Commentators have quipped that class certification is so easy in California that with little effort a group of plaintiffs could certify even a ham sandwich. In fact, as we have discussed here, we have seen a proliferation of recent appellate decisions hinging class certification on the mere existence of an employer’s uniform policy – no matter how facially lawful that policy may be or how diverse its application is to the putative class at issue.
The law may be changing. On May 29, 2014, the California Supreme Court issued its long-awaited decision in Duran v. U.S. Bank Nat’l Ass’n, which sets forth the degree of rigorous analysis in which trial courts must engage before certifying a class action. Importantly, Duran confirms that plaintiffs need more than the mere existence of a uniform policy to support their effort to certify a class.
Duran involves a group of loan officers for U.S. Bank who allege they were misclassified as overtime-exempt pursuant to the outside sales exception, which applies to employees who spend more than 50% of their workday engaged in sales activities outside their home office. Plaintiffs argued that the common issue for certification purposes was the fact that U.S. Bank had a common policy that classified its loan officers as exempt and used a common job description. Rejecting this argument, the Supreme Court confirmed that plaintiffs need more: “In wage and hour cases where a party seeks class certification based on allegations that the employer consistently imposed a uniform policy or de facto practice on class members, the party must still demonstrate that the illegal effects of this conduct can be proven efficiently and manageably within a class setting.”
Accordingly, Duran instructs trial courts to examine how any purportedly unlawful policy is applied to the putative class when deciding to certify the class and how any individualized issues surrounding this application will be managed at trial. The Court said, “[t]rial courts must pay careful attention to manageability when deciding whether to certify a class action” and explained that “[i]f the court makes a reasoned, informed decision about manageability at the certification stage, the litigants can plan accordingly…”
In this way, Duran seems to adopt the reasoning of the U.S. Supreme Court’s 2011 decision in Wal-Mart Stores v. Dukes, thereby making Dukes’ application to California state law class actions apparent. First, Duran relies on Dukes in affirming that a defendant has a due process right to litigate its defenses and that the individualized issues surrounding these defenses must be considered at the class certification stage. Second, in stating that class certification must hinge on “some glue that binds class members together” Duran seems to echo the U.S. Supreme Court’s admonition in Dukes that plaintiffs need some “glue holding the alleged reasons for [the unlawful conduct] together” in order to support class certification. Both Duran and Dukes similarly instruct that class certification is proper only where an examination of all of the class members’ claims for relief will produce a common answer to the critical liability question.
Additionally, Duran confirms that plaintiffs may propose using statistical or survey data to prove class wide liability at trial. However, the Court clearly stated that plaintiffs cannot use statistical evidence as “an evidentiary substitute for demonstrating commonality.” For example, in Duran, even though the trial court found certain allegations were common to the class (i.e. whether U.S. Bank uniformly classified the loan officers as exempt employees and allegedly failed to train or monitor their compliance with the exemption), these questions did not produce common answers as to how the 260 class members actually spent their time. Moreover, the statistical model used by the trial court failed to ameliorate the problem.
The trial court permitted plaintiffs to submit a “random” sample of 20 employees chosen by the court and did not permit U.S. Bank to introduce any favorable evidence from employees who were not part of the sample. Based on the evidence from this 20-employee sample and statistical extrapolations that were applied to the rest of the class, judgment was rendered against U.S. Bank for the misclassification of all 260 employees – even though some of those employees signed declarations demonstrating that they were properly classified as exempt. Duran, therefore, emphasizes that when using statistical evidence, the defendant must be permitted to address questions supporting its defenses even if those questions must be answered on an individualized basis. And, if these individualized questions become so numerous that the trial would be unmanageable, the class should not be certified.