United States: Massachusetts Supreme Judicial Court Provides Guidance For Class Actions

In Gammella v. P.F. Chang's China Bistro, Inc., Massachusetts's highest court, the Supreme Judicial Court (SJC), has weighed in on several recurring class action litigation issues, providing much needed guidance in an area where there is limited precedential case law in this jurisdiction. The decision also highlighted some important and somewhat subtle distinctions between class action practice in Massachusetts state court versus federal court.

  • First, the court addressed the standard for certifying a class action brought under the Massachusetts Wage Act or the minimum fair wage law. The court rejected plaintiff's argument that a more lenient class certification standard should be inferred from the wage laws, holding that Mass. R. Civ. P. 23 provides the correct framework for analyzing certification.
  • Next, the court clarified the standard for determining whether the numerosity requirement for class certification has been met and, in the process, provided a reminder of why "fail-safe" classes are not permissible.
  • Finally, the court signaled that attempts to moot a putative class action with a Rule 68 offer of judgment or tender of "complete relief" are unlikely to gain traction in Massachusetts state proceedings.

Background

The factual underpinning of the Gammella case is uncomplicated. Under regulations promulgated by the Massachusetts Department of Occupational Safety, if an hourly employee scheduled to work for three hours or more reports for duty at the time set by the employer but is involuntarily dismissed before having worked three hours, the employee must nonetheless be paid for at least three hours at no less than the basic minimum wage. This is known as "show up" or "reporting" pay.

The plaintiff in Gammella had worked for P.F. Chang's for approximately seven years and testified that on numerous occasions he was cut from his shift after reporting for work and was not paid reporting pay as required by law. In discovery, the defendant produced reports confirming the plaintiff's testimony on this point, and identifying approximately 7,000 similar instances involving hundreds of other employees who had worked shifts of fewer than three hours without receiving reporting pay. The plaintiff moved for certification of a class made up of hourly employees in Massachusetts who were scheduled to work for at least three hours but worked fewer hours and were not paid three hours of reporting pay.

The defendant asserted that it had no way of knowing whether the hundreds of employees identified had been involuntarily dismissed early from their shifts or whether their shifts had been cut short at the employees' own requests. Based on an opinion letter from the Executive Office of Labor and Workforce, which stated that no reporting pay was required where an employee voluntarily chose to leave a shift early, the motion judge redefined the plaintiff's proposed class. The redefined class included only those employees who had been involuntarily cut or whose choice to leave early was not free from pressure from the employer. The trial judge then took the unusual step of denying certification for failure to sufficiently establish numerosity. The numerosity requirement for class certification is usually the easiest element to establish, and classes of as few as 40 members have been certified. Here, however, despite the hundreds of other employees identified as putative class members, the trial judge concluded that the plaintiff had failed to present sufficient evidence of numerosity to certify the class. The trial judge did not assess the remaining Rule 23 factors.

As an aside, it is worth noting the plaintiff did not attempt an interlocutory appeal of the denial of class certification, presumably because such discretionary review is rarely granted under Massachusetts law, even less frequently than in federal court. Only about 1% of all appeals in Massachusetts are interlocutory; in contrast, by some counts up to 25% of Federal Rule 23(f) petitions seeking review of class certification orders are granted.

After denial of certification, the defendant made two offers of settlement. The first was a formal Rule 68 offer of judgment, which under its own terms and under the provisions of Rule 68 was deemed withdrawn when the plaintiff failed to accept it. The second was a "tender of complete relief," a letter accompanied by a certified check in an amount that would render "complete relief" on the individual plaintiff's claims, with an offer of reasonable attorneys' fees, costs and interest. The letter advised that if the offer was not accepted, the defendant would move to dismiss the action on grounds of mootness. Upon expiration of the tender, the defendant sought dismissal and the trial court granted it, holding that complete relief had been offered and the claims were accordingly moot. Both parties and the court recognized that upon dismissal, the plaintiff would be able to appeal the ruling on class certification.

Appeal

Massachusetts's highest court took up the appeal sua sponte. The plaintiff argued before the SJC that class certification should be decided not with reference to the requirements of Mass. R. Civ. P. 23, but under a more lenient standard inferred from provisions of the wage laws, which authorize a private right of action, including the right to bring a class action. The SJC rejected this argument, comparing the provisions of the wage laws to the language of the Massachusetts Consumer Protection Act (known as chapter 93A), which contains "highly detailed language" specifying the standard to be applied to class actions brought under its provisions. In contrast, the wage laws contain no such language. Accordingly, the court definitively stated that a class action brought under the wage laws must be analyzed using the Rule 23 standard, not a more lenient approach such as that available under chapter 93A.

On the issue of numerosity, the SJC held that the trial judge had required too strict a standard of proof at the class certification stage. All that is needed to certify a class is evidence "sufficient to enable the motion judge to form a reasonable judgment that the class meets the requirements of Rule 23." Moreover, the court explained that the numerosity requirement "is less about the number of class members than it is about the impracticability of joinder" of all the members. One of the traditional rationales for permitting class claims is to allow aggregation of multiple small claims into an action that has value such that it becomes worth pursuing. Thus, where the plaintiff had identified hundreds of employees who had in more than 7,000 instances worked fewer than three hours without receiving reporting pay, and the defendant's own poor record keeping prevented the parties and court from determining the reasons for nonpayment, it was reasonable to infer that the class was numerous and joinder would be impracticable.

Analysis

Open questions remain as to whether the defendant can defeat class certification on remand, based on commonality and typicality. In ruling on the class certification motion, the trial judge noted that the defendant had not identified a single instance from 2011 to 2015 when it had provided any Massachusetts employee with reporting pay. However, there are almost certainly instances within that set of data where a failure to pay reporting pay was not a violation because the employees voluntarily left their shift early. The question will then become whether "common questions of law and fact" do indeed predominate over individual issues, as contemplated by Mass. R. Civ. P. 23. The SJC signaled that these hurdles could be overcome, referencing another wage class action in which it had held that the possible presence of some uninjured class members did not defeat certification, and noting that the defendant's poor record keeping could not be used to defeat class certification.

The court also pointed out that by attempting to redefine the class as only those workers who had improperly been denied reporting pay, the motion judge had created an impermissible "fail-safe class," meaning a class defined as only those who had a valid claim. A fail-safe class is impermissible because any putative class member to whom the defendant is not found liable is defined out of the class, is not bound by the judgment, and may continue to litigate, contrary to the purpose of class actions.

Finally, on the issue of mootness, the SJC held that the tender of "complete relief," under the circumstances, had not mooted the class representative's individual claims and had not deprived the court of subject matter jurisdiction. The idea of mooting a "case or controversy" by offering or tendering complete relief to a plaintiff is a strategy that holds great appeal for defendants. However, as the SJC noted, the United States Supreme Court rejected this tactic in Campbell-Ewald Co. v. Gomez, 136 S.Ct. 663 (2016), holding that an unaccepted settlement offer − in the form of a Rule 68 offer of judgment − does not moot a claim. Here, even the "tender of complete relief," which included delivering a certified check in an amount exceeding the dollar value of the plaintiff's individual claim, could not moot the claim. The SJC also emphasized that unlike federal courts, where jurisdiction is limited by the Article III "case or controversy requirement," standing in state courts is governed by different considerations.

In this particular case, the mootness argument was made even weaker because by the time the SJC heard this case the plaintiff's motion for class certification had been denied and was under appeal. The viability of the class claims was therefore still very much at issue. Moreover, the SJC reasoned that permitting a defendant to employ this tactic to moot a putative class action would effectively render the denial of class certification unreviewable, an unacceptable outcome.

Conclusion

It is clear that the parties and the court had an interest in seeing a final judgment entered so that the class certification ruling could be reviewed. Had the trial court not dismissed the claim on mootness grounds, no appeal would have been possible until the putative class representative's individual claim was tried to judgment. This ruling highlights the critical importance of the class certification determination and demonstrates that even where certification is initially denied, the potential for reversal on appeal must be considered. In any event, the SJC's ruling in Gammella provides useful guidance to class action litigants and the Massachusetts trial courts.

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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