Class Action

Duran v. U.S. Bank National Association case

The Duran decision, preceding the Brinker case by 2 months is yet another milestone in the judicial effort to curtail or eliminate the right to recovery of unpaid overtime wages.  Duran was a class action case; the class plaintiffs followed the mechanism by which most class actions have been tried in this State for the past 50 years.  In brief, the Duran Plaintiffs were 260 employees of the Defendant bank who claimed that they were misclassified as exempt from the right to overtime.  At the trial court level, the judge selected 21 Plaintiffs as representative of the class of 260 plaintiffs and certified the class.  (By certifying the class the court in essence said that common issues of fact outweigh individual issues and that the most expeditious way to proceed was to “certify” a class of people who would be represented by the 21 chosen plaintiffs.  Liability would then be determined by the 21 witnesses as representative of the whole class.  In that fashion, the parties would avoid 260 separate trials).  USB challenged the 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 a third of the people in the class were not misclassified; and, even if this were 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.  In short, USB argued that determining liability in a class action could not be determined by use of a sample group.

The appellate court bought USB’s arguments with every bell and whistle attached.  While it did not have the nerve to say that there could be no wage and hour class action claims, it did hold that a defendant has the right to defend against every single claim in a class action.  In a decision stretching to 38 pages and 80 footnotes (a sure sign that a court thinks it is making new law) the court attacked the concept of trial by representative parties; i.e. the class action as it has been known for half a century.  To illustrate its point, the court noted that even if the trial were to take 520 days, as plaintiffs claimed, that was acceptable to protect the defendant.  Further, according to the court a class of 260 is really too small to worry about things like efficiency (“We also note that the class here is comprised of 260 members…it would not have been implausible …to conduct some type of individualized inquiries as to each plaintiff’s entitlement to damages.”).  This is a flat out re-writing of the law.  The whole point of class actions is judicial economy and protection of the class.  To eliminate the class action process with as many as 260 plaintiffs is unprecedented.

Plaintiffs in this case correctly stated that USB’s position, if upheld, would effectively kill off class actions, in wage and hour cases at least, in California.  That is most certainly true and the court does not really try to deny it.  The most it can say is that the “situation is not quite that dire.”  Ah, but it is that dire.  This decision must either be overturned or legislatively annulled; if not, there is a very small chance of any class action case surviving.  At a minimum, every plaintiff may look forward to an appeal.  It worked for UBS, precedent is now out there, and any like minded conservative judge can simply follow the lead.

This case is a true milestone; a de jure throw over of the legislature’s injunction in Code of Civil Procedure section 382 that cases with common issues may be tried as one if common issues prevail.  This decision is nothing more than an attempt to kill off what the big business lobby considers nuisance number 1.  While we are all in favor of job creation and a friendly business environment, we do not believe that extends to a carte blanche to deprive workers of their statutory rights.  Simply put, an individual case for overtime is, to the employer, not something to lose sleep over.  A class action is altogether different and encourages employers to respect the law because the damages can be very high indeed.  When, as here, the judiciary becomes a cheerleader for big business (banks, no less) the incentive to follow the law drops dramatically.  As a weatherman might say: “we are looking at unpaid overtime increasing in the near future.”

Mora v. Big Lots Stores, Inc.

This case illustrates well the requirements for certifying a class action in the context of overtime claims.  Class actions mean that one person represents a large group of people who have similar claims.  These actions can be complex and expensive.  When necessary, Attorney Joseph Ainley will partner with other law firms when handling class actions to ensure that maximum resources are available.  The great value of class actions is that the cost to the defendant can be high enough to force the employer to change its behavior and to stop violating the law.

Mora v. Big Lots Stores, Inc., 194 Cal.App. 4th 496 (2011)

The well-known firm, Rudy, Exelrod, Zieff & Lowe, represented plaintiffs in this class action certification case.  Plaintiffs were the managers of 178 close-out retail stores in California called “Big Lots Stores.”  Plaintiffs contended that they had been mis-classified as managers who, in fact, spent the majority of their time during each work week on non-exempt, non-managerial duties, and that they did not exercise discretion and independent judgment in the performance of the managerial duties that they did perform.

In support of class certification, plaintiffs submitted declarations from Big Lots’ managers who outlined the various duties that they performed, 75% of which were non-managerial.  Plaintiffs also offered the declaration of an expert in labor force behavior and survey research who declared that if he had access to appropriate personnel information and information on store operations, he would be able to accurately allocate what percentage of the managers’ overall work time was spent on exempt versus non-exempt tasks.

In opposition, Big Lots submitted 141 declarations from putative class members, 23 depositions, and declarations of individuals who claimed to have observed the 44 store managers whose declarations had been submitted in support of the motion for class certification.  The defense also offered the report of an expert who contended that approximately two-thirds of the managers whom he had observed spent more than 50% of their time performing non-exempt managerial tasks.  Another defense expert contended that the activities of the store managers varied greatly from store to store.

The court denied class certification on grounds that there was a lack of community of interest among the proposed class members.  According to the court, this “community of interest” required three factors:  (1) predominant questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who adequately represent the class.  According to the court, plaintiffs fell short on all three counts.

The court concluded that the actions of the managers varied substantially based on the size of the store, the type of merchandise carried, the number of employees supervised, the time of year, and the personality and judgment of the individual store manager.  The court also concluded that the wide variation of work performed by the managers from store to store and the “myriad of individualized factors” that affected each manager and the time they spent on particular tasks made it impossible for the putative class members to be “typical” of a proposed class.  Finally, the court found the proposed class members to have “checkered work histories” and therefore to be poor representatives of the class and not “adequate.”

On appeal, the court noted the deference that appellate courts apply to trial court determinations of class certifications.  The court cited to Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1089, for the proposition that “unless (1) improper criteria were used; or (2) erroneous legal assumptions were made … any valid pertinent reasons stated will be sufficient to uphold the order.”  See also Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th 1096, 1106.

In its analysis, the court, in essence, resolved the issue to whether a uniform corporate policy existed to serve as the basis for a class action.  According to the court, “Job duties attributable to uniform corporate policies and practice (based on strict compliance with corporate manuals and action plans), as supervised by district managers and reinforced by standardized training” would provide the basis for a class.  In this case, however, the appellate court upheld the finding “that there exists no uniform corporate policy requiring store managers to engage in primarily non-managerial duties, that wide store-to-store variation exists in the type of work performed and the amounts of time per work week spent by managers on different activities, and that misclassification when it occurs is the exception, not the rule.”  The appellate court deferred to the finding in the trial court that Big Lots’ evidence “plainly and inescapably established … that it does not operate its stores or supervise its managers in a uniform or standardized manner.”  This, apparently, is sufficient to defeat class certification.  The court strongly suggests that where misclassification is a policy of the company and is uniformly applied, there is a basis for class certification.  Where there is no explicit policy or where that policy is not uniformly applied, then class certification may be avoided.

This case should be read in conjunction with Arenas v. El Torito Restaurants, Inc. (2010) 183 Cal.App.4th 723, 734-735; Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326; Jaimez v. Daiohs USA, Inc. (2010) 181 Cal.App.4th 1286, 1299; Dunbar v. Albertson’s, Inc. (2006) 141 Cal.App.4th 1422, 1431.