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Vedder Thinking | Articles California Corner: California Employers Have More Ammunition in Fighting Class Certification

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In December 2001, there was a class action lawsuit filed against U.S. Bank National Association alleging certain California loan officers had been misclassified as exempt from overtime. The case proceeded to trial, with the judge allowing use of "representative testimony" from slightly less than 10 percent of the putative class for the purpose of determining liability. Thereafter, the court used statistical expert testimony to extrapolate classwide damages, resulting in a $15 million verdict against U.S. Bank.

The Bank appealed, arguing that it was not appropriate to determine liability or damages based on a sampling, particularly where the court did not allow the Bank to submit contrary evidence from any putative class members not selected as part of the sample. The appellate court reversed and ordered decertification. The California Supreme Court granted review and, in May 2014, affirmed the appellate court's decision, remanding the case for a new trial on both liability and damages, and encouraging the trial court to "entertain" a new class certification motion.

So what does this mean for California employers? When facing a class action, one of the things employers focus on is how to defeat certification. In order to do so, one area of focus is the manageability of the class, meaning, how feasible is it for a court to devise a way to consider classwide evidence that would not compromise the employer's right of due process by limiting submissions or testimony? Tangential to the manageability argument is the assertion that there are so many individualized issues within the class, that the only feasible way to determine liability would be to accept testimony from all putative class members. With a sizeable group, such an individualized inquiry would, of necessity, demonstrate that trial would not be "manageable" and, accordingly, proceeding on a classwide basis would not serve judicial economy.

The Duran v. U.S. Bank Nat'l Assn'n, No. S200923 (Cal. May 29, 2014) decision, and particularly the testimony of the defense expert regarding the errors caused by the plaintiffs' statistical sampling assumptions, provides new ammunition for the employers’ manageability arguments in this context. Regarding presentation of defenses, the Duran ruling explained: "If trial proceeds with a statistical model of proof, 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 as exempt." As for the trial court's sampling plan, the California Supreme Court highlighted a number of errors, including the small sampling size, lack of randomness, and an "intolerably high" margin of error, resulting in a sample that was neither representative nor fundamentally fair. While Duran does not go so far as to say that all sampling or representative testimony is facially invalid, it puts greater focus on the mechanics of trial processes, and greater pressure on class counsel to demonstrate the legitimacy of their proposed trial plans. And anytime the plaintiffs' burden of proof is heightened at certification, it is a good thing for employers.

If you have any questions about this, or any other California matter, please contact Brendan G. Dolan at +1 (415) 749 9530, Heather M. Sager at +1 (415) 749 9510, Lucky Meinz at +1 (415) 749 9532, Brittany A. Sachs at +1 (415) 749 9525, or Zachary Scott at +1 (415) 749 9535.

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Brittany A. Sachs

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Heather M. Sager

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Brendan G. Dolan

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