Posts belonging to Category Certification Rulings

In an action brought under the federal Fair Labor Standards Act (FLSA), United States District Judge Terrence F. McVerry has conditionally certified a class of employees of prominent vitamin and supplement chain General Nutrition Centers (GNC). See Vargas v. Gen. Nutrition Centers, Inc., No. 10-867 (W.D. Pa. Aug. 16, 2012) (Order on Motion to Certify Class) (available here).

Plaintiffs contended that GNC’s policies regarding overtime encouraged store managers to underreport their hours and work off-the-clock (despite a formal, written policy prohibiting off-the-clock work). Each location was assigned an “hours budget” — an allocation of straight time during which employees were expected to complete all tasks. If a store exceeded its hours budget in a given month, the responsible manager would be reprimanded or even fired. Rather than suffer the consequences of allowing employees to incur overtime, managers would regularly perform any necessary work  off-the-clock.

The court found that plaintiffs presented sufficient evidence to show a de facto policy prohibiting overtime, through “Defendants’ efforts to document overtime expenses, to individually identify those who accrue overtime expenses, to demand explanations for each use of overtime, . . . and to impose consequences for being over the allotted budget . . . .” Order at 15.

Though the FLSA maintains somewhat more relaxed standards for conditional certification than certification under Federal Rule 23, Judge McVerry’s order suggests that the plaintiffs might well have satisfied the Rule 23 requirements on the strength of their evidence of off-the-clock work. Moreover, despite the FLSA’s lack of a predominance requirement, the Vargas decision includes analysis akin to that where predominance is contested. See, e.g., Order at 10 (“This tone was carried further as the messages were transmitted to the store Managers.”).

Further, despite being outside the ambit of Rule 23, Vargas is potentially pertinent to Rule 23 and state wage-and-hour class actions in its analysis of an informal practice, as opposed to a formal policy, being the basis for a collective action. The ruling describes how the de facto policy of off-the-clock work arose through a sequence of correspondence, including emails introduced into evidence by the plaintiffs, from the highest levels of GNC management down to store-level managers. “Plaintiffs have adduced evidence of a de facto policy through their proffer of a number of records and correspondence that spans the breadth of company-wide authority. . . .” Order at 15.

A class of consumers claiming that they were overcharged by the defendant gas company has been certified by Los Angeles Superior Court Judge Elihu M. Berle. See Hamilton v. Suburban Propane Gas Corp., No. BC433779 (L.A. Super. Ct. Aug. 13, 2012) (order granting class certification). The class alleged that their monthly gas bills contained a line item designated as a “reg fee,” which did not in fact reflect a government-imposed fee. Rather, they contend that the “fee” was simply a device by which the defendant acquired additional, unapproved payments which were unconnected with the provision of any service.

As is common in class certification battles, the issue of whether common questions of law or fact predominate proved dispositive, with the defendant arguing that the term “reg fee” does not necessarily have a common, deceptive meaning across the entire class. This gave rise to an exchange during the class certification hearing, with Judge Berle asking the defendant’s counsel, “Tell me, as a consumer, what does ‘reg fee’ mean?” The defendant’s lawyer responded that “[‘reg’ is] a reference for ‘regulatory,’ but that doesn’t have any inherent meaning in itself.” While not explicit in either the hearing transcript or Judge Berle’s minute order, it appears that counsel’s concession that “reg” referred to “regulatory” supported the plaintiffs’ contention that “reg fee” evokes a government-imposed fee, rather than an arbitrary amount that augments the utility’s own bottom line.

The adequacy of the class representative, Rosalie Hamilton, was also contested, on the basis of the fact that she is 102 years old. Even so, Judge Berle found Ms. Hamilton suitable to represent the class.

A federal judge in New York’s Southern District has certified a class of investors alleging that IndyMac MBS, various individual officers and six underwriters failed to disclose the risk attendant to the mortgage-backed securities that were instrumental in the economic meltdown that is generally associated with the September 2008 collapse of Lehman Brothers. See In re: IndyMac Mortgage-Backed Sec. Litig., No. 09-4583 (S.D.N.Y. Aug. 17, 2012) (Memorandum Opinion) (available here).

As is often the case, the issue of predominance proved decisive here, with defendants arguing that the 700-plus potential class members raised far too many individual issues to meet this requirement. The proposed class was indeed diverse, both in terms of their knowledge and status (being comprised of both individual investors with little or no sophistication as well as experienced institutional investors) and the facts surrounding their purchases (differences in timing, notice received, prospectus materials relied upon, liability and damages).

Though U.S. District Judge Lewis A. Kaplan conceded the existence of individual issues, he nonetheless found that common issues predominated, stating, “[t]he Court is convinced that issues subject to generalized proof significantly predominate over any individualized considerations that are likely to arise in this case.” Opinion at 32. Judge Kaplan gave particular emphasis to the link between predominance and superiority, noting that “concentrating this dispute in a class action in a single forum has clear benefits that outweigh any issues raised by defendants.” Opinion at 34.

Central District Judge Michael W. Fitzgerald has granted a motion to certify a class alleging meal and rest break violations under California law, and in the process has instructively interpreted the California Supreme Court’s landmark ruling in Brinker v. Super. Ct., 53 Cal. 4th 1004 (2012). See Paige v. Consumer Programs, Inc., No. 07-2498 (C.D. Cal. Jul. 16, 2012) (order granting in part plaintiffs’ amended motion for class certification) (available here).

The action was stayed pending the issuance of Brinker, after which the parties submitted supplemental briefing as to whether, in light of Brinker, the plaintiff’s “meal and rest break claims satisfied the requirements of Rule 23(b)(1) or, in the alternative, Rule 23(b)(3).” Order at 2. As is typical of class certification motions that turn on whether the predominance of common questions is established, the court focused on the portions of Brinker that “examined whether, when assessing meal and rest break claims under California law, ‘individual questions or questions of common or general interest predominate.’” Order at 3, citing Brinker at 1017.

The parties’ supplemental briefing presented starkly different interpretations of Brinker’s implications as to predominance, with Judge Fitzgerald finding that, while “the Brinker court did not elaborate on every possible form of common proof that may satisfy a predominance assessment,” the plaintiff in Paige sufficiently “allege[d] the existence of various uniform policies that were consistently applied to purported class members,” and thereby established the requisite predominance. See Order at 3. For instance, each of the plaintiff’s declarants attested to the defendant regularly (though not always) scheduling shifts with only one employee on the premises. Id. Additionally, the defendant allegedly had policies dictating that “customers could not be turned away and employees could not leave the business operations unattended during open hours,” which accrued in favor of certification. Id. The plaintiff also presented evidence of “corporate records show[ing] break-free schedules of multiple employees.” Order at 4.

The defendant submitted a Notice of New Authority in order to draw the court’s attention to a ruling on a decertification motion concerning not the interpretation of Brinker but on whether the non-payment of meal and rest break violation premiums is a proper basis for class certification. See Notice of New Authority, Paige v. Consumer Programs, Inc., No. 07-2498 (C.D. Cal. Jul. 11, 2012) (No. 120) (available here). Despite not being bound by the ruling of a peer trial court, Judge Fitzgerald nonetheless “reviewed the order,” but stated that the purported new authority did not affect his reasoning as to certification and the interpretation of Brinker’s predominance doctrine. Order at 4.