Daily Blast May 29, 2014

The California Supreme Court in Duran v. U.S. Bank National Association (May 29, 2015, S200923) __ Cal.4th __, analyzed issues concerning the certification of class actions in wage and hour misclassification litigation and the use of representative testimony and statistical evidence at trial of such a class action. The court held that “[a trial] plan that relies on statistical sampling must be developed with expert input and must afford the defendant an opportunity to impeach the model or otherwise show its liability is reduced.” (Slip opn., p. 2.) The case highlights difficult questions about how individual issues can be successfully managed in a complex class action. (Id. at p. 18.)

The class action lawsuit was brought by loan officers for U.S. Bank National Association (“USB”), who sued for unpaid overtime, claiming they had been misclassified as exempted employees under the outside salesperson exemption. (Slip opn., p. 1.) After certifying a class of 260 plaintiffs, the trial court devised a plan to determine the extent of USB’s liability to all class members by extrapolating from a random sample. (Ibid.) In the first phase of trial, the court heard testimony about the work habits of 21 plaintiffs. USB was not permitted to introduce evidence about the work habits of any plaintiff outside this sample. Based on testimony from the small sample group, the trial court found that the entire class had been misclassified. The court then proceeded with the second phase of trial, which focused on testimony from statisticians. After this phase, the court extrapolated the average amount of 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. (Id. at pp. 1-2.) The Court of Appeal reversed the judgment, holding that the trial court’s reliance on representative sampling to determine liability denied USB its due process right to litigate affirmative defenses. (Id. at p. 17.) The Supreme Court granted review. (Id. at p. 18.)

The Supreme Court agreed with the Court of Appeal that the judgment had to be reversed because the trial court’s flawed implementation of sampling prevented USB from showing that some class members were exempt and entitled to no recovery. (Slip opn., p. 2.) The court held that “[while] class certification can be a useful tool for deciding common questions, . . . remaining individual issues must be fairly managed. In some cases, statistical methods may offer a reasonable and appropriate way to do so. However, reliance on statistical proof cannot be used 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. When liability is to be established on a classwide basis, the defendant must have an opportunity to present proof of affirmative defenses within whatever method the court and parties fashion to try these issues. If the 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.” (Id. at p. 50.) The Court explained that the trial court’s exclusion of all evidence about the work habits of the business banking officers outside the sample group and its implementation of a biased sampling plan constituted an abuse of discretion. (Id. at pp. 50-51.) Thus, “a class action trial management plan must permit the litigation of relevant affirmative defenses, even when these defenses turn on individual questions.” (Id. at p. 19.)

Related Practices

• Appellate