In Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), the Ninth Circuit Rule 23 predominance was defeated where many (or even most) class members “were never exposed to the allegedly misleading advertisements” (666 F.3d at 597) because the defendant subjected only a small segment of an expansive class of car buyers to misleading material as part of a “very limited” advertising campaign (id. at 595). This decision raised questions about how federal courts in the Ninth Circuit would actually evaluate UCL claims when faced with reconciling In re Tobacco II and Mazza. In Ruiz Torres v. Mercer Canyons Inc. (9th Cir. Aug. 31, 2016), a wage & hour suit in which the District Court certified a class, the Ninth Circuit analyzed Mazza in a manner demonstrating that it may be constrained in its application moving forward.Read More
While getting a class certified is often a serious fight, defeating class allegations at the demurrer stage is generally rare. But never say never. In Schermer v. Tatum (March 18, 2016), the Fourth Appellate District, Division One, affirmed a trial court ruling sustaining a demurrer to class allegations in the plaintiffs' second amended complaint (SAC). The plaintiffs brought a class action on behalf of residents who live in the 18 mobilehome parks. The plaintiffs alleged they were subjected to uniform unconscionable lease agreements and leasing practices by a collection of related defendants. The SAC involved 18 mobilehome parks allegedly owned and/or operated by two defendants (Tatums and Kaplan), and were managed through defendant Mobile Community Management Company (MCM). The plaintiffs also named as defendants the 18 "single-purpose" business entities that are each described as the owners of one of the mobilehome park in California.
The Court of Appeal began by summarizing the first amended complaint, the demurrer hearing related to it, and the SAC. And that summary is all you need to read to know where things are headed. The Court described the "highlights" of the FAC as follows:
In the FAC, plaintiffs again alleged defendants Tatum and Kaplan, through MCM, engaged in unlawful conduct at each of the 18 mobilehome parks. Specifically, they alleged defendants "charg[ed] excessive rent, pursu[ed] arbitrary evictions, and implement[ed] unreasonable polices." Plaintiffs further alleged in their FAC that defendants Tatum and Kaplan took "advantage of vulnerable prospective and current residents" including "non-[E]nglish speaking and elderly residents" who, plaintiffs claimed, were "especially susceptible" to defendants' unlawful business practices. Plaintiffs alleged defendants "most egregious practice" was the use of a "one-sided, standardized lease" agreement. Plaintiffs provided 32 examples of lease clauses that allegedly violated California's Mobilehome Residency Law (Civ. Code, § 798 et seq.; MRL).
Plaintiffs' FAC also set forth about 11 "factors" that plaintiffs alleged showed procedural unconscionability between plaintiffs and the putative class, on the one hand, and defendants, on the other. Such factors included among others "residents' poor socio-economic background" and defendants' "knowledge of residents' vulnerability to oppression." Plaintiffs also listed about 17 examples of substantive unconscionability in their FAC in connection with defendants' use of the standardized lease agreement in the 18 mobilehome parks. As before, plaintiffs' class action allegations included any person who had an ownership interest in a mobilehome in any of the 18 parks, and a senior citizen and non-English-speaking subclass.
Slip op., at 3-4. Then, discussing the hearing on the demurrer to the FAC, the Court said, "At the demurrer hearing, plaintiffs' counsel agreed with the court that plaintiffs' FAC was 'a mess' and counsel admitted they 'did a horrible job in succinctly and systematically putting forth facts that show what the [FAC] -- what the case is about and how it shows a pattern of conduct that is deserving of being treated in a class action.' " Slip op., at 4. Not looking good.
Describing the subsequently issued Order on the demurrer to the FAC, the Court set forth key parts of the trial court's ruling:
"Plaintiffs allege multiple causes of action, all of which related in some way to the Lease Agreements utilized at the Defendants['] parks. Based upon the allegations in the [FAC], it appears that some of the claims involved the alleged unconscionability of the contracts themselves, while others involve each Defendant's alleged actions in executing or enforcing the individual contracts as to individual Plaintiffs. [¶] The Court finds that multiple factual allegations predominate. Plaintiffs['] measure of damages will be unique to each park. The proposed class does not all reside at the same location or under the same circumstances. Each putative class member is/was a resident at one of the eighteen separate mobilehome parks located throughout the State of California, giving rise to individualized factual questions related to causation, liability, and damages.
"Example of the individualized issues include the remedy (determining excess rents paid at each space requires a factual showing of fair market values for rents in a particular area [at] a particular time and park-by[-]park appraisal). Further, there appear to be multiple lease agreements. Although Plaintiffs allege Defendants used a 'standardized' Lease Agreement, they attach at least five different variations of the Lease Agreement and/or Amendments to the Lease Agreement. (See Exhibits 'A,' 'B,' 'C,' 'D,' and 'E,' attached to the [FAC].)
Slip op., at 5. The trial court went on to identify additional issues, including the fact that many class members would not be able to state certain claims if they had not attempted to sell their homes, and there were no putative class representative plaintiffs for many of the mobilehome parks.
The SAC filed by the plaintiffs attempted to address many of the trial court's concerns, but a number of its allegations were found by the trial court to be conclusory assertions about defendants, and not allegations of fact. The SAC did not address damage issues that would arise, which included the fact that several of the mobilehome parks were in cities with their own rent control ordinances. The trial court was particularly concerned by the fact that each agreement at each park with each potential class member was individually negotiated and by the fact that a unique damage calculation would be required for each park and each person at each park. Moreover, the trial court took notice of the fact that many individuals were involved in their own litigation with their own park.
After discussing the procedural background, the Court made sure to note that it is undisputed that class allegations can be decided on demurrer:
It is beyond dispute that trial courts are permitted to decide the issue of class certification on demurrer. (Tucker, supra, 208 Cal.App.4th at p. 212; see Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 440 [noting the issue is "settled" that courts are authorized to "weed out" legally meritless class action suits prior to certification by demurrer or pretrial motion].) A trial court may sustain a demurrer to class action allegations where " 'it concludes as a matter of law that, assuming the truth of the factual allegations in the complaint, there is no reasonable possibility that the requirements for class certification will be satisfied. [Citations.]' [Citations.]" (Tucker, at p. 211, italics added; see Canon U.S.A., Inc. v. Superior Court (1998) 68 Cal.App.4th 1, 5 [noting that when the "invalidity of the class allegations is revealed on the face of the complaint, and/or by matters subject to judicial notice, the class issue may be properly disposed of by demurrer or motion to strike," and noting that "[i]n such circumstances, there is no need to incur the expense of an evidentiary hearing or class-related discovery"].)
Slip op., at 14. Much of the discussion that follows is unsurprising, given the discussion of the trial court's analysis. The Court did wade into the murky waters of attempting to categorize an allegation as either an "ultimate fact" or a "conclusion":
We conclude plaintiffs' allegations in their SAC—which were noticeably absent from their original complaint—that defendants implemented a uniform policy and procedure in each and every lease transaction with plaintiffs and the putative class members over a four-year period (i.e., the proposed class period), in each of the 18 mobilehome parks owned and/or operated by Tatum and Kaplan, are not properly admitted for purposes of demurrer because such allegations are not ultimate facts but rather merely contentions and/or improper factual conclusions.
Slip op., at 17-18. In my experience, this is very much an eye-of-the-beholder call that deserves a clarifying opinion with more objective guidance as to how to distinguish between the two.
In any event, the Court agreed with the trial court's assessments, finding, in particular, that the individual nature of the transactions was such that each course of dealing is unique, and damages, because of different circumstances, park locations, and local ordinances, are also unique to each potential class member. The Court declined to grant leave to amend to the plaintiffs, agreeing with the trial court that the problems were insurmountable. The lesson here is that overreach can be fatal. It might have been more workable to describe uniform leasing practices at one mobilehome park and seek class relief for the aspects of the transaction that were common to all of the residents, while, at the same time, addressing how damages will be calculated and distributed.
The "separate location" argument seems better suited to this sort of consumer circumstance than it is in the wage & hour context, where defendants nevertheless try the "each of our stores is unique and different" argument, as if they have no uniform policies regulating employees and allow each store to run their own affairs like the wild West. Hey, at least this Court cited Brinker (but it felt like an ironic cite to me).
As I fill the backlog, we have yet another big decision from the California Supreme Court. In Ayala v. Antelope Valley Newspapers, 59 Cal. 4th 522 (June 30, 2014), the Supreme Court examined how the question of certification should be answered in the context of misclassification of independent contractors. Newspaper carriers, classified as independent contractors, filed suit to obtain remedies available to employees under California’s wage & hour laws. Plaintiffs moved for class certification. The trial court concluded the case could not proceed as a class action, holding that on the critical question whether plaintiffs and the class were employees, plaintiffs had not shown common questions predominate. The trial court held that to determine employee status for the class would necessitate numerous unmanageable individual inquiries into the extent to which each carrier was afforded discretion in his or her work. The Court of Appeal disagreed in part, holding that the trial court had misunderstood the nature of the inquiries called for, and remanded for reconsideration of the class certification motion as to five of the complaint’s claims.
The Supreme Court affirmed the Court of Appeal. Beginning with the test for employee status as the key issue for evaluating the commonality issue, the Court said:
We begin by identifying the principal legal issues and examining the substantive law that will govern. In doing so, we do not seek to resolve those issues. Rather, the question at this stage is whether the operative legal principles, as applied to the facts of the case, render the claims susceptible to resolution on a common basis. (Brinker, supra, 53 Cal.4th at pp. 1023–1025, 139 Cal.Rptr.3d 315, 273 P.3d 513; Sav–On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 327, 17 Cal.Rptr.3d 906, 96 P.3d 194 [the focus “is on what type of questions—common or individual—are likely to arise in the action, rather than on the merits of the case”].)
The trial court and Court of Appeal correctly recognized as the central legal issue whether putative class members are employees for purposes of the provisions under which they sue. If they are employees, Antelope Valley owes them various duties that it may not have fulfilled; if they are not, no liability can attach. In turn, whether putative class members' employee status can be commonly resolved hinges on the governing test for employment.
Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522, 530 (2014). The Court observed that the test relied upon in the Courts below was the Borello common law test. After considering the need to examine other employment tests, the Court concluded that the case could be resolved by focusing on the common law test exclusively. The Court then restated the essentials of the common law test for employment:
Under the common law, “ ‘[t]he principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.’ ” (Borello, supra, 48 Cal.3d at p. 350, 256 Cal.Rptr. 543, 769 P.2d 399, quoting Tieberg v. Unemployment Ins. App. Bd. (1970) 2 Cal.3d 943, 946, 88 Cal.Rptr. 175, 471 P.2d 975; accord, Empire Star Mines Co. v. Cal. Emp. Com. (1946) 28 Cal.2d 33, 43, 168 P.2d 686.) What matters is whether the hirer “retains all necessary control” over its operations. (Borello, at p. 357, 256 Cal.Rptr. 543, 769 P.2d 399.) “ ‘[T]he fact that a certain amount of freedom of action is inherent in the nature of the work does not change the character of the employment where the employer has general supervision and control over it.’ ” (Burlingham v. Gray (1943) 22 Cal.2d 87, 100, 137 P.2d 9; see Toyota Motor Sales U.S.A., Inc. v. Superior Court (1990) 220 Cal.App.3d 864, 876, 269 Cal.Rptr. 647; Grant v. Woods (1977) 71 Cal.App.3d 647, 653, 139 Cal.Rptr. 533.) Perhaps the strongest evidence of the right to control is whether the hirer can discharge the worker without cause, because “[t]he power of the principal to terminate the services of the agent gives him the means of controlling the agent's activities.” (Malloy v. Fong (1951) 37 Cal.2d 356, 370, 232 P.2d 241; see Borello, at p. 350, 256 Cal.Rptr. 543, 769 P.2d 399; Kowalski v. Shell Oil Co. (1979) 23 Cal.3d 168, 177, 151 Cal.Rptr. 671, 588 P.2d 811; Isenberg v. California Emp. Stab. Com. (1947) 30 Cal.2d 34, 39, 180 P.2d 11; Burlingham, at pp. 99–100, 137 P.2d 9.)
Ayala, 59 Cal. 4th at 531. The Court added an additional, significant observation to this formulation, observing, “The worker's corresponding right to leave is similarly relevant: “ ‘An employee may quit, but an independent contractor is legally obligated to complete his contract.’ ” (Perguica v. Ind. Acc. Com. (1947) 29 Cal.2d 857, 860, 179 P.2d 812.)” Ayala, 59 Cal. 4th at 531 n. 2. The Court then listed the secondary factors that a court may consider, including: (a) whether the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.
Next the Court turned to the question of whether certification should have been granted in this matter. Before doing so, however, the Court framed the core question, right to control, at issue in the case:
Significantly, what matters under the common law is not how much control a hirer exercises, but how much control the hirer retains the right to exercise. (Perguica v. Ind. Acc. Com., supra, 29 Cal.2d at pp. 859–860, 179 P.2d 812 [“The existence of such right of control, and not the extent of its exercise, gives rise to the employer-employee relationship.”]; Empire Star Mines Co. v. Cal. Emp. Com., supra, 28 Cal.2d at p. 43, 168 P.2d 686 [“If the employer has the authority to exercise complete control, whether or not that right is exercised with respect to all details, an employer-employee relationship exists.”]; Industrial Ind. Exch. v. Ind. Acc. Com. (1945) 26 Cal.2d 130, 135, 156 P.2d 926 [“The right to control and direct the activities of the alleged employee or the manner and method in which the work is performed, whether exercised or not, gives rise to the employment relationship.”]; S.A. Gerrard Co. v. Industrial Acc. Com. (1941) 17 Cal.2d 411, 414, 110 P.2d 377 [“the right to control, rather than the amount of control which was exercised, is the determinative factor”]; Hillen v. Industrial Acc. Com. (1926) 199 Cal. 577, 581–582, 250 P. 570 [“It is not a question of interference, or non-interference, not a question of whether there have been suggestions, or even orders, as to the conduct of the work; but a question of the right to act, as distinguished from the act itself or the failure to act.”].) Whether a right of control exists may be measured by asking “ ‘ “whether or not, if instructions were given, they would have to be obeyed” ’ ” on pain of at-will “ ‘ “discharge[ ] for disobedience.” ’ ” (Toyota Motor Sales U.S.A., Inc. v. Superior Court, supra, 220 Cal.App.3d at p. 875, 269 Cal.Rptr. 647.)
Ayala, 59 Cal. 4th at 533. Applying this test to the case before it, the Court observed that:
at the certification stage, the relevant inquiry is not what degree of control Antelope Valley retained over the manner and means of its papers' delivery. It is, instead, a question one step further removed: Is Antelope Valley's right of control over its carriers, whether great or small, sufficiently uniform to permit classwide assessment? That is, is there a common way to show Antelope Valley possessed essentially the same legal right of control with respect to each of its carriers? Alternatively, did its rights vary substantially, such that it might subject some carriers to extensive control as to how they delivered, subject to firing at will, while as to others it had few rights and could not have directed their manner of delivery even had it wanted, with no common proof able to capture these differences?
Ayala, 59 Cal. 4th at 533-34. The Court concluded that the trial court lost sight of these questions in its analysis:
The trial court lost sight of this question. Its order reveals the denial of certification ultimately rested on two related determinations: (1) the record reflected considerable variation in the degree to which Antelope Valley exercised control over its carriers; and (2) the putative class as a whole was not subject to pervasive control as to the manner and means of delivering papers. Neither of these considerations resolves the relevant inquiry. Whether Antelope Valley varied in how it exercised control does not answer whether there were variations in its underlying right to exercise that control that could not be managed by the trial court. Likewise, the scope of Antelope Valley's right to control the work does not in itself determine whether that right is amenable to common proof.
Ayala, 59 Cal. 4th at 534. The Court discussed briefly the evidence available to the Court, focusing heavily on the contract between the newspaper carriers and the defendant. The Court found that even variations in the actual degree of control over different carriers was likely irrelevant if the right to control them all was effectively identical:
[T]he existence of variations in the extent to which a hirer exercises control does not necessarily show variation in the extent to which the hirer possesses a right of control, or that the trial court would find any such variation unmanageable. That a hirer may monitor one hiree closely and another less so, or enforce unevenly a contractual right to dictate the containers in which its product is delivered, does not necessarily demonstrate that the hirer could not, if it chose, monitor or control the work of all its hirees equally. (See Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1, 13–14, 64 Cal.Rptr.3d 327 [recognizing that how a hirer exercised control over a particular hiree might show, not the hirer's differential control of that hiree, but the extent of its common right to control all its hirees].) For class certification under the common law test, the key question is whether there is evidence a hirer possessed different rights to control with regard to its various hirees, such that individual mini-trials would be required. Did Antelope Valley, notwithstanding the form contract it entered with all carriers, actually have different rights with respect to each that would necessitate mini-trials?
Ayala, 59 Cal. 4th at 535-36. The Court then explained the frequent error made in the certification analysis of claims based on independent contractor misclassification:
Certification of class claims based on the misclassification of common law employees as independent contractors generally does not depend upon deciding the actual scope of a hirer's right of control over its hirees. The relevant question is whether the scope of the right of control, whatever it might be, is susceptible to classwide proof. Bypassing that question, the trial court instead proceeded to the merits. In so doing, the court made the same mistake others have when deciding whether to certify claims predicated on common law employee status, “focus[ing] too much on the substantive issue of the defendant's right to control its newspaper deliverers, instead of whether that question could be decided using common proof.” (Dalton v. Lee Publications, supra, 270 F.R.D. at p. 564.) Moreover, by purporting to resolve on a classwide basis the scope of Antelope Valley's right to control its carriers, the trial court contradicted its own conclusion, that classwide assessment of Antelope Valley's right to control is infeasible.
Ayala, 59 Cal. 4th at 537. The Court concluded by noting that many of the secondary factors must also be evaluated correctly to determine if common proof will adequately determine the secondary factor in question:
Preliminarily, we caution that courts assessing these secondary factors should take care to correctly identify the relevant considerations. Here, for example, the trial court noted variation in the “place of work.” The inquiry that sheds light on a hiree's common law employee status, however, is into who provides the place of work, the hirer or hiree (Borello, supra, 48 Cal.3d at p. 351, 256 Cal.Rptr. 543, 769 P.2d 399; Rest.3d Agency, § 7.07, com. f, p. 211; Rest.2d Agency, § 220, subd. (2)(e)), and thus the relevant inquiry is whether there is variation in who provides facilities. That carriers could pick up papers at any of several Antelope Valley warehouses or drop locations, as Antelope Valley argued, does not show variation in the underlying secondary factor.
Ayala, 59 Cal. 4th at 538.
The Court remanded with instructions to consider the certification question in light of the Court’s guidance.
It is a bit belated, but I'm getting some write-ups of the big cases up for your reading pleasure (or agony). First up is Duran v. U.S. Bank National Association (May 29, 2014). Loan officers for U.S. Bank National Association (USB) sued for unpaid overtime, claiming they had been misclassified as exempt employees under the outside salesperson exemption. Plaintiffs moved to certify the case as a class action. Plaintiffs provided declarations from 34 current and former putative class members, all stating that they worked overtime hours and spent less than half of their workday engaged in sales-related activities outside their branch office. USB argued that plaintiffs could not establish a predominance of common issues or that the class action device was superior to other methods of adjudication. USB filed declarations from 83 putative class members, 75 of whom said they usually spent more than 50 percent of their workday engaged in outside sales. USB also submitted deposition testimony from the four former class representatives stating that they regularly worked more than half the day outside the office. The Court certified the class of 260 individuals.
The trial court then devised a plan to determine the extent of USB’s liability to all class members by extrapolating from a random sample. After considering competing proposals, the court expressed concern about the potential for biased survey results and proposed an alternative of its own devising. The court opted to select a random sample of 20 class members to testify at trial. A decertification motion was denied. The court later ruled on a key motion in limine, denying USB the ability to introduce any testimony or declarations from class members or other loan officers not in the random sample group.
Phase one of the bench trial lasted 40 court days. The two named plaintiffs and 19 of the 20 other RWG members testified. USB called several corporate witnesses and the direct supervisors of some of the RWG witnesses.
In anticipation of phase two, plaintiffs moved to amend the declaration of their expert, Jon Krosnick, to permit trial testimony about the results of a telephone survey Krosnick had conducted of class members’ work hours. The court allowed the amendment. USB moved to exclude the survey evidence. In opposition, plaintiffs filed a declaration from their statistics expert, Richard Drogin, whon opined that phase one findings of liability and average weekly hours of unpaid overtime could be “reliably projected to the whole class” because they were based on a random sample. Drogin calculated a weighted average of overtime for the RWG at 11.87 hours per week, with a margin of error of plus or minus 5.14 hours at a 95 percent confidence interval. The relative margin of error for the overtime estimate was plus or minus 43.3 percent. The Court then concluded USB did not carry its burden of proof on the outside salesperson exemption. Based primarily on testimony from RWG witnesses, the court ruled that the entire class employed by USB was misclassified as exempt, and all class members were owed overtime in amounts to be determined in phase two of the trial.
During the damages phase, USB’s statistician testified that it was statistically possible that 13 percent of the class was properly classified as exempt. He calculated that up to 14 percent of the class, or 36 members, could have been properly classified as exempt.
Nevertheless, the court calculated the total amount of overtime restitution owed to the class at $8,953,832. With prejudgment interest, the total award as of May 15, 2009, came to $14,959,565. The impact of a 14 percent error on the judgment total would have been approximately $2 million. On appeal, the Court of appeal ordered the class decertified and reversed the judgment. A petition for review was then granted.
The Supreme Court began its discussion by reviewing the outside sales person exemption and how the exemption test interacts with class proof:
We have observed that some common questions about the exemption “are likely to prove susceptible of common proof” in a class action. (Sav-On, supra, 34 Cal.4th at p. 337.) Job requirements and employer expectations of how duties are to be performed may often be established by evidence relating to a group as a whole. (Ramirez, supra, 20 Cal.4th at p. 802.) But litigation of the outside salesperson exemption has the obvious potential to generate individual issues because the primary considerations are how and where the employee actually spends his or her workday. (Sav-On, at pp. 336-337; Ramirez, at p. 802.) Of course, the questions of actual performance and employer expectations can be intertwined.
Slip op., at 21. The Court noted that, while predominance “requires a determination that group, rather than individual, issues predominate,” that does not “preclude the consideration of individual issues at trial when those issues legitimately touch upon relevant aspects of the case being litigated.” Slip op., at 22. The Court then scrutinized the unique manageability issues inherent in the affirmative defenses likely to arise in misclassification cases:
In her concurring opinion in Brinker, Justice Werdegar drew an instructive distinction between the types of affirmative defenses that can undermine manageability: “For purposes of class action manageability, a defense that hinges liability vel non on consideration of numerous intricately detailed factual questions, as is sometimes the case in misclassification suits, is different from a defense that raises only one or a few questions and that operates not to extinguish the defendant’s liability but only to diminish the amount of a given plaintiff’s recovery.” (Brinker, supra, 53 Cal.4th at p. 1054 (conc. opn. of Werdegar, J.), fn. omitted.) Defenses that raise individual questions about the calculation of damages generally do not defeat certification. (Sav-On, supra, 34 Cal.4th at p. 334.) However, a defense in which liability itself is predicated on factual questions specific to individual claimants poses a much greater challenge to manageability.
Slip op., at 25. The Court then observed that many courts have been reluctant to certify misclassification cases unless uniform policies or practices violate wage and hour laws:
Unless an employer’s uniform policy or consistent practice violates wage and hour laws (see, e.g., Brinker, supra, 53 Cal.4th at p. 1033), California courts have been reluctant to certify class actions alleging misclassification. (E.g., Arenas v. El Torito Restaurants, Inc. (2010) 183 Cal.App.4th 723, 734; Dunbar v. Albertson’s, Inc., supra, 141 Cal.App.4th 1422, 1431; see also Soderstedt v. CBIZ Southern California, LLC (2011) 197 Cal.App.4th 133, 153-154 [certification denied, despite employer’s uniform policies, due to variations in how the policies were implemented with different employees].)
However, individual issues will not necessarily overwhelm common issues when a case involves exemptions premised on how employees spend the workday. In Sav-On, supra, 34 Cal.4th 319, for example, we upheld certification of an overtime class action based on a showing that all plaintiffs performed jobs that were highly standardized. As a result, class members performed essentially the same tasks, most of which were nonexempt as a matter of law. (Id. at pp. 327-328.) Further, the defendant’s corporate policy required all class members to work overtime. (Id. at p. 327.) Where standardized job duties or other policies result in employees uniformly spending most of their time on nonexempt work, class treatment may be appropriate even if the case involves an exemption that typically entails fact-specific individual inquiries.
Slip op., at 25-26. In this matter, the Court concluded that the trial court did not adequately manage individual issues when it essentially precluded litigation of individual issues:
The primary consideration in a misclassification case pertains to “the realistic requirements of the job.” (Ramirez, supra, 20 Cal.4th at p. 802.) The trial court ultimately made detailed findings to the effect that the BBO position was essentially a telemarketing job, most easily performed in the office. However, at the certification stage, it should have been apparent that litigation of the outside salesperson defense would also involve significant inquiry into how each of the class’s 260 members “actually spen[t] his or her time.” (Ibid.)
Slip op., at 28. Thus, it was the failure to manage individualized issues, rather than the predominance of common issues that the Court found to be a fatal flaw in the management of the case:
USB’s exemption defense raised a host of individual issues. While common issues among class members may have been sufficient to satisfy the predominance prong for certification, the trial court also had to determine that these individual issues could be effectively managed in the ensuing litigation. (See Brinker, supra, 53 Cal.4th at p. 1054 (conc. opn. of Werdegar, J.); Sav-On, supra, 34 Cal.4th at p. 334.) Here, the certification order was necessarily provisional in that it was subject to development of a trial plan that would manage the individual issues surrounding the outside salesperson exemption.
In general, when a trial plan incorporates representative testimony and random sampling, a preliminary assessment should be done to determine the level of variability in the class. (See post, at p. 40.) If the variability is too great, individual issues are more likely to swamp common ones and render the class action unmanageable. No such assessment was done here.
Slip op., at 28. When considering the impact of Duran, it is imperative to emphasize that the Court did not overturn the predominance finding at the time of certification. Rather, the Court found that the subsequent trial plan was an inadequate method of managing individualized issues. Related to that finding, the Court held that the trial management inappropriately abridged the right to assert affirmative defenses:
While class action defendants may not have an unfettered right to present individualized evidence in support of a defense, our precedents make clear that a class action trial management plan may not foreclose the litigation of relevant affirmative defenses, even when these defenses turn on individual questions.
Slip op., at 30. Here, too, plaintiffs must be alert to overreach in the characterization of Duran by defendants. Duran does not promise an unfettered right to force the trial of every affirmative defense as to every class member. The trial decision in Duran, however, simply cannot be supported with any conviction:
The court’s decision to extrapolate classwide liability from a small sample, and its refusal to permit any inquiries or evidence about the work habits of BBOs outside the sample group, deprived USB of the ability to litigate its exemption defense. USB repeatedly submitted sworn declarations from 75 class members stating that they worked more than half their time outside the office. This evidence suggested that work habits among BBOs were not uniform and that nearly one-third of the class may have been properly classified as exempt and lacking any valid claim against USB.
Slip op., at 31. The Court rejected analogies to disparate treatment discrimination cases, where individual treatment is of little relevance and aggregate group treatment is the singular question.
The Court did not foreclose class proof in misclassification cases, saying only that it would be appropriate in instances where common proof of treatment or practices is compelling:
This is not to say that an employer’s liability for misclassification may never be decided on a classwide basis. A class action trial may determine that an employer is liable to an entire class for misclassification if it is shown that the employer had a consistently applied policy or uniform job requirements and expectations contrary to a Labor Code exemption, or if it knowingly encouraged a uniform de facto practice inconsistent with the exemption. (See, e.g., Bell, supra, 115 Cal.App.4th at p. 743.) In such a case, the evidence for uniformity among class members would be strong, and common proof would be sufficient to call for the employer to defend its claimed exemption.
Slip op., at 34-35. Next, the Court discussed statistical evidence. It began by noting, “Questions about the use of statistical evidence to prove classwide liability and damages are far from settled.” Slip op., at 35. The Court recognized the widely divergent opinions on the use of statistical evidence:
It is an open question, hotly contested among the parties and amici curiae, whether statistical sampling can legitimately be used to prove a defendant’s liability to absent class members. The question has arisen in numerous contexts, ranging from mass torts (e.g., Cimino v. Raymark Industries, Inc. (5th Cir. 1998) 151 F.3d 297, 319-320) to employment discrimination (e.g., Wal-Mart Stores, Inc. v. Dukes, supra, 564 U.S. at p. __ [131 S.Ct. at pp. 2560-2561]). In the wage and hour context, recent decisions from federal district courts have disagreed about whether statistical sampling may be used to prove liability.
Slip op., at 36-37. The Court then discussed Bell, noting that the “statistical evidence in Bell was heard only after classwide liability had been established.” Slip op. at 37. The Court concluded its general assessment of statistical models for proof of liability by noting that no general rule is necessary:
We need not reach a sweeping conclusion as to whether or when sampling should be available as a tool for proving liability in a class action. It suffices to note that any class action trial plan, including those involving statistical methods of proof, must allow the defendant to litigate its affirmative defenses. If a defense depends upon questions individual to each class member, the statistical model must be designed to accommodate these case-specific deviations.
Slip op., at 38. The Court expressly noted that the Mt. Clemens use of statistical evidence to calculate damages in overtime pay cases, while well accepted by courts, did not provide a sound rationale for accepting too much error in the liability phase of a misclassification case.
The Court then discussed errors in the Court’s statistical methodology, noting that (1) the sample size was too small, (2) the sample was not random, suffering from non-response bias and self-selection bias, (3) the 43 percent margin of error was far too large, (4) the response rate was poor, (5) measurement errors were likely, and (6) the methodology differed significantly from Bell, where two experts worked together to determine a reliable sampling methodology.
Concurring in the opinion, Justice Liu authored a concurrence that agreed with the conclusion that the trial court’s statistical approach was hopelessly flawed but questioned whether enough guidance had been provided for future misclassification class actions. First, with respect to the outside sales exemption in California, Justice Liu said:
[I]n recognizing that California’s definition of an outside salesperson is quantitative in nature, Ramirez did not say that the test boils down to whether a particular employee actually spends more than 50 percent of his or her working hours on outside sales. Instead, the ultimate question is: what are “the realistic requirements of the job”?
Slip op. conc., at 4. Justice Liu then explained how both aggregate evidence and individualized evidence should be considered to address the misclassification question:
[N]either an aggregate method of proof (like sampling or representative witness testimony) nor individualized evidence (like a declaration) is necessarily dispositive when the ultimate issue at trial is to determine “the employer’s realistic expectations” or “the realistic requirements of the job.” (Ramirez, supra, 20 Cal.4th at p. 802.) The two types of evidence must be considered and weighed alongside each other, and more broadly, they must be considered and weighed together with the full range of evidence bearing on the ultimate issue, including the employer’s job description, company policies, industry customs, and testimony of supervisors or managers who monitored, evaluated, or otherwise set expectations for employees in the class. We entrust our trial courts with the task of weighing such multidimensional evidence, and their judgments will be sustained if supported by substantial evidence.
Slip op. conc., at 10. Justice Liu concluded by observing that the trial court was correct as to how it framed the certification question:
Today’s opinion properly identifies the shortcomings of the representative witness group in this case and the trial court’s failure to give due consideration to the individualized evidence that U.S. Bank National Association (USB) sought to introduce in its defense. But it is important to note that the trial court focused on the right question on the merits: What were the realistic requirements of the BBO position?
Slip op. conc., at 11. There is little doubt that Duran will be oversold as a bar on all forms of aggregate proof in class actions. The only remedy will be to present a thorough analysis of what Duran does and does not stand for in misclassification cases and the greater class certification context.
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.
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.)
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...
When it comes to certification, you can fix almost any problem other than commonality (community of interest). Inadequate representative? Get a new one. Problem with inexperienced class counsel? Co-counsel. Numerosity is not really amenable to correction, but most of the time firms just pass on the tiny classes. But commonality, there's where the rubber meets the road. In Hendelman
v. Los Altos Apartments, L.P. (Jul. 22, 2013; pub. ord.
Aug. 20, 2013), the Court of Appeal (Second Appellate District, Division Three) affirmed a trial court order denying plaintiffs' motion for class certificaiton for lack of ascertainability, community of interest, and superiority. The bulk of the Court of Appeal opinion addresses the commonality-related failings.
The Court first held that the warranty of habitability claim was not suitable for resolution through common proof:
[T]he mere “existence of a prohibited (uninhabitable) condition or other noncompliance with applicable code standards does not necessarily constitute a breach of the warranty of habitability.” (Friedman et al., Cal. Practice Guide: Landlord-Tenant (The Rutter Group 2012) § 3:39, p. 3-13, citing Green v. Superior Court, supra, 10 Cal.3d at pp. 637-638.) “Whether the defect or code noncompliance is ‘substantial’ (and thus a cognizable breach) or ‘de minimis’ (no actionable breach) is determined on a case-by-case basis.” (Friedman et al., supra, § 3:40, p. 3-13.) “In considering the materiality of an alleged breach, both the seriousness of the claimed defect and the length of time for which it persists are relevant factors. Minor housing code violations standing alone which do not affect habitability must be considered de minimis and will not entitle the tenant to reduction in rent; and likewise, the violation must be relevant and affect the . . . common areas which [the tenant] uses.” (Hinson v. Delis (1972) 26 Cal.App.3d 62, 70, disapproved on other grounds by Knight v. Hallsthammar (1981) 29 Cal.3d 46, 55, fn. 7.) Stated otherwise, whether a particular defect or violation of a housing code constitutes a breach of the implied warranty of habitability depends on the severity and duration of the defect or violation. Breach is a rebuttable presumption affecting the burden of producing evidence. (Friedman et al., supra, §§ 3:46 to 3:47, pp. 3-14 to 3-15.)
Slip op., at 11. The
trial court concluded that even the code violations impacting all tenants did
so differently and to different degrees, and the Court of Appeal, giving
deference to the trial court, agreed.
One question raised by this decision is whether variation in entitlement
to damage tainted the analysis as to whether liability could be shown through
common proof, especially where strict liability is imposed on the landlord. At times the Court seems to conflate proof of liability with nominal damages.
The Court then found that the claim for increased rent injected the same individualized questions about whether services to each tenant were reduced in any substantial manner that amounted to an implied increase in rent.
As to the retaliation claim, the Court found that no representative could state that claim, either due to statute of limitations problems or a failure to have been a tenant during the relevant time period. And as with the habitability claim, the Court agreed that a nuisance action depended heavily on facts unique to each tenant, defeating commonality.
The Court declined to consider the many proposed adjustments or amendments to claims or the class definition on Appeal, finding that such arguments are, in the first instance, matters for the trial court.
Still playing catch-up. Today's edition of blog from the past concerns the Automobile Club of Southern California, an organization that inspires mixed feelings in me. On the one hand, they do provide what I consider to be excellent insurance services. But I can't help but feel that there is a dark underbelly at AAA of SoCal. Some of that underbelly was challenged but escaped unscathed in Thompson
v. Automobile Club of Southern California (pub. Ord. June 27, 2013), in which the Court of Appeal (Fourth Appellate District, Division Three) affirmed the trial court's denial of class certification in a case alleging claims based on the backdating of the membership renewals when the renewal is late.
The plaintiff specifically challenged the practice of “backdating” late renewals to the member’s original expiration date if the renewal occurs within 95 days. The plaintiff contended that this practice resulted in late-renewing members receiving less than a full year of services. The Auto Club argued that the 95-day period is a “grace period” and that members are generally permitted to continue receiving services, particularly during the first 31 days, and saves members the $20 fee to start a new membership. The plaintiff moved for class certification. The trial court denied the motion, finding that the class members could not be ascertained and that individual questions predominated.
With respect to the factual issues surrounding class certification, we afford the trial court “ ‘great discretion in granting or denying certification.’ ” (In re Tobacco II Cases (2009) 46 Cal.4th 298, 311.) The trial court’s ruling will be reversed only if a “ ‘manifest abuse of discretion’ ” is present. (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1022.) “ ‘A certification order generally will not be disturbed unless (1) it is unsupported by substantial evidence, (2) it rests on improper criteria, or (3) it rests on erroneous legal assumptions. [Citations.]’ [Citations.]” (Ibid.)
Slip op., at 6. The Court said, “ ‘We may not reverse, however, simply because some of the court’s reasoning was faulty, so long as any of the stated reasons are sufficient to justify the order. [Citation.]’ (Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 843-844.)” Slip op., at 6-7.
The Court then examined the bases of the trial court’s decision. Looking first at the trial court’s ascertainability finding, the Court concluded that the class definition was significantly overbroad, and thus not ascertainable from the available records:
If putative class members either received benefits during the delinquency period, were not damaged as a result of the renewal policy, or renewed after the Auto Club’s membership policy was disclosed, their ability to recover is called into serious question. If class members received benefits during the delinquency period or they were told about the Auto Club’s renewal practices, they cannot maintain a cause of action under the UCL. If they were not economically damaged, they cannot recover on a breach of contract, under the CLRA, or through an unjust enrichment claim. (See Civ. Code., § 1780, subd. (a); Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388; Lectrodryer v. SeoulBank (2000) 77 Cal.App.4th 723, 726.)
Slip op., at 11. As it so happens, I disagree that the ability to identify the class from available records is the touchstone of ascertainability. Certainly that is one very useful way, but the purpose of a class definition is to allow a potential class member to determine when reading the definition whether they are a member of the class. Consider consumer class actions involving retail transactions. Often, there is no way to know the identity of purchasers of a product; but the purchasers know. The notion that the class can only be ascertained if they are identified in available records is simply an invitation to maintain shoddy records and a strangely narrow view of what it means to have an ascertainable class. This portion of the opinion is horse hockey.
Anyhow, the Court of Appeal then agreed that the same issues impacting the ability to identify the class (under the Court's narrow view of ascertainability) presented individualized issues that predominated over common questions:
The trial court found that individual issues predominate: “(A) Individual issues predominate regarding whether a putative class member is entitled to recover on any of Plaintiff’s causes of action. This is because, as stated above, there were members who suffered no injury because they (i) received services during their delinquency, (ii) had the Auto Club’s renewal policy explicitly disclosed to them, and/or (iii) were economically better off under the Auto Club’s system of renewal than they would have been if they had begun new memberships on the date of payment and paid the $20 new enrollment fee. Determining whether a member falls into any of these categories and would therefore not be entitled to recover from the Auto Club on any of Plaintiff's theories of liability, can only be done on a case-by-case basis.” The court went on to explain that essentially the same reasons applied to each cause of action.
Slip op., at 13-14. The Court concluded by finding that the arguments concerning typicality and superiority were not significant because of the substantial problems with ascertainability and commonality. The decision presents an example of the potential for a serious entanglement of merits questions with certification issues when the Court considered the viability of the plaintiff’s theory.
I overlooked last week's Conference Results from the California Supreme Court until today, but better late than never. On March 20, 2013, the Court denied review in Bradley v. Networkers International (December 12, 2012). See earlier post here. This is a significant result, as the case applies Brinker to a certification analysis in the context of whether workers were misclassified as independent contractors.
The long-running saga of Wang v. Chinese Daily News, Inc. took its latest turn today, when the Ninth Circuit, on remand from the United States Supreme Court, issued the most decision in Wang v. Chinese Daily News, Inc. (9th Cir. Mar. 4, 2013). The Ninth Circuit reversed various aspects of the District Court's certification order after applying Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) to the District Court's decision.
First, the Court vacated the District Court's Rule 23(a)(2) analysis and directed the District Court to conduct the rigorous analysis required by Wal-Mart:
We vacate the district court’s Rule 23(a)(2) commonality finding and remand for reconsideration in light of Wal-Mart. On remand, the district court must determine whether the claims of the proposed class “depend upon a common contention . . . of such a nature that it is capable of classwide resolution — which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” Wal-Mart, 131 S. Ct. at 2551. Plaintiffs must show “significant proof that [CDN] operated under a general policy of [violating California labor laws].” Ellis, 657 F.3d at 983 (quoting Wal-Mart, 131 S. Ct. at 2553 (alteration omitted)). However, plaintiffs need not show that every question in the case, or even a preponderance of questions, is capable of classwide resolution. So long as there is “even a single common question,” a would-be class can satisfy the commonality requirement of Rule 23(a)(2).
Slip op., at 10.
Next, the Court quickly concluded that the monetary relief sought by the plaintiffs was not "incidental." The Court reversed the District Court's order certifying the class under Rule 23(b)(2).
Finally, the Court remanded for further consideration as to whether certification was warranted under Rule 23(b)(3):
For two reasons, we remand to the district court for reconsideration of the propriety of class certification under Rule 23(b)(3). First, the district court’s conclusion that common questions predominate in this case rested on the fact, considered largely in isolation, that plaintiffs are challenging CDN’s uniform policy of classifying all reporters and account executives as exempt employees. See Wang, 231 F.R.D. at 612–13. In two recent decisions, we criticized the nature of the district court’s Rule 23(b)(3) predominance inquiry in this case. See In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 958–59 (9th Cir. 2009); Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 944–48 & n.14 (9th Cir. 2009). We observed that the district court in this case “essentially create[d] a presumption that class certification is proper when an employer’s internal exemption policies are applied uniformly to the employees.” In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d at 958. We wrote that such a presumption “disregards the existence of other potential individual issues that may make class treatment difficult if not impossible.” Id. The main concern of the predominance inquiry under Rule 23(b)(3) is “the balance between individual and common issues.” Id. at 959. “[A] district court abuses its discretion in relying on an internal uniform exemption policy to the near exclusion of other factors relevant to the predominance inquiry.” Vinole, 571 F.3d at 946.
Slip op., at 13. The Court also noted that Brinker impacted the analysis of meal period claims and required evaluation by the District Court.