August 11, 2020

Volume X, Number 224

August 11, 2020

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August 10, 2020

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Court’s Flawed Trial Plan Sinks Overtime Class Action against Employer, California Supreme Court Rules

Calling “seriously flawed” a lower court’s trial management plan which used sampling evidence to prove class liability and damages under California law, the California Supreme Court has vacated a $15-million judgment against the employer for overtime pay and remanded the case for a new trial on both liability and damages. Duran v. U.S. Bank National Ass’n, No. SC S200923 (May 29, 2014). 

The high court’s decision highlights the difficult questions that arise in deciding how individual issues can be successfully managed in a complex class action in California. The Court did not reach any broad conclusion as to whether or when sampling should be available to prove liability in a class action; however, if sampling is used, it advised, the sample must not be too small, and the sample must be randomly selected. 

Furthermore, the Court stated that statistical proof cannot be relied on to bar the presentation of valid defenses to either liability or damages, even if the alternative would require adjudication of a defense on an individual level. If the trial proceeds with a statistical model, a defendant accused of misclassification must be given a chance to impeach that model or otherwise show that its liability is reduced because some plaintiffs were properly classified. 

Background

In this class action case, approximately 260 employees of U.S. Bank (“USB”) alleged they were misclassified as exempt from the right to overtime. At the trial court level, 21 plaintiffs were selected as representative of the class and the class was certified. 

USB challenged the trial court’s certification on two grounds. First, USB argued that taking a statistical sampling to represent all of the people in the class was unfair because USB believed that at least one-third of the people in the class were not misclassified; and even if legitimate, the statistical methodology was unsound. Second, USB argued that on the issue of liability, it had the right to present a defense to each and every claimant on hours worked and whether they were exempt. 

Based on testimony from the small sample group, the trial court found the entire class had been misclassified. The court then extrapolated the average amount of unpaid overtime reported by the sample group to the class as a whole, resulting in a verdict of approximately $15 million and an average recovery of over $57,000 per person. 

The Court of Appeal, while falling short of saying that a court could never use sampling to establish liability in a wage and hour class action case, agreed with USB. It held that in the circumstances presented, the trial court’s reliance on representative sampling to determine liability clearly denied USB due process. The Court of Appeal concluded the trial court had abused its discretion in denying USB’s motion to de-certify the class. Even if certification had once appeared appropriate, it should have become apparent that individual issues predominated so as to render class treatment impossible. In addition to reversing the trial court’s judgment, the Court of Appeal ordered the class decertified. 

Supreme Court Decision

The high court unanimously agreed with the Court of Appeal. The Supreme Court emphasized, “We have encouraged trial courts to be ‘procedurally innovative’ in managing class actions....We have remained open to the appropriate use of representative testimony, sampling, or other procedures employing statistical methodology. However, the trial plan here was seriously flawed. First, without following a valid statistical model developed by experts, the court improperly extrapolated liability findings from a small, skewed sample group to the entire class. Second, in pursuing this extrapolation, the court adamantly refused to admit relevant evidence relating to [class members] outside the sample group. These rulings significantly impaired USB’s ability to present a defense.”

While the Supreme Court did not provide any bright-line rules on the use of statistical sampling, it strongly criticized the trial court’s trial management plan, giving employers an idea of the types of trial procedures that should raise red flags.

Jackson Lewis P.C. © 2020National Law Review, Volume IV, Number 154

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About this Author

David G. Hoiles Jr., Jackson Lewis, Office Managing Principal, Employment Lawyer, Misappropriations Attorney
Office Managing Principal

David G. Hoiles, Jr. is Office Managing Principal of the San Diego, California office of Jackson Lewis P.C. Mr. Hoiles worked in the Los Angeles, California office of Jackson Lewis for 12 years before relocating to San Diego in July of 2014.

Mr. Hoiles represents employers and individual defendants in all types of employment litigation, including the defense of claims of sexual harassment, unlawful employment discrimination and retaliation, failure to provide reasonable accommodations, breach of contract, intentional tort,...

619-573-4919
Kelly D. Gemelli, Jackson Lewis, non-solicitation agreements lawyer, Retaliation litigation attorney
Of Counsel

Kelly (Wood) Gemelli is Of Counsel with the San Diego, California, office of Jackson Lewis P.C. Ms. Gemelli represents employers in all areas of employment law and has litigated a broad range of employment matters.

Ms. Gemelli's experience includes:

  • Discrimination and harassment suits on the basis of age, race, national origin, gender, and disability
  • Leave issues
  • Non-competition and non-solicitation agreements
  • Retaliation claims
  • Wage and Hour claims

She is well-versed in matters that arise under Title VII, the Americans with Disabilities Act, Paid Family Leave, Family and Medical Leave, Pregnancy Disability Leave, and various California state employment-related laws. She regularly appears in state and federal courts and has handled administrative charges before state and federal administrative agencies. Additionally, she has defended numerous wage and our claims and has conducted wage and hour audits for her clients.

619-573-4916
Fraser A. McAlpine, Jackson Lewis, Class Actions Lawyer, Incentive Compensation Attorney
Office Managing Principal

Fraser A. McAlpine is Office Managing Principal of the San Francisco, California, office of Jackson Lewis P.C. He represents employers in complex employment litigation including class actions, collective actions, and representative actions.

Mr. McAlpine has represented employers in a wide range of employment discrimination cases brought by private plaintiffs or governmental agencies involving claims concerning pay, promotions, reduction-in-forces, and reasonable accommodation. He has also represented employers in disputes...

415-796-5472
Sherry Swieca, Ninth Circuit, Litigation, Appellate, Jackosn Lewis Law FIrm
Principal

Sherry L. Swieca is a Principal in the Los Angeles, California, office of Jackson Lewis P.C. Her practice focuses on appellate matters in the California Courts of Appeal and Ninth Circuit Court of Appeals, as well as assisting employers in many industries with compliance, best practices, and preventive measures such as advice on employee discipline and disability-leave management, updating written employment policies, handbooks and arbitration agreements, and conducting personnel investigations and training.

Ms. Swieca is a Certified Appellate Specialist with...

213-689-0404