Duran v. U.S. Bank National: California Supreme Court Finds Class Certification Violated Due Process

by Perkins Coie
Contact

The Supreme Court of California released its decision in Duran v. U.S. Bank National Association on May 29, 2014.  The decision will likely reshape the landscape of class-action practice in California. Finding that the trial court had improperly certified a class of employees, the supreme court held that: 

  • Class certification is only appropriate when the trial plan permits litigation of individual defenses, and defendants have a due process right to present individual defenses. 
  • Merely showing a predominance of common issues is not enough to certify a class; plaintiffs must also show that the individual claims can be litigated “fairly and efficiently.”
  • Even when statistical methods are appropriate, they cannot be a substitute for common proof, and concern for parties’ rights requires that courts use them with caution. 
  • Courts should ordinarily develop a statistical plan before certifying a class, and must decertify the class when it becomes clear that the plan is unworkable. 
  • The trial court’s approach to statistical methodology was “profoundly flawed.”  

This decision clarifies some of the confusion in California courts following the United States Supreme Court’s decision in Wal-Mart-Stores, Inc. v. Dukes, 546 U.S. __ (2011), and should significantly aid lower courts in determining the viability of potential class treatment.  Consistent with the Dukes decision, the California Supreme Court stressed the importance of defendants’ due process rights in the context of class actions.

Summary of Duran v. U.S. Bank National Association  

The two named plaintiffs worked as bank officers for United States Bank National Association. They sued, on behalf of a purported class of 260 employees alleging that they had been misclassified as “exempt” employees under the California Labor Code, and were thus owed overtime wages. The trial court granted class certification.  The parties were unable to agree on a trial management plan.  The trial court suggested an option: it could take a random sample of twenty plaintiffs to testify during the liability phase of the trial.  The bank repeatedly objected to this proposed method, claiming that it violated its due process rights.  The court ultimately conducted phase one of the trial and permitted testimony from the nineteen remaining members of the representative sample group and two of the named plaintiffs.

After the first phase of the trial, the court found that all of the class members had been misclassified, and turned its attention to damages.  For the second phase, both sides presented evidence from experts in statistical methodology and the court determined that “the best estimate . . . is that the class worked 11.86 overtime hours per week with an absolute margin of error of approximately plus or minus 5.14 hours . . . .”  It went on to grant plaintiffs a total award of $14,959,565. On appeal, the bank argued that the trial plan violated its due process rights.  

The Decision on Appeal

The California First District Court of Appeal held that the trial court erred in its use of a representative sampling method and found that the method used by the trial court violated due process because it prevented the bank from raising defenses unique to class members who were not part of the sample group. Citing both California and federal cases, including the United States Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (2011), the court of appeal found that when the question of an employee’s exempt-status depends on facts specific to that employee, due process requires individual inquiries. Finally, the court criticized the trial court for not permitting the bank to introduce evidence about the class members who had not been selected as part of the random sample, which could have established that a significant group of class members had been properly classified.  

The CA Supreme Court’s Decision

The Supreme Court of California affirmed the appellate court’s decision. The supreme court held that defendants are entitled to present individual defenses, and courts may only certify a class when the trial plan adopted preserves that right.  It went on to find that while statistical sampling may sometimes be appropriate, the trial court’s use of it was “profoundly flawed.” This decision confirms that California law is consistent with Wal-Mart-Stores, Inc. v. Dukes, 546 U.S. __ (2011). 

The supreme court held that “a class action trial management plan must permit the litigation of relevant affirmative defenses, even when these defenses turn on individual defenses.” Class certification is therefore inappropriate when the trial management plan cannot “fairly and efficiently” allow defendants to present those defenses. Although the court reiterated its encouragement to lower courts to be innovative in their trial management plans, it urged them to consider manageability closely, and to decertify classes when it becomes clear that they are not manageable in such a way as to permit individual defenses to be presented.  The court went on to state that the class action procedure is just that: a procedure.  It “may not be used to abridge a party’s substantive rights,” and when it is likely to do so, it must be abandoned.  The court found that the trial court in Duran “did not manage individual issues.  It ignored them.” 

The court did not foreclose the use of statistical methodologies such as sampling and surveys in the class-action context, but stated that the trial court “would be well advised” to develop any plans for statistical proof and methods before certifying a class, and should be prepared to order decertification if they prove unworkable.

Impact of the Decision

The decision in Duran confirms that California courts must be mindful of defendants’ due process rights; the mere presence of common questions does not permit a court to bar the presentation of individual defenses.  While statistical methodologies may be used to find liability, courts cannot create trial management plans that prevent defendants from either attacking the methodology itself or presenting evidence of individual defenses.  The decision thus brings California law into conformity with the United States Supreme Court’s decision in Dukes.

 

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.

© Perkins Coie | Attorney Advertising

Written by:

Perkins Coie
Contact
more
less

Perkins Coie on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.