Employment class action defendants in California who were hoping for an unequivocal statement that statistical sampling has no place in class actions are likely to be disappointed by today’s ruling in Duran v. U.S. Bank, N.A. The California Supreme Court cautiously left all avenues to certification open, stating that a “[s]tatistical sampling may provide an appropriate means of proving liability and damages in some wage and hour class actions.” (Emphasis added.) But despair not! The bulk of the opinion agreed with the court of appeal in finding the trial court’s methods “profoundly flawed,” recognized the “thorny” issues of proof that arise in misclassification cases, and reaffirmed a court’s obligation to consider the manageability of individual issues in certifying a class action. The Court’s instructions to lower courts and litigants to determine – as an integral part of class certification – whether the case can be manageably tried are likely to aid employers in certification battles to come.
Duran was a misclassification case brought by a group of loan officers employed by U.S. Bank. In the trial court, the plaintiffs successfully moved for class certification on the theory that they were misclassified outside sales employees. Despite declarations from U.S. Bank witnesses showing that dozens of employees spent more than fifty percent of their time on sales-related activities outside of the workplace, the case proceeded to trial.
The Supreme Court focused on the trial plan, which the Court found to be “seriously flawed” for several reasons. For instance, the trial court devised its own sampling methodology, without help of experts. It then compounded that error by allowing testimony of non-random, hand-selected plaintiffs in addition to 20 “randomly” selected class members, barring the defendant from introducing the testimony of class members outside the selected group and then extrapolating classwide liability from the flawed sample group.
The Court found that this process deprived the defendant of the ability to litigate its exemption defense and held that “[t]he injustice of this result is manifest.” From these myriad flaws, however, the Court distilled a few key class certification guidelines for trial courts to follow.
First, the Court recognized that exemption defenses often turned on issues of “how individual employees perform their jobs,” and that in such cases, proceeding as a class action can become “particularly thorny.” In this regard, the Court observed that “[a]lthough common proof may be possible if there are uniform job requirements or policies, an employer’s liability for misclassification under most Labor Code exemptions will depend on employees’ individual circumstances. Liability to one employee is in no way excused or established by the employer’s classification of other employees.”
Second, the Court held that “manageability of individual issues is just as important as the existence of common questions uniting the proposed class,” and highlighted the importance of a feasible trial plan: “Rather than accepting assurances that a statistical plan will eventually be developed, trial courts would be well advised to obtain such a plan before deciding to certify a class action. In any event, decertification must be ordered whenever a trial plan proves unworkable.” Moreover, while sampling is available as a tool to manage issues at trial, it is not to be used “to manufacture predominate common issues where the factual record indicates none exist,” (citing Dailey v. Sears, Roebuck & Co., 214 Cal. App. 4th 974, 998).
Third, any trial plan must “permit the litigation of relevant affirmative defenses, even when these defenses turn on individual questions.” In other words, the trial court cannot simply disregard the evidence regarding affirmative defenses that the defendant has put forth, simply because the plaintiffs present sampling evidence. And, just because the defendant’s affirmative defenses are “cumbersome to litigate in a class action,” they cannot be ignored. The Court based this requirement not only on procedural considerations, but on ones of due process as well.
Does Duran foreclose the availability of class certification in misclassification cases? Certainly not. But the Court today unequivocally stated that trial courts have an obligation to ensure that class claims can actually be tried in a manner that protects due process for all litigants, and if they cannot, the class should not be certified.