On Tuesday, on remand from the U.S. Supreme Court, the Ninth Circuit held that the certification requirements set forth by the U.S. Supreme Court for a multimillion plaintiff gender discrimination class action in Dukes v. Wal-Mart Stores, 131 S. Ct. 2541 (2011), applied equally to a 200-person class of newspaper employees with wage and hour claims.
The opinion in Wang v. Chinese Daily News, Case No. 08-55483 (9th Cir. March 4, 2013) is a welcomed extension of Dukes and offers the following key insights:
The stringent interpretation of Rule 23(a)(2)’s commonality requirement in Dukes applies to mega and smaller class actions alike;
Plaintiffs who seek individual monetary relief cannot circumvent Rule 23(b)(3)’s predominance test by tacking on an injunctive relief claim and seeking certification under Rule 23(b)(2);
For wage and hour claims, an employer’s maintenance of an internal wage hour policy will not alone satisfy Rule 23(b)(3)’s predominance test if individual inquiries will make class treatment difficult or impossible;
Individual damages for class members cannot be determined by applying findings from a sample under the “Trial by Formula” method.
The decision is a positive advancement in the area of class action defense and a valuable tool for employers for obtaining denial of class certification in wage and hour actions in the future.
The Proposed Class and Procedural Background
In 2004, plaintiffs filed a class action on behalf of newspaper employees who worked in Chinese Daily News’ San Francisco and Los Angeles offices, and then plaintiffs narrowed the class definition to one office with 200 employees. Plaintiffs asserted claims under the California Labor Code relating to overtime, meal and rest breaks, itemized wage statements and penalties, and for violation of California’s Unfair Business Practices Law (Bus. & Prof. Code § 17200). Plaintiffs also pursued collective action under the Fair Labor Standards Act. The district court certified plaintiffs’ class under Rule 23(b)(2), or alternatively Rule 23(b)(3). The Ninth Circuit affirmed. Following Dukes, the Supreme Court vacated and remanded the Ninth Circuit’s decision for reconsideration.
Rule 23(a)(2) Commonality Difficult to Satisfy for Mega (1.5 Million) and Smaller (200) Classes Alike
The Court vacated its previous ruling that plaintiffs’ claims satisfied Rule 23(a)(2)’s commonality requirement. The Court reiterated the requirement from Dukes that, for Rule 23(a)(2) commonality to exist, plaintiffs must share not only common questions, but common answers as well. The Court held that, although “Plaintiffs’ claims do not depend upon establishing commonalities among 1.5 million employees and millions of discretionary employment decisions,” there were nonetheless “significant differences among the class members.” The Court remanded and instructed the district court to apply the “one stroke” standard from Dukes: whether a factfinder can resolve a dispute of fact that is central to the class members’ claims in “one stroke,” or whether commonality is defeated because additional “strokes” are required to resolved individualized issues.
Line in the Sand Drawn Between “(b)(2)” and “(b)(3)” Class Actions Under Rule 23
The Court made two key points regarding the standards for certifying (b)(2) versus (b)(3) class actions:
Plaintiffs cannot circumvent Rule 23(b)(3)’s predominance analysis by masking a class action to recover individual monetary damages as an action for injunctive relief under Rule 23(b)(2). During the en banc appeal in Dukes before the Ninth Circuit, the Court held that, although plaintiffs sought individual monetary relief, the district court could still certify a (b)(2) class because plaintiffs’ monetary claims did not predominate over their claim for injunctive relief. The Supreme Court rejected this interpretation, holding that, absent “incidental” damages, “individualized monetary claims belong in Rule 23(b)(3).” The Wang plaintiffs conceded that the district court’s previous Rule 23(b)(2) certification decision could not stand under this more stringent standard; accordingly, the Court reversed.
The Court sharpened the predominance analysis under Rule 23(b)(3) in wage and hour class actions. In remanding the case for reconsideration of whether plaintiffs’ class could be certified under Rule 23(b)(3), the Court made two pronouncements—(1) plaintiffs’ challenge to the employer’s internal wage and hour policy will not alone satisfy predominance if potential individual issues will make class treatment difficult or impossible, and (2) for California meal and rest break claims, the predominance analysis must be informed by Brinker Restaurant Corp. v. Superior Court, 273 P.3d 513 (2012). In Brinker, the California Supreme Court recognized that, while a class may be certified to address an employer’s facially unlawful wage and hour policy, it expressed doubt as to a class action’s utility to resolve individual employees’ challenges to their employer’s actions or decisions related to wage and hour issues.
The Court Rejected Use of the “Trial by Formula” Sampling Method to Prove Individual Damages on Classwide Basis
The Ninth Circuit cautioned that damages must be proven as to each individual plaintiff and disavowed the “trial by formula” method, which calculates damages based on a set of class members and then projects those damages to the entire class. The Court also acknowledged that a “trial by formula” damages calculation would improperly deny defendant the opportunity to raise affirmative defenses as to each individual plaintiff’s damages claim.