In Wang v. Chinese Daily News, Inc., on remand from the U.S. Supreme Court, the Ninth Circuit Court of Appeals applied the Supreme Court's decision in Dukes v. Wal-Mart to reverse and remand a federal district court decision certifying a California state wage law class action. Like Dukes, Wang has had a somewhat protracted history. Following certification as an FLSA collective action, and prior to the Supreme Court's decision in Dukes, the district court certified the plaintiffs' state wage law claims as a class action under Rule 23(b)(2) of the Federal Rules of Civil Procedure (FRCP) or, in the alternative, under Rule 23(b)(3). Following a 16-day jury trial, the plaintiffs were awarded over $2.5 million. The company appealed and the Ninth Circuit affirmed. On appeal to the U.S. Supreme Court post-Dukes, the Court vacated the Ninth Circuit decision and remanded for reconsideration in light of its decision in Dukes.
On remand, the plaintiffs conceded that, based on Dukes, class certification of their claim for monetary damages under Rule 23(b)(2) could not stand. Accordingly, the court reversed its decision on that issue and focused its analysis on the commonality standards for class certification under Rule 23(a) and the requirement under Rule 23(b)(3) that common questions predominate over individual issues.
Noting that the district court had determined commonality under Rule 23(a) based solely on the allegations in the complaint, the Ninth Circuit remanded and asked the district court to determine whether the claims of the proposed class "depend upon a common contention . . . of such a nature that it is capable of classwide resolution – which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke," as required by Dukes. The court emphasized that the plaintiffs "must show significant proof" that the company operated under a general policy of violating California labor laws.
As to the predominance requirement under Rule 23(b)(3), the Ninth Circuit held that the district court erred by basing its conclusion that common questions predominated on the fact that the employer had a uniform policy of classifying all reporters and account executives as exempt employees. The Ninth Circuit noted that it previously held in In re Wells Fargo Home Mortgage Overtime Pay Litigation that "a presumption that class certification is proper when an employer's internal exemption policies are applied uniformly to the employees . . . disregards the existence of other potential individual issues that may make class treatment difficult if not impossible."
The Ninth Circuit also asked the district court to reconsider certification of the plaintiffs' meal break claim in light of the California Supreme Court's recent opinion in Brinker Restaurant Corporation. v. Superior Court, in which the court held that an employer is obligated to "relieve its employee of all duty for an uninterrupted 30-minute period," but need not actually ensure that its employees take meal breaks.
Finally, and perhaps most significantly, the Ninth Circuit emphasized the U.S. Supreme Court's disapproval of "Trial by Formula," in which damages are determined for a sample set of class members and then applied by extrapolation to the rest of the class "without further individualized proceedings." Echoing Dukes, the court held that employers are entitled not only to "individualized determinations of each employee's eligibility" for monetary relief, but also are "entitled to litigate any individual affirmative defenses they may have to class members' claims."
This case is significant for employers facing state wage law class actions because, in addition to confirming the applicability of Dukes to wage-and-hour cases, it strongly suggests that class actions may not be the appropriate means of adjudicating misclassification, meal and rest break, or other claims in which individualized issues, such as an employee's actual duties or the manner in which a particular pay practice is administered, predominate.
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