Co-authored by Kristin McGurn and Kevin Young

Seyfarth Synopsis: At a time when the Massachusetts meal break landscape is increasingly friendly to employees, a federal judge in the state recently denied class certification in a meal break case, Romulus, et al. v. CVS Pharmacy, Inc. At issue were store policies, common in retail, that called for in-store key-holder coverage whenever the store was occupied. This decision represents both a victory and a roadmap for employers, and particularly retailers, facing meal break claims under Massachusetts law.

The plaintiffs in Romulus alleged that as Shift Supervisors, they were required to remain in the store during certain of their unpaid meal breaks, particularly during times when no other managers were present in the store. Further, the plaintiffs alleged, such breaks were often interrupted due to work. Based on these allegations, the plaintiffs sought certification of two classes of Shift Supervisors under Rule 23 of the Federal Rules of Civil Procedure.

On Wednesday, Judge Rya W. Zobel of the District of Massachusetts entered an order denying the plaintiffs’ bid for class certification. Relying on the Massachusetts Supreme Judicial Court’s recent decision in DeVito v. Longwood Security Services, which set a strict standard for being “relieved of all duties” in order for meal breaks to be unpaid under state law, Judge Zobel assumed for purposes of her decision that remaining on-premises during a break is compensable “work.” Even under that assumption, Judge Zobel found class certification improper due to the plaintiffs’ inability to satisfy Rule 23’s “commonality” and “predominance” requirements.

With respect to commonality, Judge Zobel relied on the U.S. Supreme Court’s monumental decision Dukes, et al. v. Wal-Mart Stores, Inc. in searching for a “common contention” that might produce the same injury to all class members. The judge found that resolving plaintiffs’ claims depended on the answers to two questions: (1) were putative class members required to remain in the store during meal breaks; and (2) if so, were they required to clock out (and thus be unpaid). She ruled that plaintiffs’ reliance on CVS’s policy and handbook statements were insufficient to resolve these critical questions on a class-wide level.

Specifically, Judge Zobel rejected the contention that policy statements relating to supervisor presence in the store when it was occupied by customers, taken together with a policy providing unpaid meal breaks, equated to common proof of an illegal practice capable of resolving all class members’ claims. The plaintiffs did not contend that the policies were facially unlawful, but rather challenged their implementation. Siding with CVS, Judge Zobel noted that the policy language did not necessitate that a Shift Supervisor remain in-store during meal breaks or take a meal break when no other manager was present. The judge also noted CVS policy language providing for the reporting and payment of in-store breaks. Accordingly, Judge Zobel found that—even assuming a policy requiring Shift Supervisors to remain in the store during certain meal breaks—resolving whether class members were required to clock out and go without pay for such breaks could not be resolved through common proof.

Judge Zobel also found that Rule 23’s more demanding predominance factor was unmet. That is, even if the law required CVS to compensate Shift Supervisors for meal breaks when they were required to remain on premises, the questions of whether supervisors were in fact required to do so, and whether they were then compensated, remained both unanswered and individualized. Denying certification, Judge Zobel ruled that the proposed classes were not “sufficiently cohesive to warrant adjudication by representation.”

The Romulus decision represents a major win for employers in the battle to avoid class certification, which is particularly notable on the heels of the stringent standard for unpaid meal breaks established in DeVito. The decision also provides a strategic roadmap for employers seeking to avoid certification where break-by-break implementation of facially lawful meal break policies is challenged.

Authored by Michael W. Kopp

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.

Authored by Geoffrey Westbrook

After more than four years of litigation, Citibank hauled in a significant victory last week against putative class and collective actions in Ruiz v. Citibank. Personal bankers from California, New York, Washington D.C. and other states alleged that Citibank withheld overtime pay under a nationwide scheme encouraging off-the-clock work. Although finding “systematic violations at the branch level,” a New York federal district court held that the plaintiffs failed to produce sufficient evidence to connect those violations to an uniform, overarching company practice. The court denied the plaintiffs’ bid for class certification of state law claims and decertified a collective action under the Fair Labor Standards Act.

Ruiz is part of a growing trend among trial courts emphasizing the need for evidence of an unlawful company policy in nationwide class and collective actions. Modern class actions must satisfy the “rigorous” Rule 23 certification standard articulated by the U.S. Supreme Court in Wal-Mart Stores, Inc. v. Dukes. Collective actions, however, are assessed under the FLSA’s “similarly situated” test. As explained below, the court in Ruiz blurred the lines between these two distinct standards, requiring evidence of an illegal company policy or uniform nationwide managerial conduct supporting the plaintiffs’ claims in both types of actions. Without such evidence, even with nationwide violations at the local level, under Ruiz both must fail.

Background

Digna Ruiz, a New York resident, filed a complaint seeking to represent a nationwide collective action under the FLSA and a class action under state labor law. He alleged that Citibank failed to compensate its personal bankers for overtime hours by setting high production targets and strictly limiting overtime work. A month later, residents of Washington, D.C., Illinois, Virginia and California filed nearly identical collective and class actions under the FLSA and laws of their respective states. These matters were consolidated in the U.S. District Court for the Southern District of New York.

After limited discovery, the court granted conditional certification of the FLSA collective action. More than 400 personal bankers opted in, and discovery proceeded in anticipation of the plaintiffs’ motion for class certification and Citibank’s motion to decertify the collective action.

Denial of State Law Class Certification Based on Rule 23 and Dukes

Class certification was denied based almost entirely on the “commonality” requirement of Rule 23. To certify a nationwide class, among other requirements, there must be some evidence of a common policy or management practice that is subject to testing at the class-wide level. The court likened the case to Dukes, where written corporate policies were lawful and managers were lawfully given significant discretion over pay and promotions. In the absence of an illegal policy, Dukes requires evidence showing an unlawful corporate practice connecting Citibank’s more than 900 branch offices across the country. Evidence of a local or even regional policy will not likely be sufficient to certify a nationwide class.

The plaintiffs failed to show Citibank’s lawful policies uniformly translated themselves into unlawful managerial behavior across the country. Anecdotal evidence demonstrated conflicting experiences among bankers nationwide in which some personal bankers felt pressured to work off the clock, while others had no issue meeting performance goals. There was significant evidence that certain managers pressured bankers not to report overtime hours, but at those and other branches many were properly paid overtime, indicating at best an inconsistent practice. Knowledge of overtime violations rarely percolated above the district level, and when it did, immediate efforts were made by area management to rectify the violations. Thus, the plaintiffs could not establish a common management approach — on a nationwide basis — in exercising their considerable discretion and resulting in unpaid overtime through Citibank branches as a whole. Evidence of even systematic violations at the branch level (and in some cases reaching up to senior management) was not sufficient to certify a nationwide class.

Decertification of FLSA Collective Action

In decertifying the FLSA collective action, the court followed a rising trend analogizing the “commonality” requirement of Rule 23 to the “similarly situated” test for collective action ultimate certification. In this vein, the Ruiz court granted Citibank’s decertification motion. It relied on the same evidence underlying its class action certification denial, holding that “Plaintiffs have advanced the ball very little in demonstrating a common plan or scheme.” Secondhand statements regarding an alleged companywide policy to force unpaid overtime by branch managers, in the face of Citibank’s lawful overtime and performance policies, was not sufficient to show personal bankers across the country were “similarly situated.” All told, evidence of individual overtime violations at the district level will not alone carry the day for purposes of class and collective action certification.

Conclusion

Ruiz represents a growing movement of the courts seeking to bridge the analytical differences between class and collective actions. The result of this trend is a greater uniformity in wage and hour decisions based on parallel theories. Logically, a putative class of plaintiffs failing to meet Rule 23 “commonality” requirements should not be permitted to proceed with a collective action either. We will continue to track district courts throughout the country in hopes that this common sense line of cases increases in popularity.

Authored by Jessica Schauer Lieberman

This week, the U.S. District Court for the District of Massachusetts took retailer Lowe’s advice to “never stop improving” — on the class certification standard.  The court issued a decision that may demonstrate that employers are gaining ground in convincing district courts to more narrowly interpret the class certification requirements in light of recent Supreme Court case law. 

The case, Magalhaes v. Lowe’s, was filed by a Lowe’s subcontractor who installed shades and blinds for Lowe’s customers.  The plaintiff claimed that the arrangement violated Massachusetts’s restrictive independent contractor statute and sought class certification on behalf of a putative class of installation subcontractors whom he claimed should have been classified as employees.  District Judge Denise Casper denied the plaintiff’s motion, stating that he had failed to meet the commonality, typicality, adequate representation prongs of Rule 23(a), as well as the predominance requirement of Rule 23(b)(3). 

The court  relied heavily on the Supreme Court’s 2011 decision in Wal-Mart v. Dukes in rejecting the plaintiff’s claim that commonality was satisfied because all of the subcontractors signed identical contracts with Lowe’s.  The court stated that the contract was insufficient to demonstrate common questions of fact because degree of control that Lowe’s actually asserted over the contractors varied despite the terms of the contract.  For example, the amount of interaction that each contractor had with Lowe’s representatives varied widely.  In addition, the work at issue involved “over fifty different industries” that would each have to be examined individually to determine whether they were “outside the usual course” of the defendant’s business.  As a result, a class-wide proceeding could not “produce a common answer” to the central questions in the case. 

The court also determined that the plaintiff’s claims were not typical of the putative class and that he was not an adequate representative because he had his own established window treatment  installation business and employed two other individuals who also did work for Lowe’s customers.  Not only were other class members differently situated for this reason, but the plaintiff’s status as an employer in his own right created a conflict because the contract he signed with Lowe’s required him to indemnify the company for lawsuits brought by his own employees.

Finally, the court stated that the factual distinctions it had identified in addressing the commonality, typicality and adequate representation prongs would create individual inquiries that would overwhelm any common issues.  As a result, the predominance requirement of Rule 23(b)(3) was not met. 

The case is notable for the its heavy reliance on Dukes’ admonition that common questions must be able to “resolve an issue that is central to the validity of each one of the claims in one stroke.”  The decision undoubtedly will help many employers build their own defenses to class certification.

Fourth Circuit.bmpCo-authored by Richard Alfred and Kevin Young

Since the Supreme Court decided Dukes v. Wal-Mart in June 2011, litigants have wrestled over its impact on wage-hour class and collective actions.  Plaintiffs typically argue that Dukes should be limited to its context—a mega Title VII discrimination case brought as a Rule 23(b)(2) class action.  Defendant-employers respond—correctly in our view—that the principles that guided the Court’s decisions, both on Rule 23’s commonality requirement and Due Process concerns over individualized proof of monetary damages, apply equally to wage and hour class and collective actions.  The Fourth Circuit (which encompasses federal courts in Maryland, the Carolinas, and the Virginias) weighed in on the debate last week, refusing to narrowly cabin the Court’s landmark decision and endorsing Dukes’ as a mandate for a “more rigorous” analysis in deciding whether to certify a state law wage-hour class action.

Ealy v. Pinkerton Government Services involved overtime claims under the FLSA and post-shift work and meal break claims under Maryland law.  The plaintiffs, security personnel at Andrews Air Force Base, reported to the base armory at the start of each shift to obtain weapons and equipment to be used while on shift, and returned the weapons and equipment at shift-end.  Returning the weapons and equipment took about 15 minutes which, the plaintiffs alleged, was uncompensated.  They also alleged that their time was deducted for a daily meal break that they actually spent on duty.  The district court conditionally certified an FLSA collective and, in a later ruling, granted class certification under Rule 23(b)(3) of the state-law claims.

The Fourth Circuit forcefully reversed the district court’s class certification decision, explaining that the court abused its discretion by failing to undertake the “more rigorous” class certification analysis required by Dukes and focusing heavily on Rule 23(a)’s commonality requirement.  Rejecting the conclusion that proposed class members were sufficiently united by the question of whether they were compensated for meal breaks, the Court of Appeals ruled, expressly relying on Dukes, that the alleged common question must be “dependent upon a ‘common contention,’ the resolution of which will resolve ‘each one of the claims in one stroke…’”  Moreover, the Court of Appeals relied on Dukes in cautioning the district court not to blend this commonality inquiry with the separate Rule 23 inquiry as to whether common questions of law or fact predominate over those affecting only individual class members.

Because the district court failed to conduct the rigorous class certification analysis that Dukes requires, the Fourth Circuit vacated the class certification decision.  On remand, the court must now apply the rigorous analysis required by Dukes in determining whether plaintiffs have met their burden of proving that Rule 23’s requirements are satisfied and that a class may be certified.  The broader importance of the Fourth Circuit’s decision is that another appellate court has joined the Seventh, Eighth, and Ninth Circuits in ruling that Dukes raises the bar for bringing state law wage-hour class claims in federal court. 

Seventh Circuit.jpgCo-authored by Laura Reasons, Giselle Donado, and Noah Finkel

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.

N.D. Ohio.bmpAuthored by Kristin G. McGurn

A federal judge in the Northern District of Ohio continued a recent trend in automatic meal break deduction litigation by decertifying a conditionally-certified nationwide class of HCR Manorcare’s nursing home employees (click to link HERE). The potential class included 44,000 current and former HCR workers from 300 short- and long-term assisted living, skilled nursing, and rehabilitation facilities across the country.  Discovery involved managers, HR staff, and hourly employees at 26 facilities as plaintiffs hailing from 28 states had opted in to the suit.  The court concluded that HCR’s meal break policy, which deducted 30 minutes automatically from timecards on certain shifts and required employees to report exceptions, was lawful.  There was no allegation or evidence that HCR employed a policy to violate that compliant policy.  Plaintiffs argued that the common theory of liability binding plaintiffs together was HCR’s lack of vigilance and involvement in local implementation.  The court refused to maintain the conditional class based on HCR’s use of the automatic deduction  itself.  It focused instead on differences among the opt-in plaintiffs as to how managers in HCR’s far-flung network handled reporting of missed or interrupted meal breaks, their training on the policy, and encouragement for exception reporting.  The court also found that differing responsibilities, employment experiences, personal habits, and individualized defenses among HCR’s registered nurses, licensed practical nurses, certified nursing assistants, and admission coordinators were too disparate to support a collective action.  The court held that proceeding collectively would be neither fair nor useful if based on representative testimony, and was otherwise procedurally unmanageable.  As a result, the court dismissed the claims of 318 opt-in plaintiffs.

Importantly, the court also refused to certify a partial collective action because discovery revealed that employees’ meal break experiences were not linked to their position, shift or facility, but rather to individual managers’ decisions in implementing policy.  Plaintiffs did not suggest how sub-classes could be established. 

Decertification of the conditional class followed a mandamus petition to the Sixth Circuit, in which HCR challenged, under federal rules governing joinder of parties and class actions, the familiar two-step process (conditional certification and notice/decertification) employed by most courts facing FLSA collective actions.  Through the writ of mandamus, HCR sought to vacate the nationwide conditional certification and interrupt the delivery of notice to a sampling of employees across the country, relying on Wal-mart, Inc. v. Dukes principles (click to link HERE) that the district court had held were inapplicable to the collective action.  Though the Sixth Circuit denied the writ, that court recently upheld decertification in similar automatic meal-period deduction cases in, White v. Baptist Mem’l Health Care Corp. (click to link HERE) and Frye v. Baptist Mem’l Hosp., Inc. (click to link HERE).  The Northern District of Ohio, bound by those decisions, has continued this trend.

supreme court.jpgCo-Authored by Richard Alfred, Patrick Bannon and Jessica Schauer Lieberman

In the year and a half since the United States Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, litigants, courts and even the Supreme Court itself have continued to analyze the legal standard for certification of Rule 23 class actions.  The Supreme Court heard oral argument yesterday in Comcast Corp. v. Behrend, a case that could have important implications for wage and hour class actions, and perhaps collective actions as well.

The named plaintiffs in Behrend alleged that antitrust violations by Comcast caused damages to about two million cable subscribers in Greater Philadelphia by raising the price of their cable service.  The trial court judge certified a class of the two million subscribers, based in part on the judge’s finding of “predominance” — a finding that questions of law or fact that affected all of the would-be class members “predominated” over questions affecting only individual customers.  Comcast argued that it was improper to certify the class because the named plaintiffs’ only evidence of the damages subscribers allegedly suffered was an expert witness report that Comcast contended was fundamentally methodologically flawed.  According to Comcast, the trial judge mistakenly thought he was required to accept the expert report at face value at the certification stage of the case and defer evaluation of the methodology until post-certification.

The Supreme Court agreed to consider the case but reformulated the issue presented by Comcast to the question whether a federal trial court may certify a class action without resolving whether the plaintiff has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.  Surprisingly, yesterday’s oral argument focused more on issues peripheral to that question and on procedural defects claimed by the plaintiffs than on the question presented for Supreme Court review.   In fact, at one point, it seemed that several of the Justices were considering dismissing the case because of Comcast’s alleged waiver of a key argument in the courts below.  Nonetheless, the oral argument offered at least two possible insights into the Court’s thinking that may be important for the future of wage and hour class and even collective actions.

First, both Comcast and the cable subscribers started their arguments from key premises in Dukes:  that a party seeking class certification cannot merely allege, but must be able to prove, the certification requirements; and that the trial court should conduct a “rigorous analysis” of a plaintiff’s proof regarding certification requirements.  The majority opinion in Dukes suggested that the trial court’s rigorous analysis should include assessment whether evidence offered by a plaintiff’s expert witness was sufficiently reliable to be considered admissible.  At the oral argument in Comcast, the two sides agreed that a trial judge has an obligation to make some assessment at the certification stage whether expert evidence is sufficiently reliable to support certification.  Even the lawyer for the plaintiff cable subscribers conceded this point.  If the Court’s opinion in Comcast reflects this conclusion, employees would find it harder to rely on shaky expert evidence to support certification of wage and hour class actions.

Second, there also seemed to be broad agreement at oral argument that both damages issues and liability issues (not merely liability issues) should be considered in determining whether common issues of law or fact predominate in a potential class action.  Indeed, merely by asking whether a trial court should always require admissible evidence that damages could be awarded on a class-wide basis, the Supreme Court seems to imply that the individualized nature of damages may defeat class certification.  Both sides accepted this proposition, as well, agreeing that plaintiffs had to establish that damages could be proven on a class-wide basis before a class could be certified.  In fact, at one point in the argument, Justice Kagan quipped that she was “still in search of a legal question that anybody disagrees about here.”

If the Supreme Court adopts this predominance standard for class actions that seek monetary damages as the primary relief, such as wage and hour claims, it will be far more difficult for plaintiffs to obtain class certification.  In many wage and hour class actions, claimed damages are highly individualized.  Plaintiffs have argued and a number of courts have ruled that the individual nature of damages does not defeat class certification where common questions of law or fact predominate in determining whether the employer is liable.  A ruling by the Supreme Court in Comcast that plaintiffs must be able to demonstrate that they will be able to measure damages on a class-wide basis for class certification would refute those arguments and require district courts to deny class certification in wage and hour cases that require individualized proof of damages. 

Further, if damages as well as liability issues count in deciding whether common questions predominate under Rule 23, the same rationale should apply in collective actions under the Fair Labor Standards Act in deciding whether a group of employees are “similarly situated” for purposes of conditional certification and decertification.  If a group of employees have been affected by a challenged wage and hour policy or practice in ways that would lead to individualized damages, then courts should find those employees not “similarly situated” and should deny collective certification.

It remains to be seen whether Comcast produces an important follow-on opinion to Dukes or a quiet dismissal on technical grounds.  But employers facing wage and hour claims should find the oral argument encouraging as a measure of how the common ground regarding class certification standards has shifted in the 16 months since Dukes.  We expect a decision this winter and will, of course, keep our readers informed as developments occur.

scapel.jpgCo-authored by Richard Alfred and Kevin Young

As readers of our blog know from prior posts, we have argued successfully before several courts that the Supreme Court’s landmark ruling in Wal-Mart Stores v. Dukes has an important impact on collective and class actions brought under the FLSA and state wage and hour laws.  With its July 29th ruling in Dinkel v. MedStar Health, Inc., the District of Columbia’s federal district court joined those courts that have confirmed the application of Dukes to wage and hour collective actions by citing Dukes in denying FLSA and D.C. Minimum Wage Act conditional certification of the plaintiffs’ broad proposed collective.  The ruling confirms, among other issues addressed in the court’s opinion, that Dukes provides viable arguments that aid in the defense of plaintiffs’ efforts to conditionally certify putative collective actions based on allegations of only a few.

MedStar owns nine hospitals in the District of Columbia and Maryland.  The plaintiffs worked at only one of them, the Washington Hospital Center (“WHC”).  At any given time, the court explained, there were nearly 4,000 hourly employees working across WHC’s 200+ departments.  Not content to limit their conditional certification bid to employees from the two departments in which they worked, the plaintiffs sought to conditionally certify a collective of all non-exempt WHC employees plus all hourly employees in all departments at MedStar’s eight other hospitals.   

The plaintiffs sought to assert two claims under both the FLSA and the DC-MWA on behalf of this proposed collective.  The first was a meal break claim based on an alleged automatic 30-minute deduction for lunch breaks.  An automatic deduction, in and of itself, does not violate the law.  But the plaintiffs alleged that MedStar’s auto-deduction crossed the line because of an unwritten policy under which supervisors and managers “discouraged” and “ignored” employees’ efforts to receive pay for auto-deducted breaks during which they were required to work.  The second claim was a uniform maintenance claim, in which the plaintiffs alleged that they and other hourly employees spent hours maintaining their uniforms each week away from the hospitals and “off the clock.”

In Dinkel, the D.C. district court rejected the plaintiffs’ broad proposed meal break collective under both the FLSA and DC-MWA, citing concerns with the plaintiffs’ barebones factual showing in support of their conditional certification motion and with the manageability of the proposed collective.  The plaintiffs’ only evidence based on their own “personal knowledge” of a potentially unlawful unwritten policy involved the two departments at WHC in which they worked.  For the other 200+ departments at WHC, not to mention the other eight hospitals, the court observed, the evidence was “limited to the existence of an auto-deduct policy, which is not by itself the least bit unlawful,” and plaintiffs’ unsupported assertions were “insufficient to discharge their burden”–even applying the relatively lenient standard for conditional certification.

Furthermore, the court reasoned, cases like Dukes signal that the plaintiffs’ proposed collective would have been objectionable even if their evidence had been more robust.  Their claim turned on an alleged unwritten policy, purportedly carried out by supervisors and managers, to block employees’ efforts to be paid for missed meal breaks.  Even at the “early stage of proceedings,” the district judge wrote, referring to conditional certification, “the Court cannot turn a blind eye to the fact that such a practice will ultimately turn on the way in which individual supervisors and managers exercised their discretion to manage employees’ meal breaks.”  Citing Dukes—which, in announcing a higher commonality standard for Rule 23 class actions, directed attention to a class proceeding’s capacity to generate common answers, not a plaintiff’s capacity to raise common questions—the court doubted “a workable across-the-board approach for such a determination.” 

Based on these considerations, the court substantially reduced the plaintiffs’ proposed meal-break collective.  Rather than conditionally certifying a collective across all departments of all nine hospitals, as the plaintiffs sought, the court limited it to the two departments at WHC where the plaintiffs worked.  While the court also conditionally certified the plaintiffs’ proposed collective on their uniform-maintenance claim, that decision resulted from “the absence of a meaningful opposition from Defendants” and not from any analysis of the facts.

Dinkel is a significant win for employers.  The court refused to conditionally certify the plaintiffs’ broad proposed meal break collective because of (1) their failure to show through personal knowledge that they were similarly situated to the group they sought to sweep into the alleged collective; and (2) concerns that the claims of the proposed members of the collective would require inquiries too individualized to adjudicate collectively.  The Supreme Court’s mandates in Dukes require plaintiffs to make a factual showing that their proposed collective––even for conditional certification––is manageable and not dependent on individualized proof.  Under the teachings of Dinkel, these mandates doom the common practice of plaintiffs to submit a thin factual record, often limited to the named plaintiff’s position, supervisor, facility, department, division, geography, and the like, in support of conditional certification of a collective far broader in scope.

 

bduking.jpgCo-authored by Richard Alfred and Kevin Young

It has been more than a year since the Supreme Court’s landmark ruling in Wal-Mart Stores, Inc. v. Dukes, and its impact on wage and hour class actions remains hotly debated.  While plaintiffs’ attorneys have argued that the decision is limited substantively to discrimination cases and procedurally to Rule 23(b)(2) class actions, an increasing number of court rulings have endorsed  the application of Dukes’ commonality and due process holdings to wage and hour claims, at least in state law class actions.  The issues were the focal point last Tuesday when the Ninth Circuit heard oral argument in Wang v. Chinese Daily News.  The Ninth Circuit had previously affirmed the district court’s handling of the case––including its certification of a class under Rule 23(b)(2) and its judgment for the plaintiffs following a jury trial––but the Supreme Court vacated that ruling post-Dukes and sent the case back to the Court of Appeals for “further consideration in light of … Dukes….”  The Ninth Circuit’s ruling this time around will almost certainly impact Dukes’ application in wage and hour class actions.

Wang took a protracted path to last week’s oral argument.  It began over eight years ago, in March 2004, when three employees of the Chinese Daily News filed a hybrid class action in a California federal district court, alleging violations of both the FLSA and California Labor Code  arising from alleged unpaid overtime and meal and rest break violations.  In 2005, the district judge certified a California class of 200 individuals under Rule 23(b)(2), or, in the alternative, 23(b)(3).  (Rule 23(b)(2) class claims seek equitable relief, such as an injunction, while (b)(3) classes seek monetary relief.  Any plaintiff seeking class certification under either provision must show that there are common questions of law or fact among the putative class members, but a plaintiff seeking a (b)(3) class must also show that those questions predominate over individualized questions and that a class action is superior to other methods of adjudication.)

The newspaper suffered a string of defeats in the ensuing years.  In 2006, it tried and failed to decertify the class.  In 2007, a jury returned a verdict in the plaintiffs’ favor, and in 2008, the district judge entered judgment against the newspaper in the amount of $5.2 million.  Finally, in 2010, the Ninth Circuit affirmed the district court’s handling of the case, including its decisions on class certification and judgment. 

But the case took a turn in 2011, as the newspaper petitioned for Supreme Court review at the end of March, and the Court decided Dukes just a few months later.  As we reported, Dukes tightened the standard plaintiffs must meet to satisfy Rule 23’s commonality requirement and made clear that a defendant has a due process right “to individualized determinations of each employee’s eligibility for backpay,” at least under Rule 23(b)(2).  Because this latter holding—which was unanimous—is based on Constitutional principles, defendants have reasoned that it applies to all class claims, not just discrimination class claims brought under 23(b)(2).  We agree and have argued that both holdings in Dukes apply to wage and hour class actions.  In late 2011, the Supreme Court vacated the Ninth Circuit’s ruling affirming Wang and remanded the case for consideration in light of Dukes—thus, Wang is a clear opportunity to address this issue. 

With Tuesday’s oral argument, the Ninth Circuit undertook its further consideration of Wang.  Having no choice but to concede that their class was not properly certified under Rule 23(b)(2), the plaintiffs argued that certification was nonetheless proper under 23(b)(3).  The newspaper argued otherwise in its briefs, urging that the tighter Rule 23 commonality requirement and due process concerns announced in Dukes applied to the plaintiffs’ Rule 23(b)(3) claims and were not satisfied.  At argument, the Ninth Circuit panel focused on three questions:  (i) how Dukes changes the class certification calculus in Wang, (ii) how the California Supreme Court’s decision in Brinker impacts the meal break issue, and (iii) what evidence the district court should use in deciding certification if that issue is sent back to the lower court for a post-Dukes assessment. These questions may signal the panel’s inclination to rely on Dukes to vacate the district court’s decision certifying a Rule 23(b)(3) class and to remand the case.

Of course, how the Ninth Circuit will rule remains uncertain.  The stakes are certainly high.  But if, as we predict, the court rules that the commonality and/or due process concerns addressed in Dukes apply in Rule 23(b)(3) wage and hour class actions, it will provide employers with new ammunition in their defense against such lawsuits.  Over time, it could force those bringing these lawsuits to narrow the scope of their proposed classes to satisfy Dukes-based concerns.  This would reverse the very troubling decade-long trend of forcing employers to defend wage and hour class claims based on insufficient evidence of commonality and grossly unfair and statistically inadequate representative proof of damages.

A ruling by the Ninth Circuit applying Dukes to Wang’s class claims would also create a split with the Seventh Circuit’s decision in Ross v. RBS Citizens, which is the first and, to date, only federal appellate court decision to assess the application of Dukes in the wage and hour class context.  In Ross, the Seventh Circuit found that Dukes had no impact on a district court’s decision to certify under Rule 23(b)(3) a class of 1,100 individuals, most of whom claimed that they worked off the clock.  The Seventh Circuit found that Dukes’ broad language regarding Rule 23’s commonality requirement has no application outside the case’s exceptional facts––a class of millions asserting discrimination claims that required proof of individual intent.  That court also concluded, in a footnote, that the due process concerns described in Dukes apply only to 23(b)(2) classes, not (b)(3) classes.

Coincidentally, RBS filed a petition for certiorari late last week, seeking Supreme Court review.  While Supreme Court review is rarely granted, the likelihood that it will be granted increases dramatically in the event of a circuit split.  While there is no split in the circuits at this time, a Ninth Circuit ruling in Wang applying Dukes to Rule 23(b)(3) wage and hour class actions would change that and enhance the chances that the Supreme Court will intervene.  We will, of course, keep our readers fully informed as developments arise.