Co-authored by Steve Shardonofsky and Maya Harel

In opposing class- or collective-action certification, employers often submit declarations from current employees stating that they have been paid properly and have not been subject to whatever unlawful policy or practice is at issue.  There is an increasing trend in courts across the country to reject these type of declarations on the basis that they are inherently unreliable (because, it goes, they are obtained from current employees who presumably have an incentive to “cooperate” with their employer).  But in a recent tentative order (which we expect will be finalized soon) denying class certification, a footnote by U.S. District Judge George H. Wu from the Central District of California could stem this tide and help level the playing field for employers.  There are many famous and significant footnotes in American jurisprudence, like Footnote 4 in United States v. Carolene Products Co. (which first outlined strict scrutiny review in constitutional law).  While Judge Wu’s footnote in Rea v. Michaels Stores, Inc. won’t change the landscape of constitutional jurisprudence, it could become important for future class- and collective-action battles.  Employment counsel will also find Judge Wu’s exposition on the standard for predominance under Rule 23 enlightening and helpful for future litigation.

To Form a More Perfect Footnote…

The plaintiffs in this case alleged that Michaels had misclassified its store managers in California. There was lengthy litigation before the case was removed to federal court (including an interlocutory appeal to the Ninth Circuit). During that time, a state court had certified a class of store managers according to state certification standards and procedures.  Once in federal court, Michaels moved to decertify the class, arguing that Plaintiffs could not meet the requirements of Rule 23 of the Federal Rules of Civil Procedure.  To buttress this argument, Michaels submitted declarations of current employees to demonstrate that the plaintiffs’ experiences were not common of those of the class members and that individualized issues predominated.  In response, the plaintiffs argued that declarations from current employees should not be trusted.

Instead of accepting blindly (as some courts have done) the idea that declarations from current employees lack evidentiary value and are inherently unreliable, Judge Wu took a more measured and well-reasoned stance on this issue in Footnote 3 of his opinion (and also gave the plaintiffs a dose of their own medicine).  Why, Judge Wu asked rhetorically, should the Court look “with a jaundiced eye” toward the declarations of current employees, “but take at face value evidentiary submissions of former employees, who one might presume (if one were engaging in speculative presumptions) have an axe to grind”?  Courts should not reject the declarations en masse, Judge Wu explained, until they “are shown to be individually false.”  This makes logical sense, although only time will tell if Judge Wu’s reasoning will resound with other courts.

Rule 23 Predominance Is Not About The Numbers; Quality Counts Here Too

A state court’s interlocutory ruling granting class certification is not afforded full faith and credit protection by the federal courts.  Consequently, upon removal, Michaels moved to deny class certification under Rule 23.  After a detailed review of the briefing and arguments, Judge Wu denied class certification (essentially decertifying the class that had been certified in state court).  He rejected the plaintiffs’ contention that the question of whether the executive exemption applied could be answered on a class-wide basis simply because the store managers had common job descriptions and were subject to some common policies.

Despite some common questions, however, Judge Wu concluded that many issues relevant to assessing whether the store managers met the executive exemption — particularly those relating to discretion/independent judgment and the “primarily engaged in” element — would predominate over common questions of law or fact.  As he explained, the predominance inquiry “does not involve counting the number of common issues, but weighing their significance.”  Because of the significance of the individualized inquiries at issue, any class proceedings “would almost necessarily devolve into individual mini-trials,” Judge Wu wrote.  This he knew from past experience because he presided over a bench trial involving the misclassification of one of Michaels’ store managers in July 2013.  Because the plaintiffs could not satisfy the predominance requirement, Judge Wu denied class certification outright without considering the other parts of the Rule 23 analysis (numerosity, typicality, adequacy, and superiority).

Judge Wu’s decision strengthens the rationale for using declarations as a strategic tool to oppose class- and collective-action certification.  Given the significance of Footnote 3, don’t just gloss over the next footnote you come across.  It may win the case for you the next time around.  The decision also highlights a legal point sometimes missed by judges and practitioners: when it comes to class or collective-action certification, not all issues carry the same weight.  It’s not about counting common issues or individualized inquiries; rather, it’s about how significant or important each of those issues are.  Write the response brief in those terms, and you will be a few steps ahead.

Leave a Reply

Your email address will not be published. Required fields are marked *