a prerequisite to class certification. Rule 23(b)(3) requires a showing that questions common to the class predominate, not that those questions will be an­swered, on the merits, in favor of the class. Because mate­riality is judged according to an objective standard, the materiality of Amgen’s alleged misrepresentations and omissions is a question common to all members of the class Connecticut Retirement would represent. The al­leged misrepresentations and omissions, whether material or immaterial, would be so equally for all investors com­posing the class. As vital, the plaintiff class’s inability to prove materiality would not result in individual questions predominating. Instead, a failure of proof on the issue of materiality would end the case, given that materiality is an essential element of the class members’ securities fraud claims. As to materiality, therefore, the class is entirely cohesive: It will prevail or fail in unison. In no event will the individual circumstances of particular class members bear on the inquiry.

Essentially, Amgen, also the dissenters from today’s decision, would have us put the cart before the horse. To gain certification under Rule 23(b)(3), Amgen and the dissenters urge, Connecticut Retirement must first establish that it will win the fray. But the office of a Rule 23(b)(3) certification ruling is not to adjudicate the case; rather, it is to select the “metho[d]” best suited to adjudi­cation of the controversy “fairly and efficiently.”

Slip op., at 2-3.  With the heavy tide of anti-class decisions emanating from the U.S. Supreme Court of late, this is an important reminder that certification analysis focuses on common questions, not proof.

Recent California Supreme Court Activity

While I configured and wired a veritable recording studio, the world marched on, with the issuance of interesting appellate opinions here and elsewhere in U.S.  The California Supreme Court has been up to some interesting activity this year as well.  For instance, the recent debpulication of opinion from the Second Appeallate District, Division Eight, that seemed inconsistent with the manner in which Brinker instructed courts to evaluate class issues, at least in the wage & hour field.  And in the last few weeks the California Supreme Court's Conference events included the following item of note:

• The Court granted review in Ayala v. Antelope Valley Newspapers, Inc. (pub ord. Oct. 17, 2012), previously published at 210 Cal. App. 4th 77.  In Ayala the Court of Appeal partially reversed a trial court order denying class certification.  The wage & hour case stems from the classification of workers as independent contractors.

The grant of review in Ayala raises the question of whether Bradley v. Networkers International LLC, 211 Cal. App. 4th 1129 (2012), as modified (Jan. 8, 2013), might turn on some issue that the Supreme Court intends to resolve in Ayala.

$15 million misclassification class judgment reversed in Duran v. U.S. Bank National Association

Exemption-based misclassification cases are hard to certify.  But when you certify an overtime exemption misclassification case, try it, and win a $15 million verdict, you'd think that the hard times are behind you.  Not so fast.  In Duran v. U.S. Bank National Association (February 6, 2012), the Court of Appeal (First Appellate District, Division One) reversed that verdict, decertified the class, and sent the whole thing back down to the trial court for further consideration of how to resolve the individual break claims in light of Brinker.

The plaintiffs in the case were 260 current and former business banking officers (BBO's) who claimed they were misclassified by USB as outside sales personnel exempt from California‘s overtime laws.  The procedural history was messy.  Exemption defenses were summarily adjudicated.  The defendant moved unsuccessfully to decertify.  The trial included motions about evidentiary exclusions.  It appears from the summary that a substantial amount of evidence the defendant sought to introduce was excluded from the trial.  Significantly, a small survey was conducted and then relied upon by a statistics expert to determine class-wide liability.

The Court issued a number of significant holdings, which all revolve around the propriety of proving liability in a misclassification class action with statistical evidence, as opposed to proving damages once liability is established.  For example, the Court held that use of statistical evidence to prove liability is inconsistent with cases examining such evidence at certification:

USB claims California law precludes class-wide liability determinations based on evidence obtained from a representative sample in employment cases alleging misclassification. USB relies on several state and federal wage and hour class action cases for the proposition that surveying, sampling, and statistics are not valid methods of determining liability because representative findings can never be reasonably extrapolated to absent class members in misclassification claims given that time spent performing exempt tasks may differ between employees. While all the cases cited by USB involve rulings on motions to certify or decertify class actions, they support the conclusion that improper procedures were followed in this case.

Slip op., at 47-48.  The Court also held that statistical sampling for proof of liability is inconsistent with its Bell III decision:

The procedures we approved in Bell III are only superficially similar to the procedures utilized in the present case.  Again, in Bell III we did not have occasion to consider the use of a representative sample to determine class-wide liability, since liability was not an issue on appeal. Accordingly, the only issue we addressed was the damages calculation itself, and not whether the plaintiff employees had a right to recover damages in the first place. And our assessment was based on a record evidencing cooperation and agreement among the parties and their counsel.

Slip op., at 45.  With respect to Bell III, the Court explained that the present case suffered a number of flaws (sample too small, no test studies to set sample size, lack of randomness, and no cooperation between the parties) not found in Bell III.  The Court then said:

Fifth, the restitution award here was affected by a 43.3 percent margin of error, more than 10 percentage points above the margin of error for the double-overtime award we invalidated in Bell III. In absolute terms, the average weekly overtime hour figure could conceivably be as low as 6.72 hours per week, as opposed to the 11.86 hour figure arrived at here. While we again will not set a bright line for when a margin of error becomes so excessive as to be deemed unconstitutional, we are troubled by this result.

Slip op., at 46.

Next, the Court concluded that the exclusion of 78 sworn statements that, if admitted, would have reduced the class size by about one-third, was a prejudicial error that violated the defendant's due process right to present relevant evidence in its defense: "The evidence USB sought to introduce, if deemed persuasive, would have established that at least one-third of the class was properly classified. Thus, this evidence USB sought to introduce is unquestionably relevant and therefore admissible."  Slip op., at 55.

The Court then explained that the fatal flaw in the trial management plan was the exclusion of virtually all means by which the defendant could have defended against class-wide liability:

Fundamentally, the issue here is not just that USB was prevented from defending each individual claim but also that USB was unfairly restricted in presenting its defense to class-wide liability. With that in mind, the cases relied on by plaintiffs are inapposite. Both Long v. Trans World Airlines, Inc. (N.D.Ill. 1991) 761 F.Supp. 1320 [protective order limited discovery of information from plaintiff flight attendants to a representative sample of class members], and In re Antibiotic Antitrust Actions (S.D.N.Y. 1971) 333 F.Supp. 278 [states sought recovery for alleged overcharges in the sale of certain antibiotics], concerned the damages phase of a trial, not the liability phase.

Slip op., at 58.  So, when a defendant asserts that this case stands for the proposition that it gets to defend agasint each individual class member's claim, be sure to remind the defendant and Court that the holding actually criticized the absence of any means to mount a defense, rather than specifying the specific forms that a reasonable opportunity to defend must take:

In sum, the court erred when, in the interest of expediency, it constructed a set of ground rules that unfairly prevented USB from defending itself. These ground rules were the product of the trial court. We do not suggest that the implementation of any particular additional procedural tool would have satisfied due process. We simply hold that the court, having agreed to try this matter as a class action, denied USB the opportunity to defend itself by flatly foreclosing the admission of potentially relevant evidence.

Slip op., at 60.

The Court spent some additional time commenting on the margin of error near 44 percent, which it found to be unacceptably large to form the basis of any reasonable result.  The Court concluded its opus by finding that, under the second motion to decertify, the trial court erred by failing to decertify the class.

I think I can sum all this up by observing that (1) misclassification cases in the exemption context are difficult cases and getting tougher all the time, and (2) defendants will incorrectly claim that this decision stands for a mythical due process right that the defendant gets to challenge each class member's claim.  Can't help with one, and can't stop two, but as to two, you can point out that there are many ways to provide a defendant with a reasonable opportunity to defend against class liability.

In the "Pitts" of despair, a "Terrible" attempt to pick off a class representative fails

I remember when what was probably the first Terrible Herbst gas station opened a mere block from my home in Las Vegas.  Refilled a lot of bike tires there.  But enough about my childhood.  Terrible Herbst isn't the friendly local gas station of my youth.  Now it's just another corporate slave to the whisperings of defense counsel skilled in the dark arts.  In Pitts v. Terrible Herbst, Inc. (August 9, 2011), the Ninth Circuit considered whether a rejected offer of judgment for the full amount of a putative class representative's individual claim moots a class action complaint where the offer precedes the filing of a motion for class certification.  The Ninth Circuit concluded that it did not.

Pitts filed a hybrid FLSA and Nevada labor law class action.  The defendant removed it to federal court.  With a discovery motion pending, Terrible made a Rule 68 offer of judgment in the amount of $900.  Pitts claimed $88.00 in damages but rejected the offer.  Terrible then sought to have the matter dismissed.  The Ninth Circuit rejected this attempt to impede consideration of the class certification question:

An inherently transitory claim will certainly repeat as to the class, either because “[t]he individual could nonetheless suffer repeated [harm]” or because “it is certain that other persons similarly situated” will have the same complaint. Gerstein, 420 U.S. at 110 n.11. In such cases, the named plaintiff’s claim is “capable of repetition, yet evading review,” id., and “the ‘relation back’ doctrine is properly invoked to preserve the merits of the case for judicial resolution,” McLaughlin, 500 U.S. at 52; see also Geraghty, 445 U.S. at 398; Sosna, 419 U.S. at 402 n.11.

Slip op., at 10453.  The Court then discussed the argument that the claims in this matter were not "inherrently" transitory:

We recognize that the canonical relation-back case—such as Gerstein or McLaughlin—involves an “inherently transitory” claim and, correspondingly, “a constantly changing putative class.” Wade v. Kirkland, 118 F.3d 667, 670 (9th Cir. 1997). But we see no reason to restrict application of the relation-back doctrine only to cases involving inherently transitory claims. Where, as here, a defendant seeks to “buy off” the small individual claims of the named plaintiffs, the analogous claims of the class—though not inherently transitory—become no less transitory than inherently transitory claims. Thus, although Pitts’s claims “are not ‘inherently transitory’ as a result of being time sensitive, they are ‘acutely susceptible to mootness’ in light of [the defendant’s] tactic of ‘picking off’ lead plaintiffs with a Rule 68 offer to avoid a class action.”

Slip op., at 10454.  Interestingly, the Court essentially found that the right to certify a class was an additional right not satisfied by the Rule 68 offer, and that right could not be extinguished unless certification were denied and all appellate efforts were exhausted.

Next, the Court ruled that it was error to find that Pitts failed to timely file a motion for class certification when the trial court refused to rule on a pending discovery motion to obtain evidence necessary for certification.

Other issues raised in the appeal were not addressed by the Court once it concluded that the trial court erred in its ruling regarding the timing of certification.