“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”
—Winston Churchill, 1942
The inherited wisdom about wage-and-hour class actions is that they settle after certification. The assumption is that certification in wage-and-hour class actions is the decisive battle in the war; if lost, the only question is how big the price tag is going to be—the sooner it settles the less it costs. Certification is the beginning of the end.
But in many cases these assumptions may be misguided. In fact, certification may be only the end of the beginning. For those willing to accept the risk and withstand the pending uncertainty, opportunities to win the war remain even after the court has certified a class.
Before proceeding further, let’s discuss an overarching view of class actions:
A class action, as created under and governed by the rules of Federal Civil Procedure (Fed. R. Civ. P. 23), is a means to try in one case the similar claims of many plaintiffs, provided that the claims can be established with common proof, such that the evidence regarding one claim proves them all, or at least essential elements of all. Thus, a prerequisite to the class action is that “there are questions of law or fact common to the class.”[i] And one common basis for maintaining a class action is that “questions of law or fact common to class members predominate over any questions affecting only individual members.”[ii] There are various interwoven principles relating to how “common” the common issue tying a class together must be to satisfy these requirements. So too, “the likely difficulties in managing a class action” impact the certification decision. [iii]
A classic example is a securities class action. Everybody who bought a stock bought the same thing; the people and the price are readily ascertainable; and the fraud-on-the-market theory allows the proof of injury to one to establish injury to all. The common question then is did the defendants make misrepresentations affecting the value of the stock.
The same can sometimes be said in employment cases, such as those based on alleged failure to pay for all hours worked or overtime wages, failure to provide adequate rest and meal breaks, or misclassification of employees as exempt from minimum-wage and overtime requirements.
However, in employment situations where there is no common policy or practice affecting all or a group of employees, the grounds for certification are less clear. There, a variety of factors may result in different treatment for different employees under different circumstances—including the varying practices or actions of individual employees and managers. In such cases, proof of one person’s claim does not and cannot prove another’s; rather, disparate practices by location, manager, individual employee, or other variable make it unlikely that issues common to the class would predominate over individual ones.
Where a case does not meet the commonality and predominance requirements of Rule 23, as described above, the only way to try it is through individualized proof—i.e., proof regarding each individual’s circumstances and claim. Often these cases do not get certified (and should not be). But other times, a court may certify them at first because the case “looks like” a class action, but later may decertify when it becomes clear that the claims of each class member cannot be established by class-wide proof. We argued these issues extensively (and eventually prevailed) in Sabas Arredondo, et al. v. Delano Farms Company.[iv]
All of these issues have been part of employment class-certification litigation for years. But they came into the spotlight in 2011 with Wal-Mart Stores, Inc. v. Dukes.[v] Wal-Mart was—or so many of us in the bar thought—a watershed in the development of the jurisprudence in this area. In Wal-Mart, the plaintiff and two other representatives of a putative class of 1.5 million people brought a class action alleging that Wal-Mart had discriminated against them on the basis of gender.
The claim was not that Wal-Mart had any express corporate policy against advancing women but, rather, that local managers exercised discretion disproportionately in favor of men, leading to an unlawful disparate impact. The basic theory of the case—according to U.S. Supreme Court Justice Scalia, who wrote for a majority of five—was that a corporate culture permitted bias, perhaps subconsciously, in the exercise of discretionary decision-making by thousands of managers. The Ninth Circuit upheld the District Court’s certification order, which was based on statistical evidence about pay and promotion disparities, anecdotal reports, and the testimony on a sociologist about a vulnerable corporate culture. As to manageability requirement, the Ninth Circuit determined that the case could be tried based on randomly selected sample claims and defenses.
The Supreme Court’s majority opinion made some sweeping statements. First, the opinion stated that what matters for class certification is not just common questions among class members (e.g., whether each was discriminated against or how) but the potential for common answers “capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” Second, the Court suggested that an employment class action required proof of a company-wide illegal policy for certification and concluded that allowing local discretion did not qualify as an illegal policy. The opinion also was dismissive of the idea of a “trial by formula,” based on statistical evidence, in part because it would deprive the defendant of the right to litigate its defenses against each individual’s claim.
The defense bar was optimistic about Wal-Mart Stores, Inc. v. Dukes. The case could be read as a stiff rebuke to the certification of employment class actions not involving company-wide illegal policies. But this isn’t the end of the story. We will discuss more recent cases in the next post in this series.
–Miles A. Yanick
[i] Fed R. Civ. P. 23(a)(2).
[ii] Fed. R. Civ. P. 23(b)(3).
[iii] Fed. R. Civ. P. 23(b)(3)(D).
[iv] Case No. 1:09-cv-01247-MJS, District Court for the Eastern District of California.
[v] 564 U.S. 338.