In an opinion likely to make it more difficult for wage-hour plaintiffs to certify a class action and maintain certification of a collective action, the Seventh Circuit affirmed the Western District of Wisconsin’s decertification decision in Espenscheid v. DirectSat USA, LLC on the grounds that trial was not manageable under the plan submitted by plaintiffs, where determining damages would require 2,341 separate evidentiary hearings. We previously discussed the District Court’s decision here (and thus will not rehash the background facts). Espenschied is a very important decision that could shape the wage-hour certification landscape because of its holding that ultimate certification of a collective action is subject to the same standard as a Rule 23 class action, its requirement that damages in a wage-hour case be capable of being determined through common proof, and its emphasis on a workable, trial plan as a predicate for class and collective action certification.
In the Seventh Circuit’s opinion, Judge Posner started from the premise that, for certification purposes, there is no reason to treat a state-law wage-hour class action brought pursuant Federal Rule of Civil Procedure 23 differently from a collective action under Section 216(b) of the FLSA. It explained that the district court correctly held that plaintiffs had not presented a feasible trial plan. Determining damages would require 2,341 separate evidentiary hearings. This was not a case where, for example, each technician worked from 8 a.m. to 5 p.m. and was forbidden to take a lunch break. The court reasoned that, in such a case, damages could be calculated formulaically by a computer program. But in this case, damages for each individual plaintiff would have to be determined separately by a trier of fact, as such determinations would turn on individual facts such as a workers’ effort and efficiency, different tasks performed, and the reasons the workers did not record certain tasks. Those same factors are present in several off-the-clock collective or class actions
The Seventh Circuit also upheld the district court’s rejection of plaintiffs’ proposal to present trial testimony from 42 “representative” members of the 2,341-person class. This proposal was problematic because it did not appear that the “representatives” were chosen in a statistically sound manner. Moreover, extrapolating damages of the “representatives” to the whole could result in conferring a windfall on some, while shorting others. Indeed, plaintiffs themselves acknowledged at argument that it would be “[d]ifficult for Plaintiffs to provide an objective framework for identifying each class member within the current class definitions without making individualized findings of liability.”
The court stated that class counsel “must think that like most class actions suits this one would not be tried — that if we ordered a class or classes certified DirectSat would settle. That may be a realistic conjecture, but class counsel cannot be permitted to force settlement by refusing to agree to a reasonable method of trial should settlement negotiations fail.” The court wrote that class counsel essentially had “asked the district judge to embark on a shapeless, free-wheeling trial that would combine liability and damages and be would virtually evidence free as far as damages were concerned.” This, the Seventh Circuit would not allow and thus upheld the district court’s decertification decision.
With this opinion, the Seventh Circuit has given employers some improved tools to defend against class and collective claims. This decision demonstrates an emerging trend to treat Section16(b) collective actions and Rule 23 class actions as one for purposes of analyzing certification. Judge Posner expressly stated that “there isn’t a good reason to have different standards for the certification of two different types of action, and the case law has largely merged the standards, though with some terminological differences.” With that in mind, Judge Posner reviewed the district court’s decision to decertify the three subclasses, treating “the entire set of suits before [the court] as if it were a single class action.” Few appellate courts, or district courts for that matter, have set forth the level of common proof that collective action plaintiffs must set forth at the ultimate certification stage. The Sixth Circuit, for example, has suggested that it may be similar to the standard for joinder under Federal Rule 20. O’Brien v. Ed Donnelley Enterprises, Inc. 575 F.3d 567, 584-86 (6th Cir. 2009). The Seventh Circuit takes the different view that the standard is more in line with the rigorous standard under Rule 23. In doing so, Espenschied brings the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes into the fold for 216(b) collective actions by using Rule 23’s commonality standard to drive the certification decision.
This decision also puts the onus on plaintiffs seeking certification of large classes based on a “representative” sample to provide evidence that the claims and damages of all class members can be readily ascertained from the sampling in order to satisfy Rule 23’s commonality standard. Indeed, plaintiffs’ inability to articulate how their “representative” sample was truly representative was fatal to certification. Importantly, Judge Posner suggests that even differences in damages among the class members might be reason enough not to allow certification. Offering a purportedly “representative” sample of class members, without more, likely will no longer be sufficient. Here, Dukes’ guidance on statistical evidence will prove useful to employers by providing a high threshold for what statistical evidence plaintiffs may use as the glue that binds the claims and damages of class members. With that in mind, employers would be wise to prepare a discovery plan that demands that plaintiffs establish the validity of the “representative” nature of their class sample with respect to their claims and damages. This strategy may prove useful in limiting the class to the individual representatives, and foster an early settlement given the heavy burden plaintiffs will face to validate their “representative” sample.
Finally, Espenschied makes clear that practical considerations are not to be ignored at the ultimate certification stage. The Seventh Circuit gave much weight to the fact that the plaintiffs did not offer a feasible way for determining liability and damages based upon their representative sample, and noted that while, as a practical reality, most certified classes do go on to settle, that does not obviate the need to provide evidence that plaintiffs are able to calculate damages in a meaningful way for all class members. Employers would be wise to demand a trial plan from plaintiffs explaining how they will attempt to ask the court to determine liability and damages for the class, particularly in those cases where plaintiffs rely on a representative sample. Any failure by plaintiffs to provide a feasible plan to ascertain the claims and damages should prove useful in opposing certification. Indeed, these practical considerations also may be worth raising at the conditional certification stage. While the standard is a lenient one, alerting the court that plaintiffs’ claims present significant practical hurdles that cannot be cured may sway the court. The court’s message in Espenscheid was clear–judicial resources should not be wasted simply to facilitate a settlement of a class whose claims are not ascertainable and damages are not readily calculable without individualized findings.