Rebuking “Trial by Formula,” Federal Court Decertifies Rule 23(b)(3) Class Action

In Stiller v. Costco Wholesale Corp., No. 3:09-cv-2473-GPC-BGS, Plaintiffs Eric Stiller and Joseph Moro alleged that Costco’s loss-prevention closing procedures effectively “forced” employees to work off-the clock without getting paid because they were required to remain on-site after they had clocked out of their shifts to go through security screenings. In December 2010, the district court certified a California-wide class finding that common questions predominated because Costco employed a centralized policy which applied to all employees. However, on April 15, the Court decertified the class finding that the purportedly “common” question of whether Costco had a “de facto policy of detaining employees in warehouses during closing procedures without pay” would only determine whether “employees were sometimes detained without pay as a result of the alleged policy.” Costco’s liability would still hinge on individualized determinations as to “whether, how often, and for how long [individual] class members actually experienced unpaid [off-the-clock] time.”

Stiller contrasts starkly with Williams v. Superior Court (Allstate Ins. Co.), where the California Court of Appeal characterized “trial by formula” as “a method of calculating damages” with “little, if any, relevance at the certification stage before the trial court and parties have reached the merits of the class claims.” (See our blog post about Williams here.) Citing the U.S. Supreme Court’s decision in Wal-Mart Stores, Inc.  v. Dukes, Stiller emphasized that “trial by formula” would thwart Costco’s right to assert defenses to individual claims of liability. Moreover, the Court held that the plaintiffs’ proposal to determine Costco’s liability to the class by drawing inferences about class members’ work from expert testimony and Costco’s payroll records, scheduling records, and cash register logout data improperly “put the damages cart before the liability horse” because class members were not all subject to Costco’s policies in the same way. Individualized questions relating to a class member’s right to recover, therefore, bore directly on the question of whether common questions predominated.

Hopefully, California courts take note. While California courts are not bound by federal authority when ruling on class certification decisions, the California Supreme Court’s decision in Brinker Restaurant Corp. v. Superior Court clearly indicated that California’s certification standards are derived from “federal precedent.” Hence, similar to Federal Rule of Civil Procedure 23, California courts require the party advocating for class treatment to, among other things, demonstrate the existence of a “well-defined community of interest,” which includes showing that “predominant common questions of law or fact” exist. Thus, Dukes’ rejection of “trial by formula” should apply regardless of whether the class certification decision is being considered by a federal court or a California state court.

Topics:  Class Action, Class Certification, Costco, Employer Liability Issues, Loss Prevention, Over-Time, Rule 23(b)(3), Unpaid Overtime, Wage and Hour, Wal-Mart

Published In: Civil Procedure Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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