The Story Behind Class Certification Statistics In 2016 And What It Means For Employers

by Seyfarth Shaw LLP
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In the third post of our series on workplace class action issues, this blog posting focuses on the statistical study of class certification rulings throughout the Unites States in 2016. Not unlike real estate, location – in terms of venue, the assigned judge, and applicable circuit case law – is an all-important factor in class certification dynamics.

Introduction

Federal and state courts issued more favorable class certification rulings for the plaintiffs’ bar in 2016 than in past years. Plaintiffs’ lawyers continued to craft refined and more successful class certification theories to counter the more stringent Rule 23 certification requirements established in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), and Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). In the areas of employment discrimination, wage & hour, and ERISA class actions, the plaintiffs’ bar scored exceedingly well in securing class certification rulings in 2016. In sum, class actions continue to be certified in significant numbers and certain “magnet” jurisdictions continue to issue decisions that encourage or, in effect, force the resolution of large numbers of claims through class action mechanisms.

Anecdotally, surveys of corporate counsel confirm that complex workplace litigation – and especially class action and multi-plaintiff lawsuits – remains one of the chief exposures driving corporate legal budgetary expenditures, as well as the type of legal dispute that causes the most concern for their companies.

The prime concern in that array of risks is now indisputably wage & hour litigation.

Overall Certification Statistics

A circuit-by-circuit analysis of the 244 class certification decisions in all varieties of workplace class action litigation is detailed in the following map.

circuit courts graphic

Wage & Hour Certification Trends

While plaintiffs continued to achieve initial conditional certification of wage & hour collective actions in 2016, employers also secured significant victories in defeating conditional certification motions and obtaining decertification of § 216(b) collective actions.  The percentage of successful motions for decertification brought by employers rose by nearly 10% in 2016.

Most significantly, for the first time in over a decade, wage & hour lawsuit filings in federal courts decreased.

An increase in FLSA filings over the past several years, however, caused the issuance of more FLSA certification rulings than in any other substantive area of complex employment litigation, i.e., 224 certification rulings in 2016, as compared to the 175 certification rulings in 2015.

The analysis of these rulings shows that more cases are brought against employers in more “plaintiff-friendly” jurisdictions such as the judicial districts within the Second and Ninth Circuits. This trend is shown in the following map:

flsa

The map of FLSA certification rulings is telling.

First, it substantiates that the district courts within the Ninth Circuit and the Second Circuit are the epicenters of wage & hour class actions and collective actions.

More cases were prosecuted and conditionally certified – 33 certification orders in the Ninth Circuit and 29 certification orders in the Second Circuit – in the district courts in those circuits than in any other areas of the country. The district courts in the Fifth, Eleventh, and Sixth Circuits were not far behind, with 22, 12, and 11 certification orders respectively in those jurisdictions.

Second, as the burdens of proof reflect under 29 U.S.C. § 216(b), plaintiffs won the overwhelming majority of “first stage” conditional certification motions (147 of 195 rulings, or approximately 76%); in terms of “second stage” decertification motions, plaintiffs also prevailed in a slight majority of those cases (16 of 29 rulings, or approximately 55% of the time).

The “first stage” conditional certification statistics for 2016 are aligned to the numbers in 2015, when plaintiffs won 75% of “first stage” conditional certification motions. However, employers fared much better in 2016 on “second stage” decertification motions. Employers won decertification at a rate of 45%, which was up from 36% in 2015.

The following chart illustrates this trend for 2016:

 FLSA certification motions

Third, this reflects that there has been an on-going migration of skilled plaintiffs’ class action lawyers into the wage & hour litigation space. Securing initial “first stage” conditional certification – and foisting settlement pressure on an employer – can be done quickly (almost right after the case is filed), with a minimal monetary investment in the case (e.g., no expert is needed, unlike the situation when certification is sought in an employment discrimination class action or ERISA class action), and without having to conduct significant discovery (per the case law that has developed under 29 U.S.C. § 216(b)).

As a result, to the extent litigation of class actions and collective actions by plaintiffs’ lawyers is viewed as an investment, prosecution of wage & hour lawsuits is a relatively low cost investment, without significant barriers to entry, and with the prospect of immediate returns as compared to other types of workplace class action litigation. Finally, as success in litigation often begets copy-cat filings, the increase in top wage & hour settlements in 2016 to $695.5 million as compared to $463.6 million in 2015 is likely to prompt more litigation too.

Employment Discrimination & ERISA Certification Trends

At the same time, the rulings in Wal-Mart and Comcast also fueled more critical thinking and crafting of case theories in employment discrimination and ERISA class action filings in 2016.  The Supreme Court’s two Rule 23 decisions have had the effect of forcing the plaintiffs’ bar to “re-boot” the architecture of their class action theories. At least one result was the decision this past year in Tyson Foods, in which the Supreme Court accepted plaintiffs’ arguments that, in effect, appeared to soften the requirements previously imposed in Wal-Mart and Comcast for maintaining and proving class claims.

Hence, it is clear that the playbook on Rule 23 strategies is undergoing a continuous process of evolution. Filings of “smaller” employment discrimination class actions have increased due to a strategy whereby state or regional-type classes are asserted rather than nationwide mega-cases that Wal-Mart discouraged. In essence, at least in the employment discrimination area, the plaintiffs’ litigation playbook is more akin to a strategy of “aim small, miss small.”

In turn, employment-related class certification motions outside of the wage & hour area were a mixed bag or tantamount to a “jump ball” in 2016, as 4 of the 8 were granted and 4 were denied.

The following map demonstrates this array of certification rulings in Title VII and ADEA discrimination cases:

discrimination map

In terms of the ERISA class action litigation scene in 2016, the focus continued to rest on precedents of the U.S. Supreme Court as it shaped and refined the scope of potential liability and defenses in ERISA class actions.

The Wal-Mart decision also has changed the ERISA certification playing field by giving employers more grounds to oppose class certification.

The decisions in 2016 show that class certification motions have the best chance of denial in the context of ERISA welfare plans, and ERISA defined contribution pension plans, where individualized notions of liability and damages are prevalent.

Nonetheless, plaintiffs were more successful than defendants in ERISA class actions, as plaintiffs won 8 of 12 certification rulings in 2016.

A map illustrating these trends is shown below:

ERISA map

Overall Trends

So what conclusions overall can be drawn on class certification trends in 2016?

In the areas of employment discrimination, wage & hour, and ERISA, the plaintiffs’ bar is converting their case filings into certification of classes at a high rate.

Whereas class certification was a coin toss for employment discrimination cases (4 granted and 4 denied in 2016), class certification is relatively easier in ERISA cases (8 granted and 4 denied in 2016), but most prevalent in wage & hour litigation (with 147 conditional certification orders granted and 48 denied, as well as 13 decertification motions granted and 16 denied).

The following bar graph details the win/loss percentages in each of these substantive areas:

– a 50% success rate for certification of employment discrimination class actions (both Title VII and age discrimination cases);

– a 66% success rate for certification of ERISA class actions; and,

– a 76% success rate for conditional certification of wage & hour collective actions.

all cert graphic

Obviously, the most certification activity in workplace class action litigation is in the wage & hour space.

The trend over the last three years reflects a steady success rate of 70% to 76% for the plaintiffs’ bar that is tilted toward plaintiff-friendly “magnet” jurisdictions were the case law favors workers and presents challenges to employers seeking to block certification.

Yet, in 2016, employers increased their odds of decertifying wage & hour cases to 45% as compared to 36% in 2015.

Comparatively, the trend over the past three years for certification orders is illustrated in the following chart:

FLSA 3 year graphic

While each case is different and no two class actions or collective actions are identical, these statistics paint the all-too familiar picture that employers have experienced over the last several years. The new wrinkle to influence these factors in 2017 is the Supreme Court’s recent ruling in Tyson Foods. To the extent it assists plaintiffs in their certification theories, future certification decisions may well trend further upward for workers.

Lessons For Employers From 2016

There are multiple lessons to be drawn from these trends in 2016.

First, while Wal-Mart undoubtedly heightened commonality standards under Rule 23(a)(2) starting in 2011, and Comcast tightened the predominance factors at least for damages under Rule 23(b) in 2013, the plaintiffs’ bar has crafted theories and “work arounds” to maintain or increase their chances of successfully securing certification orders.  In 2016, their certification numbers were up to the highest levels in the last three years.

Second, the defense-minded decisions in Wal-Mart and Comcast have not taken hold in any significant respect in the context of FLSA certification decisions for wage & hour cases. Efforts by the defense bar to use the commonality standards from Wal-Mart and the predominance analysis from Comcast have not impacted the ability of the plaintiffs’ bar to secure certification orders under 29 U.S.C. § 216(b).

Third, there are “cracks in the defense wall” appearing in the case law relative to efforts by employers to create sustained barriers to class certification. The Supreme Court’s decision in 2016 in Tyson Foods is the most prominent example of how “work arounds” are taking place to enable plaintiffs’ lawyers to achieve class certification.

Fourth, while monetary relief in a Rule 23(b)(2) context is severely limited, certification is the “holy grail” in class actions, and certification of any type of class – even a non-monetary injunctive relief class claim – often drives settlement decisions. This is especially true for employment discrimination, ERISA, and wage & hour class actions, as plaintiffs’ lawyers can recover awards of attorneys’ fees under fee-shifting statutes in an employment litigation context. In this respect, the plaintiffs’ bar is nothing if not ingenuous, and targeted, strategic certification theories (e.g., issue certification on a limited discrete aspect of a case) are the new norm in federal and state courthouses.

Fifth, during the certification stage, courts are more willing than ever before to assess facts that overlap both certification and merits issues, and to apply a more practical assessment of the Rule 23(b) requirement of predominance, which focuses on the utility and superiority of a preclusive class-wide trial of common issues. Courts are also more willing to apply a heightened degree of scrutiny to expert opinions offered to establish proof of the Rule 23 requirements.

In sum, notwithstanding these shifts in proof standards and the contours of judicial decision-making, the likelihood of class certification rulings favoring plaintiffs are not only “alive and well” in the post-Wal-Mart and Comcast era, but also thriving.

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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