The class action plaintiffs’ bar celebrated yesterday’s Supreme Court’s decision in Tyson Foods, Inc. v. Bouaphakeo (pdf), rejecting Tyson’s challenge to class certification. One lawyer called it “a huge David v. Goliath victory.”

But when plaintiffs’ lawyers wake up this morning and focus on the details of the Court’s opinion, they are in for a serious post-celebration hangover.

The Court’s reasoning for the first time maps a clear route for defendants to use in challenging plaintiffs’ use of statistical evidence in class actions. It also provides important guidance for defendants about preserving the ability to challenge plaintiffs’ reliance on statistics.

Continue Reading What does Tyson Foods, Inc. v. Bouaphakeo mean for class actions?

Under Federal Rule of Civil Procedure 23(b)(3), a court may certify a suit for damages as a class action when “there are questions of law or fact common to the class” that “predominate over any questions affecting only individual members.” Similar certification standards apply when a plaintiff seeks to certify a collective action under the Fair Labor Standards Act (FLSA). Yesterday, in its highly anticipated decision in Tyson Foods, Inc. v. Bouaphakeo (pdf), the Supreme Court affirmed the certification of an FLSA collective action where the evidence tying class members together was a study of a representative sample of similarly situated workers.

Continue Reading Supreme Court affirms certification of FLSA collective action in Tyson Foods, Inc. v. Bouaphakeo

The Supreme Court on Tuesday heard oral argument in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, a case that has been closely watched for its potential to narrow the circumstances in which a class action may be certified under Federal Rule of Civil Procedure 23 and a collective action for unpaid wages certified under the Fair Labor Standards Act (FLSA). We previously described this case in prior blog posts. One of us attended the argument, and the other closely reviewed the transcript (pdf). Our combined reaction: The anticipated decision in this case may focus on an FLSA issue and, if so, then it seems unlikely to mark a sea change in the rules governing Rule 23 class actions. Continue Reading Supreme Court Hears Argument in Tyson Foods v. Bouaphakeo—and a Blockbuster Class Certification Ruling Seems Less Likely

court-gavelToday, the Supreme Court granted review in what may be a major decision on the standards for class certification, Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146.

Continue Reading Supreme Court to Revisit Class-Certification Standards in Tyson Foods, Inc. v. Bouaphakeo

330px-Supreme_Court_Front_DuskThe Supreme Court will decide before the end of this Term whether to hear any or all of four important cases that raise recurring questions of class action law that have sharply divided the lower courts. These cases address questions that we have blogged about before (e.g., here and here): whether a class full of uninjured members may be certified, and whether plaintiffs may rely on experts and statistics to gloss over individualized differences among class members in order to prove their class claims and damages. These questions strike at the heart of what it means to be a “class,” because class actions generally must be litigated using common evidence to show that each class member has been harmed.

Continue Reading Supreme Court To Decide Whether To Hear Four High-Stakes Cases Asking When A Suit May Be Litigated As A Class Action

There seem to be two prevailing conceptions of class actions.  In one view, a class action is a way of determining many similar claims at once by evaluating common evidence that reliably establishes liability (and lays a ground work for efficiently calculating damages) for each class member.  That is, the class device produces the same results as individual actions would, but more efficiently.  In the other view—one we consider misguided—a “class” of plaintiffs complaining about similar conduct can have their claims determined through statistical sampling even if no common evidence will provide a common answer to common factual or legal questions. Instead, this theory holds, the results of mini-trials can simply be extrapolated to the entire class, even if individual results would vary widely.

Last week, the Ninth Circuit took a step deeper into the second camp in Jimenez v. Allstate Insurance Co. (pdf), delivering a ringing endorsement of statistical sampling as a way to establish liability as well as damages.

In Duran v. U.S. Bank N.A. (pdf), the California Supreme Court recently addressed an important question in the context of state-court class actions: Can plaintiffs invoke statistical sampling in an attempt to prove class-wide liability and overcome the presence of individual questions that ordinarily would defeat class certification?

The court’s answer to that question is a mixed bag for business. The court firmly rejected the haphazard approach to sampling used by the trial court in the lawsuit against U.S. Bank. But the court left open the troubling possibility that sampling might be used in support of class certification in the future. Continue Reading California Supreme Court Rejects Exceptionally Poor Sampling Method, But Leaves Open Many Questions About Sampling And Class Certification

In state courts, sometimes you lose even when you win. In a recent false-advertising class action, a California Superior Court entered an order concluding that the testimony of the plaintiffs’ expert—who was the linchpin of the case for class certification and on the merits—was inadmissible, which meant that the defendant was entitled to judgment as a matter of law. See Wallace v. Monier, LLC (pdf)No. S-CV-0016410 (Cal. Super. Ct. Placer Cty. Jan. 28, 2013).

Sounds great, right—so what’s the problem? The judge waited to decide these issues until after a jury trial on the class claims in which the plaintiffs were seeking damages in excess of $500 million, plus an additional amount in punitive damages. That’s a huge waste of the parties’ and the court’s resources. Many businesses would have lacked the fortitude to endure that gauntlet and agreed to a blackmail settlement in order to mitigate the enormous risk presented by the inappropriate class-action jury trial.

The case involved false-advertising claims under California law against the maker of “slurry coated” roofing tiles, which the plaintiffs alleged were prone to developing cosmetic defects during their 50-year life. To support class certification and to prove liability and damages, the plaintiffs relied on the testimony of 22 homeowners, who were selected by a statistician from the more than 100,000 who had purchased and installed the roofing tiles. The plaintiffs proposed to extrapolate from the sample homeowners’ experiences to make findings regarding liability and damages for the rest of the class.

The defendant raised numerous challenges to the admissibility of the statistician’s testimony and plaintiffs’ proposed trial plan, but these challenges were deferred until after trial. (The court heard testimony about the challenges during breaks in the trial.) Following an eight-week trial, the jury returned a verdict of $7.41 million for the plaintiff.

The trial court then finally turned to the defendant’s legal challenges. Relying on an analogy to the U.S. Supreme Court’s rejection of “Trial by Formula” in Wal-Mart Stores, Inc. v. Dukes, the trial court excluded the statistician’s testimony on the ground that his sampling techniques were neither reliable nor generally accepted by recognized authorities in the field. Because the plaintiffs’ case for class certification and liability hinged on that testimony, the court threw out the verdict and granted the defendant judgment as a matter of law. The court then denied the defendant’s motion for decertification as moot (though it is apparent from the court’s reasoning that no class should have been certified).

Although the end result was a defense victory, it was achieved at a much higher cost than necessary. There is no reason that the defendant’s legal and evidentiary challenges were postponed until post-trial motions. And although it is not categorically the case that defendants are better off in federal court, it seems less likely that a federal court would have deferred some of the key evidentiary and legal issues until after a jury verdict. Here, the defendants in Wallace had no choice; the case predated the 2005 enactment of the Class Action Fairness Act.

The California Supreme Court held in Arias v. Superior Court that a plaintiff may bring a representative action on behalf of himself and other employees to recover civil penalties under California’s Private Attorney General Act (“PAGA”) without meeting California’s class-certification requirements. The court reasoned that, unlike a class action, where the plaintiff is suing on behalf of individual employees, a PAGA plaintiff steps into the shoes of state labor-law enforcement agencies. While that holding governs California state courts, the federal district courts have been split as to whether plaintiffs bringing PAGA claims in federal court must seek class certification under Federal Rule of Civil Procedure 23.

On January 14, 2013, Judge Gutierrez of the Central District of California held that PAGA plaintiffs need not bother with class certification in federal court. See Alcantar v. Hobart Serv. (No. 5:11-cv-1600-PSG-SP). In that case, the plaintiff had filed a class action and a PAGA action alleging overtime, meal-period, and other wage-and-hour violations. The court denied class certification and granted in part defendants’ motion for summary judgment. The defendants later filed a motion in limine, asserting that the plaintiff could no longer proceed with his PAGA claim because plaintiffs who cannot meet Rule 23’s class-certification requirements lack standing to represent the rights and interests of third parties. The district court denied the motion, holding that although a class action allows individuals to seek financial remuneration to redress personal injuries, a PAGA action is an enforcement action brought on behalf of the state labor agencies to penalize noncompliant employers, making class certification unnecessary.

The Alcantar court also rejected defendants’ argument that the PAGA claims could not be tried on a representative basis without violating defendants’ due process rights. Among other things, the defendants argued that they should have the right to call each employee to the stand as they would in defending a claim under California’s Unfair Competition Law (UCL). The Alcantar court disagreed, holding that, “unlike claims under the UCL, which require an individualized determination of the particular restitution due to each plaintiff, PAGA claims require only a showing that a Labor Code violation has occurred.”

Finally, the Alcantar court rejected the defendants’ remaining argument that Wal-Mart Stores, Inc. v. Dukes forbids the plaintiff from calculating the amount of PAGA penalties owed solely by using estimates derived from representative testimony and statistics. The district court disagreed, noting that the Dukes Court had analyzed the permissibility of “Trial by Formula” in the specific context of Title VII of the Civil Rights Act, while both the Ninth Circuit and California courts have permitted awards for California Labor Code violations based on a representative sampling of class members. (Note: The issue of use of representative testimony and statistical evidence at trial in wage and hour class action lawsuits is pending before the California Supreme Court in Duran v. U.S. Bank Nat’l Ass’n., No. S200823.)

Alcantar may give new encouragement to the plaintiffs’ bar in their pursuit of PAGA claims. Under its approach, defendants in PAGA cases are deprived not only of the protections of Rule 23, but also the due process right to present individualized defenses to each employee’s claim. Whether other district courts will follow Alcantar’s lead, or instead follow the decisions of other courts that (in our view) are more consistent with Rule 23 and due process—and how the federal appellate courts will eventually settle this issue—remains to be seen. In the meantime, defendants may be able to distinguish the Alcantar court’s reasoning by showing that their cases involve fact patterns where proof of a statutory violation will require highly individualized, fact-sensitive mini trials.

A recent federal court decision has addressed the knotty issue of a defendant’s right to discovery in an FLSA collective action from the individuals who opt into the class after it is conditionally certified but before the court decides whether to grant final certification.

The case, Scott v. Bimbo Bakeries, USA, Inc. (pdf), No. 10-3154 (E.D. Pa. Dec. 11, 2012), featured a claim that the defendant’s delivery drivers—who were independent contractors—were de facto “employees” and thus entitled to various remedies under the FLSA. After the court conditionally certified the collective action, roughly 650 individuals opted into the class. To prepare its opposition to the motion for final certification of the class, the defendant sought leave to (a) propound written discovery to all 650 opt-ins, giving them 30 days to respond; and (b) depose 260 opt-ins (i.e., 40% of the opt-in class). The named plaintiff sought to limit written discovery to a representative sample of opt-ins, not to exceed 10%, and to prohibit more than 15 depositions of the opt-ins.

The court’s order reads like a defeat for the defendant. In particular, the court limited the scope of discovery to issues related to the upcoming motion for final certification. The court barred the defendant from propounding written discovery to more than 10% of the opt-ins despite the fact that many courts across the country have allowed broader written discovery, and directed that the opt-ins should get 60 days rather than 30 days to respond. And the court deemed the request to take 260 depositions to be excessive, instead limiting the defendant to 20 total depositions, including those of the named plaintiff.

But by requesting to take written discovery from every opt-in and to depose almost half of them, the defendant has set the stage for its opposition to final certification. The defendant can use the results of the discovery to show that the circumstances surrounding the opt-ins’ FLSA claims vary and warrant individualized inquiry. And the defendant can point out that it would have found even more distinctions and variations had it been permitted broader discovery, and that a trial of the collective action would necessitate a one-by-one assessment of the claims. After all, even if the court limits discovery to a “sample” of employees, the Supreme Court has made abundantly clear that a trial plan cannot limit the defendant to raising but a “sample” of the defenses that it has a statutory right to present. Although the Supreme Court relied upon the Rules Enabling Act and Rule 23 to reject the “Trial by Formula” approach that the plaintiffs had suggested in Wal-Mart Stores, Inc. v. Dukes, the defendant in an FLSA collective action can use due process as the spring board for the same argument.