Posts belonging to Category Certification Rulings

Several weeks after reinstating certification of two multistate consumer class actions involving defective, moldy washing machines in Butler v. Sears, Roebuck & Co., the Seventh Circuit has again upheld the viability and desirability of consumer class actions in another opinion authored by Judge Richard Posner, Hughes v. Kore of Indiana Enterprise Inc. (slip opinion available here). In Hughes, the Seventh Circuit reaffirmed some basic principles of class actions that seem to have been obscured of late, including the utility of class actions for prosecuting small value claims and the propriety of deterrence as a goal for class actions.

The conduct at issue in Hughes was the defendant’s alleged failure to post the required notice of a $3 transaction fee that its ATMs charged to users (over 2800 times during the class period). The district court held that the plaintiffs would be better off forgoing class certification, since class members would receive only a few dollars each, but could receive statutory damages of between $100 and $1000 for individual suits.

The Seventh Circuit reversed, observing that individual actions would be extremely unlikely due to the inability of a plaintiff to enlist a competent attorney to press such an action: “What lawyer could expect the court to award an attorney’s fee commensurate with his efforts in the case, if the client recovered only $100?” Instead, the court indicated that the better course would be to proceed with a class action, and instead of attempting to distribute very small awards to individual class members, to disburse the recovery to a charity under the cy pres doctrine. Even if the remedy were thus “purely punitive,” the court held that would be better than individual suits, as one of the proper goals of a class action is to prevent the defendant from “walking away from the litigation scot-free.”

In a major victory for consumers, the Sixth Circuit Court of Appeals has, for a second time, affirmed a district court’s class certification ruling, this time in light of the more rigorous standards imposed by the U.S. Supreme Court’s recent ruling in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). Insofar as some had speculated that Comcast rendered class certification impossible as a practical matter, the Sixth Circuit’s ruling is among the most significant class action jurisprudence developments of 2013 thus far. See Glazer v. Whirlpool Corp., No. 10-4188, (6th Cir. July 18, 2013) (slip opinion available here).

The underlying multi-district consolidated action pending in Ohio’s Northern District alleges that Whirlpool’s “front-loading washing machines (the Duets) allow mold and mildew to grow in the machines, leading to ruined laundry and malodorous homes.” Slip op at 2. Following the district court’s certification of a class, the Sixth Circuit heard an interlocutory appeal pursuant to Federal Rule 23(f) and affirmed the trial court’s grant of certification, yielding a decision now known as “Whirlpool I”. 

Whirlpool persisted, unsuccessfully petitioning the Sixth Circuit for en banc rehearing and then filing a certiorari petition with the U.S. Supreme Court, which was granted. This resulted in the Supreme Court remanding the case to the Sixth Circuit (not the trial court) under the “grant, vacate, and remand” procedural device, which specifically directed the Sixth Circuit to reconsider Whirlpool’s Rule 23(f) appeal in light of Comcast v. Behrend. Slip op. at 2-3. Notwithstanding Comcast, the Sixth Circuit reconsidered its prior ruling but reached the same conclusion: affirming the district court order certifying a class for the determination of liability. See slip op. at 3.

The Sixth Circuit’s decisive analysis, under the often-dispositive rubric of determining whether common questions of law or fact predominate, distinguishes Comcast as follows: “Here the district court certified only a liability class and reserved all issues concerning damages for individual determination; in Comcast Corp. the court certified a class to determine both liability and damages. Where determinations on liability and damages have been bifurcated, see Fed. R. Civ. P. 23(c)(4), the decision in Comcast—to reject certification of a liability and damages class because plaintiffs failed to establish that damages could be measured on a classwide basis—has limited application.” Slip op. at 27. Consequently, plaintiffs’ counsel will likely style class actions akin to the liability-damages bifurcation in Glazer v. Whirlpool that kept the Sixth Circuit’s predominance analysis outside the ambit of Comcast.

Additionally, the decision, known as “Whirlpool II”, represents some pushback with respect to another relatively recent Supreme Court decision thought to spell trouble for the future of class actions, Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), which some Court observers presumed to open the class certification inquiry to a full-scale determination on the merits. Seizing on Dukes, Whirlpool argued that the district court had committed reversible error by avoiding “several questions of fact arising from the evidence presented by the parties in connection with the motion to certify a class.” Slip op. at 13. However, the Sixth Circuit held that the “rigorous analysis” mandated by Dukes does not imply that a trial court must engage in the extensive merits-based determinations advocated for by Whirlpool. See slip op. at 13-14.

California’s Court of Appeal has reversed a trial court’s denial of a motion to certify claims alleging underpayment of earned overtime pay and miscalculation of pay rates. See Bowers Cos. Wage & Hour Cases, No. G046104 (Cal. Ct. App. June 27, 2013) (available here). The defendant conceded that the policies were as the plaintiff alleged, and as a result, the court found that common questions necessarily predominated and the claims should – indeed must – be adjudicated in a class action. The Fourth Appellate District remanded the case to the trial court with the directive to grant the plaintiff’s class certification motion consistent with the subclass definitions as revised by the unanimous three-judge appellate panel. Slip op. at 1-2.

The defendant, an ambulance company, employed the named plaintiffs as EMTs and pursuant to an alternative work schedule (AWS) paid the plaintiffs and their fellow workers overtime after they worked ten hours in a day, rather than after the usual eight hours. Slip op. at 5, 7. While California law provides for certain changes to overtime pay under a properly adopted AWS system, the plaintiffs here alleged that the defendant’s formulas for setting both regular and overtime pay rates did not comply with the applicable California AWS law. Id.

The Court of Appeal found that the trial court committed reversible error in multiple respects. First, the trial court based its denial of certification on a proposed regular rate subclass not being ascertainable, but “failed to consider whether the class definition could be modified” to resolve any ascertainability deficiency. Slip op. at 17. Connecting the ascertainability analysis to the defendant’s admittedly uniform pay-rate calculation policy, the Court of Appeal underscored a hard rule of class action jurisprudence with the observation that where there is “a theory of recovery challenging an undisputed policy uniformly applied to a readily identifiable group of employees” the proposed class or subclass is ascertainable as a matter of law. Slip op. at 18.

After dealing with the ascertainability issue, the Court of Appeal turned to the trial court’s finding that the plaintiffs hadn’t satisfied the numerosity requirement, and concluded that the modest numerosity threshold had been amply satisfied. Slip op. at 18-21.

Finally, as to the often-pivotal issue of whether common issues of law or fact predominate, the panel concluded that “Plaintiffs’ theory challenges the uniform policy Defendants applied to all class members and whether that policy violates California law is a question eminently suited for class treatment. The policy’s existence and terms may be established at trial through Defendants’ testimony and documents without any individualized evidence.” Slip op. at 23.

Though the decision has been designated as unpublished, it is likely to spark calls for that designation to be changed to published under the California Rules of Court insofar as it provides a clear, well-reasoned, and detailed statement of law concerning a much-repeated circumstance.

California’s Second Appellate District has held that a trial court erred by dismissing the plaintiffs’ PAGA action (Cal. Lab. Code §§ 2698 et seq.) for essentially the same reasons as it denied the plaintiff’s class certification motion. Nelson v. Southern California Gas Co., No. B238845 (Cal. Ct. App. May 30, 2013) (Slip opinion available here). The oral argument in Nelson – which strongly suggested that the Second District would rule as it did – was covered here. 

In Nelson, the plaintiffs, drivers for the SoCal Gas Company, brought a putative class action seeking unpaid wages and other damages arising from alleged meal and rest break violations, “off-the-clock” work, and other derivative violations. Slip op. at 2. The plaintiffs also sought separate relief, as the proxy of the State seeking the recovery of civil penalties pursuant to PAGA. Slip op. at 3. The defendant filed a motion for an order that would both declare the suit inappropriate for class treatment and deny the plaintiffs’ PAGA claim. Soon after, the plaintiffs filed a motion for class certification. The trial court denied the motion for class certification, reasoning that common questions would not predominate. Applying substantially the same analysis, the trial court also held that the plaintiffs could not bring their PAGA claim “because individual issues would predominate and a representative action would not be manageable.” Slip op. at 13.

The plaintiffs appealed both the trial court’s denial of their class certification motion and the effective dismissal of the PAGA claim. While this Court of Appeal held that the trial court had not abused its discretion in denying class certification (see slip op. at 14-29), it reversed the trial court’s PAGA analysis and holding, concluding that “the trial court abused its discretion in applying class action requirements to the PAGA claim.” Slip op. at 29.

Although Arias v. Superior Court, 46 Cal.4th 969 (2009), firmly held that class action requirements are inapplicable to PAGA, Arias did not address a case where the PAGA claim is alleged alongside class claims, which is a common type of pleading. The Arias court therefore had no occasion to draw rigorous distinctions between class actions and PAGA representative actions. Indeed, the Nelson trial court was convinced by the defendant’s argument that it could dismiss the plaintiffs’ PAGA claim on the ground that the PAGA litigation would be “unmanageable”― an element found nowhere in the PAGA statute but which is functionally identical to one aspect of the class certification “superiority” analysis. See slip op. at 31. The Court of Appeal identified the fallacy in the defendant’s argument, noting that the trial court’s conclusion that the PAGA claims would be unmanageable was based entirely on a class certification commonality analysis, and found that “[s]ince, under Arias, a plaintiff need not even plead a representative PAGA claim in accordance with class action requirements, it seems anomalous to require that the plaintiff establish the community of interest class action requirement with respect to a PAGA claim, in the context of a class certification procedure.” Slip op. at 31.

Though Nelson has been designated “unpublished,” it is expected that requests for publication will be filed by the June 19th deadline, at least as to the decision’s PAGA reasoning and holding.