United States: California Supreme Court Ruling To Make Class Certification Process More Rigorous

Court Urges Development of a Trial Plan—at the Time of Class Certification

The California Supreme Court ("Court") on May 29 provided much-needed guidance concerning the proper procedure for certifying and trying a wage hour class action. The Court's ruling will make the class certification process far more rigorous. The Court strongly suggested that a viable trial plan must be presented, by the attorney purporting to represent a class, at the time of class certification. The trial plan must give equal consideration to whether "common" (i.e., class) issues exist and to whether those issues can be tried in a "manageable" way while still respecting the due process rights of the employer. The trial plan must permit the employer to present evidence relevant to issues of both liability and damages and must also permit the employer to assert affirmative defenses as to the class as a whole or to particular members. The Court acknowledged that the class action "procedural device may not be used to abridge a party's substantive rights." Duran v. U.S. Bank Nat'l Ass'n, 2014 Cal. LEXIS 3758, *53 (May 29, 2014).

Statistical or "Aggregate" Proof May Be Used, but the Defendant/Employer May Challenge that Proof

The California Supreme Court did not hold that statistical or other "aggregate" proof may never be used to establish liability. However, as a practical matter, this decision will likely mean that such "aggregate" proof rarely will be sufficient to establish liability. And, even as to proof of damages, the Court's ruling respects the right of the employer/defendant to attack statistical or "aggregate" proof as unreliable, overinclusive, or otherwise erroneous. "If the trial proceeds with a statistical model of proof, a defendant accused of misclassification must be given a chance to impeach that model or otherwise show that its liability is reduced because some plaintiffs were properly classified as exempt." Id. at *91. The Court held that any statistical or similar proof must account for "variability" among the class members (i.e., the likelihood that class members' work experience, work habits, schedules, or job duties differed significantly among each other).

This decision should lead the California trial courts to engage in the "rigorous analysis" of both the commonality and manageability issues at the class certification stage as has been required by federal courts. Further, the opinion rejects the "trial by formula" approach that some plaintiff's attorneys (and even trial judges) have advocated in wage hour cases.

The "Fatally Flawed" Trial Plan

The putative class in Duran consisted of approximately 260 current and former "business banking officers" ("BBOs") that U.S. Bank National Association ("USB") had classified as exempt outside sales employees. After certifying the class, the trial court solicited trial plans from each side. However, rather than accept the proposal of either plaintiffs or USB, the court crafted its own trial plan—a "random" sampling of only 20 class members would testify to determine the exempt status of the entirety of the class. After the selected class members were notified that they would be testifying at trial, the court allowed a second opt-out period, which resulted in four of the selected representatives opting out. USB had obtained declarations from approximately 70 class members whose declarations stated facts supporting the outside sales exemption. In other words, USB had written evidence that 27 percent of the class, at least, was exempt. However, the Court repeatedly refused to consider the declarations of any class members who were not also among the "core random" sample.

Ultimately, 19 of the 20 selected class members testified, as did the two named plaintiffs. The attorneys for the class had substituted new "representative" named plaintiffs for the original named plaintiff, believing that the newly named plaintiffs had stronger cases than the original plaintiff. The Court permitted two of the newly named plaintiffs to testify. As the Court noted, this fact alone destroyed the "random" nature of the sample. USB also presented expert testimony that the sampling plan was statistically inappropriate and unreliable. Nevertheless, the trial court issued a statement of decision finding that every member of the class was misclassified and that each class member had worked 11.86 hours of overtime, each week. The Court's ruling resulted in a judgment of more than $15 million against USB. The judgment included substantial monetary awards to class members who had testified in written declarations that they were exempt (and therefore entitled to nothing). The trial court did not find cause for concern that the margin of error associated with the statistical analysis (by plaintiffs' expert, no less) was a whopping 43 percent.

The Court of Appeal Reverses

Not surprisingly, USB immediately appealed the trial court verdict. The court of appeal, in a somewhat scathing decision, found that the trial plan established by the trial court was "seriously flawed" and had denied USB its right to due process. Finding that the trial court "did not follow established statistical procedures" in creating its trial plan, the court of appeal noted the small size of the representative group, the lack of truly random sampling, and the 43.3 percent  margin of error.

The court of appeal also found that USB's due process right was violated by the trial court's refusal to allow USB to introduce evidence to support its affirmative defense of exempt status. USB had made repeated attempts to introduce evidence that some or all of the non-testifying class members were properly classified as exempt, including sworn declaration and live or deposition testimony. The trial court repeatedly rebuffed these efforts.

Finally, after reversing the trial court's monetary judgment, the court of appeal ordered the class decertified. Because the trial plan barred any individual inquiry, the trial court had not established that a class action was, in fact, manageable. Finding that the trial plan established by the trial court was unworkable and "a miscarriage of justice" the court of appeal refrained from "speculat[ing] as to whether a workable trial plan could have been devised to account for the [necessary] individualized inquiries."

The California Supreme Court Decision

The Court on May 29 affirmed the court of appeal's decision. In a unanimous opinion authored by Justice Corrigan, the Court specifically did "not reach a sweeping conclusion as to whether or when sampling should be available as a tool for proving liability in a class action." Rather, the Court held that while trial by representative sampling may be an appropriate vehicle for a class action trial on liability, a defendant accused of misclassification of employees must be given a chance to impeach the statistical model or to otherwise prove that its liability is reduced because some plaintiffs were properly classified as exempt. Moreover, the Court held that where representative sampling is the proposed method for establishing liability, the trial court should consider the viability of sampling at the certification stage—not afterwards.

Specifically, the Court held that, when determining whether class certification is appropriate, the trial court should determine whether the proposed trial plan will adequately allow for the litigation of affirmative defenses, even when those affirmative defenses will touch upon individual issues. The emphasis on preparation of a trial plan at the certification stage, and not later, is in our view an extremely important development. The Court stated that the issue of "commonality" (whether there is "common" issue binding the class together) must be evaluated equally with the issue of "manageability" (whether there is a method to try the case fairly, and with respect to the defendant's due process rights, as to the class as a whole). If a proposed trial plan includes representative testimony, surveys, statistical proof or random sampling, an assessment must be made of the level of "variability" within the class. If there is a high level of variability, individual issues are likely to render the trial plan unmanageable. Even where a court certifies a class, believing the trial plan to be manageable, it may be required later to decertify if discovery and trial preparation shows the trial plan is in fact not manageable.


By requiring trial courts to develop a trial plan prior to certification, and to devise a method to account for variability within the putative class, the Court has provided employers an opportunity for both presently pending and future wage hour class actions. Where a trial court failed to establish a trial plan that provided for manageability of individual issues, employers may consider moving for decertification, in light of the Court's decision in Duran.

The Court's decision in Duran is a step towards ensuring that employers receive an adequate opportunity to present a defense in class actions where individual variability is inevitable.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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