Posts belonging to Category Certification Rulings

Classwide adjudication of workplace violations has become increasingly difficult in recent years, due to heightened certification scrutiny and the widespread use of arbitration agreements and class waivers by employers.  However, a tentative ruling by an intermediate appellate court portends an easier path, in tandem with the growing significance of the California Labor Code’s Private Attorneys General Act (PAGA).

California’s Second Appellate District, Division Eight, is expected to confirm that plaintiffs seeking civil penalties on the State’s behalf and representing fellow employees pursuant to PAGA may continue to do so even where class certification has been denied. See Nelson v. Southern Cal. Gas Co., No. B238845 (Cal. Ct. App. argued Mar. 28, 2013). During oral argument, the three-judge panel tentatively indicated that it would reverse the ruling of Los Angeles Superior Court Judge Zaven V. Sinanian (available here). Judge Sinanian denied the plaintiff’s motion for class certification, chiefly on the ground of insufficient common questions of law or fact, then subsequently ruled that the plaintiff’s PAGA claims couldn’t go forward, citing the same commonality problem that supported the denial of class certification.

Judge Sinanian issued this ruling despite the California Supreme Court having held, in Arias v. Super. Ct., that a PAGA representative action need not satisfy the familiar class certification requirements of numerosity, typicality, commonality, and adequacy of representation. Arias, 46 Cal. 4th 969 (2009) (available here). In its Arias decision, the court specifically distinguished PAGA actions from other representative actions, finding that “the employee plaintiff represents the same legal right and interest as state labor law enforcement agencies — namely, recovery of civil penalties that otherwise would have been assessed and collected by the Labor Workforce Development Agency.” Arias at 986.

The official decision in Nelson is expected to issue shortly.

The U.S. Supreme Court has issued a 5-4 decision applying the Wal-Mart v. Dukes mandate, which compels federal district court judges to undertake a “rigorous” analysis of expert witness testimony when ruling on class certification motions, in the antitrust context. See Comcast v. Behrend, 569 U.S. ___ (2013) (available here).

Specifically, the Court has held that where an expert offers an antitrust damages model that incorporates three rejected theories of antitrust liability along with the lone liability theory that would have been adjudicated at trial, class certification must be denied. Slip op. at 2 (“A [damages] model that does not attempt to measure only those damages attributable to that theory cannot establish that damages are susceptible of measurement across the entire class for Rule 23(b)(3) purposes.”). Thus, the much-anticipated Comcast decision proved to be a relatively narrow application of already-established Dukes jurisprudence to the admissibility of expert testimony. As such, “the opinion breaks no new ground on the standard for certifying a class action under Federal Rule of Civil Procedure 23(b)(3).” Slip op. dissent at 3 (Ginsburg and Breyer, JJ., dissenting).

Even as a decision focused on the standard for admitting expert testimony at the class certification stage, Comcast falls well short of breaking new ground, as the Daubert criteria governing expert testimony were not applied to Rule 23 class certification motions, as had been widely speculated. Rather, the expert’s damages model was found deficient because, the plaintiff and expert conceded, “the model did not isolate damages resulting from any one theory of antitrust impact.” Slip op. at 4. Indeed, it is likely that even a pre-Dukes analysis would have found this particular expert testimony inadequate, as it consisted of regression analysis that, it was undisputed, lacked the sine qua non of regression analysis: isolating the influence of a particular independent variable.

As in Dukes, the proposed class in Comcast was unusually sprawling, even by class action standards, entailing “four theories of liability and 2 million subscribers located in 16 counties.” Slip op. at 10. The case arose in the often arcane area of antitrust law, casting further doubt on the decision’s ability to radically remake class actions. While the defense bar declared victory, it was in conspicuously muted terms, as with McDermott Will & Emery partner David L. Hanselman, Jr. who, quoted in Law360, observed merely that “[t]he court held that individualized issues of damages may preclude class certification; it did not hold that individualized issues of damages will always or necessarily preclude class certification.”

On remand from the U.S. Supreme Court, the Ninth Circuit has issued the latest iteration of a class certification decision that has been in continual flux even as it has been widely cited in wage and hour class actions. See Wang v. Chinese Daily News, Inc., No. 08-55843 (9th Cir. Mar. 4, 2013) (slip opinion available here). In October of 2011, the U.S. Supreme Court vacated Wang v. Chinese Daily News, Inc., 623 F.3d 743 (9th Cir. 2010), and remanded it “for further consideration in light of Wal-Mart Stores, Inc. v. Dukes.”

In the underlying action, a hybrid FLSA collective action and state-law wage and hour class action, the district court had granted certification under both Federal Rule 23(b)(2) and 23(b)(3). On appeal to the Ninth Circuit, the appellate panel affirmed the certification under Rule 23(b)(2) and on that basis found it unnecessary to consider the certification under 23(b)(3). However, in this most recent ruling, the Ninth Circuit found that the monetary damages sought by the plaintiff were in no sense “incidental,” and on that basis altogether vacated the district court’s Rule 23(a)(2) analysis and directed the district court to conduct a Dukes-compliant analysis, stating: “Plaintiffs must show ‘significant proof that [CDN] operated under a general policy of [violating California labor laws].’” Slip op at 10 (internal citation omitted).

However, plaintiffs need not show that every question in the case, or even a preponderance of questions, is capable of classwide resolution. So long as there is “even a single common question,” a would-be class can satisfy the commonality requirement of Rule 23(a)(2). Id. The Ninth Circuit directed the district court to two of its recent class certification decisions, In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 958–59 (9th Cir. 2009) and Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 944–48 & n.14 (9th Cir. 2009), and ordered it to conduct its analysis on remand consistent with the predominance jurisprudence articulated in those cases. Slip op. at 13.

Once again, therefore, while Dukes has plainly imposed a more demanding class certification standard, that standard has not proved to be the insuperable obstacle to certification that many had predicted when Dukes was issued.

In its most important class action ruling since Wal-Mart v. Dukes, the U.S. Supreme Court has affirmed a Ninth Circuit decision holding that securities fraud plaintiffs need only “plausibly allege” the materiality of a misleading statement to satisfy the requirements for class certification. See Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, No. 11-1085 (S. Ct. Feb. 27, 2013). Hoping to build on the animus toward class actions in recent decisions like Dukes and AT&T Wireless v. Concepcion, attorneys for Amgen and their amicus allies had argued for a requirement that materiality be affirmatively proven at the class certification stage.

The Amgen case arose from statements made by the defendant about the safety of two drugs that stimulate red blood cell production ― statements that the plaintiffs contended were materially false and, per the fraud on the market theory, had inflated the company’s stock price. Unlike the Dukes and Concepcion majorities, the 6-3 Amgen decision represents a clear victory for the plaintiffs’ bar.

Justice Ruth Bader Ginsburg authored the majority opinion. The Court’s liberal bloc — Ginsburg and Justices Breyer, Sotomayor, and Kagan — remained unified, and they welcomed defections from conservative members Chief Justice John Roberts and Justice Samuel Alito. Roberts also crossed ideological lines in last year’s “Obamacare” decision, leading some observers to conclude that the Chief Justice is deliberately shaping a legacy of true deliberation rather than reflexively ideological voting. Demonstrating just how fractured the conservative bloc was in deciding this case, Justices Scalia and Thomas wrote dissents, with Justice Kennedy joining in the Thomas dissent.