United States: Another Watershed Moment For Class Actions? SCOTUS To Address Limits On Statistical Proof In Class And Collective Actions

In a case that is certain to provide an important sequel to the Wal-Mart Stores, Inc. v. Dukes and Comcast Corp. v. Behrend decisions, the Supreme Court will hear argument next week on Tyson Foods Inc. v. Bouaphakeo, to address (1) the use of statistical averaging in class actions to prove liability and damages, and (2) whether courts may certify a class that includes individuals with no injury.

Tyson Foods is important because it likely will set further limits on use of statistical proof in Rule 23(b)(3) cases, and address for the first time the standard for certification of collective actions under the Fair Labor Standards Act.

The road to the Supremes. Tyson Foods reached the Supreme Court by way of a divided Eighth Circuit opinion affirming a $5.8 million verdict on an off-the-clock class claim. Plaintiffs claimed that Tyson's Iowa meat processing facility had not paid over 3,000 plant workers for the time they spent changing in and out of various types of work gear and walking to and from the production line. The district court found there was a common question as to whether the challenged time was compensable, and certified the case as a collective action as to the FLSA claim, and as Rule 23 class action as to the state law wage and hour claims.

Tyson unsuccessfully attempted to decertify the class, and argued neither liability nor damages were "capable of classwide resolution ... in one stroke," as required by Dukes. Tyson pointed to variations in the type and amount of equipment worn by employees in the hundreds of classifications at issue, and highlighted the disparities in the routines and amount of time employees spent on these tasks. Unpersuaded, the district court permitted a nine-day jury trial on the class claims, where plaintiffs used an expert's model to calculate the "average" time employees spent on the donning, doffing and walking activities at issue. These average activity times were then extrapolated to the class members. Although plaintiffs' expert conceded that the actual times for these activities varied considerably – and more than 200 class members suffered no injury at all – the jury nonetheless awarded a lump sum verdict, to be divided among all class members.

Divided approaches to Dukes. The divided Eighth Circuit panel's majority opinion and dissent highlight the inconsistent approaches lower courts have taken in interpreting Dukes. The panel majority found that there was a common question concerning whether the activities were compensable under the FLSA and state law, and that plaintiffs had "prove[n] liability for the class as a whole, using employee time records to establish individual damages."

The dissent took the majority to task for ignoring the considerable differences in donning and doffing times, employee routes to their work stations, the amount of time Tyson allotted for such activities, shortened time shifts, "and a myriad of other relevant factors." The dissent highlighted the fact that a rigorous inquiry into Rule 23's requirements may overlap with the merits, and that in a wage-hour case the merits may be intertwined with damages questions. Using statistical models to gloss over differences pertinent to both liability and damages violated Dukes' requirement that the action generate "common answers apt to drive the resolution of the litigation" and its prohibition against "trial by formula."

For example, an employee who clocks 38 hours and alleges another 1.5 hours of off-the-clock work does not have a claim under federal law so long as he is paid no less than minimum wage for all of his work time taking into account his uncompensated time. If he claims a total of 2.5 hours of off-the-clock work, however, he would allege an FLSA violation that, if proven, would result in an hour of pay at the appropriate overtime rate. In such cases (and commonly for wage-hour claims), determining liability and damages is an inherently intertwined inquiry requiring the same evidence. For this reason, the common issues involved in determining liability would predominate over any individualized damages issues under Rule 23(b)(3), and bifurcation of a liability-only class would be inappropriate.

Why This Case Matters. First, the Supreme Court will have the opportunity to clarify the extent of Dukes' limitations on the use of statistical techniques to establish damages and liability under Rule 23. Second, the case has particular significance in the wage and hour context, because it provides the opportunity for the Supreme Court to weigh in for the first time as to the standards that apply to certification of FLSA collective actions. Third, the case provides the opportunity for the court to address Tyson Foods' constitutional argument that an award of monetary damages to uninjured class members is impermissible.

Stay Tuned ... This case is set for oral argument on Tuesday, November 10, so be on the lookout for a follow up blog post here when a decision is reached.

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