United States: California Supreme Court Provides Guidance On Class Certification

Last Updated: June 11 2014
Article by Robert Jon Hendricks and Carrie A. Gonell

In its Duran decision, the court emphasized that trial courts considering class certification must determine whether the case is manageable as a class action.

On May 29, the California Supreme Court issued its decision in Duran v. U.S. Bank National Association,1 outlining the guiding principles for trial courts for both the class certification and trial phases of wage and hour class actions with respect to (1) the manageability of class action trials and (2) the use of statistical sampling in wage and hour trials.

The decision reaffirmed that trial courts considering certification need to focus not only on whether there are potential common questions to be litigated in the class action, but also whether it is "feasible to try the case as a class action."2 The court emphasized that, at the class certification stage, whether a class trial may be successfully managed is as important as whether common questions exist. Courts also have a continuing obligation to decertify a class if they determine that the case is no longer viable as a class action.

The court did not completely rule out the use of statistical sampling in wage and hour cases, but a plaintiff who wants to use such sampling must show that there is a statistically defensible way to do so that allows the defendant to litigate its defenses—even when those defenses are potentially individualized in nature. Given that this may not be possible, alternatively, any viable trial plan has to set out how the parties will litigate those individual issues on a manageable basis, if it is possible to do so. Ultimately, any trial plan must account for the fact that "[l]iability to one employee is in no way excused or established by the employer's classification of other employees."3

The following sections provide a more in-depth look at the lower court proceedings as well as the California Supreme Court's decision.

Lower Court Proceedings

In December 2001, a putative class action complaint was filed, alleging that U.S. Bank National Association (USB) had improperly classified its business banking officers (BBOs) as exempt, thus depriving them of overtime pay under California law. USB relied primarily on the outside sales exemption, which provides that individuals who customarily and regularly work more than half their working time away from the employer's place of business engaged in sales activities are exempt from overtime pay. The trial court certified a class of more than 200 BBOs.

During a classwide trial, the court relied on representative witness testimony from 22 class members, including the two named plaintiffs, to find that the entire class of BBOs was misclassified and owed overtime. Although USB repeatedly sought during and after the trial to introduce evidence of other class members' experiences to support its outside sales exemption defense, the trial court refused to hear this evidence.

On appeal, the appellate court vacated the judgment and decertified the class, finding that USB's due process rights had been violated because of the trial court's conduct.

California Supreme Court Decision

Echoing the appellate court, the California Supreme Court found the injustice of the trial court proceedings to be "manifest" and concluded that USB's due process rights had been violated by the trial court's refusal to consider pertinent evidence that it sought to admit to prove many BBOs qualified for the outside sales exemption and, thus, had no claims for overtime pay.4

The California Supreme Court recognized an employer's right to assert and submit evidence to support relevant affirmative defenses, such as the outside sales exemption, that would preclude liability, "even when these defenses turn on individual questions."5 The court acknowledged that "a misclassification claim has the potential to raise numerous individual questions that may be difficult, or even impossible, to litigate on a classwide basis."6

Continuing Obligation to Decertify

According to the Duran court, even after a trial court has certified a class, it has an ongoing duty, throughout the life of a case, to determine whether the action may be maintained as a class action. If it cannot be, then the class should be decertified. For example, in Duran, USB moved to decertify the class both before and after the trial. In both instances, the trial court denied USB's motions without considering USB's evidence that showed why the case could not proceed as a class action.

An important takeaway for employers going forward is to understand that, even if a trial court initially certifies a class, that does not necessarily mean that the case will proceed as a class through the trial. Discovery that occurs after a class has been certified, for example, could bolster an employer's position that individual questions predominate or that a class trial could not be effectively managed.

Trial Management Plan

The court stressed the importance that trial courts consider the manageability of class actions at the certification stage, including whether and how statistical evidence will comprise part of the proof on class action claims. The court explained that "the manageability of individual issues is just as important as the existence of common questions uniting the proposed class."7 The court further explained that "a defense in which liability itself is predicated on factual questions specific to individual claimants poses a much greater challenge to manageability."8

Statistical Sampling—Errors Committed by the Trial Court in Duran

If statistical sampling is ever used in the class context, it must be (1) representative and (2) "the results obtained must be sufficiently reliable to satisfy concerns of fundamental fairness."9 The court was clear that statistical evidence alone would not be sufficient to establish classwide liability. In this particular case, the court faulted the lower court for the representative sampling it relied on to find classwide liability. The errors that the trial court committed in the eyes of the Duran court included the following:

  • Sample size too small: The trial court selected a sample of 22 individuals out of a class of more than 200 without consulting either party's experts or relying on any statistical methodology. Although the Duran court did not offer a hard and fast rule for what an appropriate sample size would be, it advised that the parties' experts should be involved, the sample size must be "statistically appropriate," and the sample size must be "capable of producing valid results within a reasonable margin of error."10 Thus, the variability of class member experiences must also be taken into account when determining an appropriate sample size.
  • Sample was not random: Even though the trial court initially selected 20 class members at random as a sample, it also included the two named plaintiffs, which undermined the randomness of the sample. The court subsequently excluded one class member from the sample because the court found his experience to be unique and excluded another member because he failed to appear at trial. Also, after permitting the plaintiffs an opportunity to amend their complaint, the court allowed class members a second opportunity to opt out of the class, resulting in four plaintiffs within the sample group opting out. The Duran court thus concluded that the sample was not truly random and was biased in the plaintiffs' favor.
  • Intolerably large margin of error: The trial court erred by relying on a sample that produced a margin of error of more than 43%. The sampled class members worked on average 11.86 hours of overtime per week, but, because of the margin of error, the actual overtime worked could have ranged from 6.72 hours to 17 hours per week. Although noting that such a high margin of error is impermissible, the Duran court did not provide any bright-line guidance as to how high the margin of error could be and still be acceptable.

Any trial plan that relies on statistical sampling must not only avoid the deficiencies in the methodology adopted by the trial court here, but it also "must be developed with expert input and must afford the defendant an opportunity to impeach the model or otherwise show its liability is reduced."11

Scope of the Case

Although the Duran court issued its decision in the context of a misclassification case, its general principles regarding the importance of manageability, particularly at the class certification stage, have widespread applicability.

Next Phase of the Duran Case

On remand, the plaintiffs in Duran may attempt to move to recertify a class of BBOs, but they will have to demonstrate the feasibility of trying the case on a classwide basis. Given the record evidence of differences among how and where the BBOs performed their duties, it is unclear if any trial plan that relies on statistical evidence can ever successfully be developed in this particular case.

Footnotes

1. No. S200923 (Cal. May 29, 2014).

2. Id., slip op. at 22.

3. Id. at 33,

4. Id. at 31.

5. Id. at 19.

6. Id. at 22.

7. Id. at 24.

8. Id. at 25 (emphasis in original).

9. Id. at 50.

10. Id. at 41.

11. Id. at 2.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions