Posts belonging to Category Certification Rulings

The Ninth Circuit Court of Appeals has affirmed an order granting class certification in an unusual class action in which pilots and airline crew members sought recovery of “hazard pay” earned in delivering supplies to military posts in Iraq and Afghanistan.  See Hester v. Vision Airlines, Inc., __ F.3d __ (9th Cir. 2012) (available here).

The plaintiffs allege that Vision Airlines, a U.S. military subcontractor, retained funds that were specifically designated for hazard pay, and simply fired any employee who was aware that they were entitled to these funds, keeping the money for its own benefit.  See slip op. at 2-4.  The district court certified the class based on theories of liability that included unjust enrichment, money had and received, and conversion.  Id. at 4.  Specifically, the operative complaint alleged that Vision received and retained more than $21 million in hazard pay on behalf of its employees during the class period.  Id.

Particularly notable in Hester is the relatively rare imposition of a draconian discovery sanction, as the defendant’s answer was stricken after it repeatedly refused to produce documents related to hazard pay in response to an interrogatory served by the plaintiffs, and misled the court as to the existence of responsive documents.  See id. at 5-7.  Indeed, the district court’s imposition of such severe sanctions, affirmed by the Ninth Circuit, substantially shaped the case’s disposition.  The Ninth Circuit rejected the defendant’s contention that striking its answer was unjustified given that the district court had failed to consider less onerous sanctions, noting that Vision was warned several times on the record that this was a possibility.  The court also noted that, given defendant’s “willful disobedience,” it was reasonable to conclude that lesser sanctions would have been pointless.  Id. at 11.

Because the answer was stricken and a default judgment issued, the defendant in Hester was left to contest the adequacy of the plaintiffs’ allegations in the operative complaint, an argument that both the district court and Ninth Circuit rejected.  Id. at 7.  Likewise, the defendant was unsuccessful in seeking reversal of class certification, with the half-hearted argument that because the named plaintiff, Hester, had an employment contract with Vision and the other class members did not, the class representative was not typical and common issues did not predominate.  The Ninth Circuit dismissed this summarily, noting that “Vision did not produce any evidence that Hester had an employment contract with Vision.”  Id. at 13-14.

Hester stands as an ominous warning to defendants that engaging in discovery gamesmanship could have serious consequences.

A federal judge in the Southern District of New York has rebuffed a defendant’s attempt to block class treatment using the aggressive tactic of moving to strike class allegations.  See Chen-Oster v. Goldman Sachs, No. 10-6950 (S.D.N.Y. Jul. 17, 2012) (Opinion & Order) (available here).  Defendant’s motion, largely premised on Wal-Mart v. Dukes (131 S. Ct. 2541 (2011)), attacked the plaintiffs’ class allegations based on commonality, predominance, and standing for injunctive relief.  See Opinion at 2-3.  Judge Leonard B. Sand denied the defendant’s motion except as to class allegations under 23(b)(2), holding that, under Dukes, only current employees would have standing to pursue injunctive relief as a remedy, and the class contained both current and former employees.  Id. at 15.  However, Judge Sand clearly took issue with this, stating that “. . . the Dukes majority’s blanket rule that always denies standing to ex-employees cuts too broad a swath”, but nonetheless followed that rule.  Id. at 13.

In distinguishing Dukes as to the commonality and predominance issues, the court emphasized that the Chen-Oster plaintiffs alleged specific, company-wide employment practices, in contrast to the generalized allegations in Dukes.  Id. at 4-5.  Additionally, Dukes’ historically massive proposed class size was not an impediment to certification, since “Plaintiffs do not number in the millions; Plaintiffs all worked at—and the allegations all center around—Goldman’s New York office.”  Id. at 7.

This is the second time that the Chen-Oster case had generated a notable ruling, the first having come in connection with the U.S. Supreme court’s AT&T Mobility v. Concepcion decision.  In that prior ruling, the court held that, notwithstanding Concepcion, “it remains the law of the Second Circuit that an arbitration provision which ‘precludes plaintiffs from enforcing their [federal] statutory rights’ is unenforceable.” Chen-Oster v. Goldman, Sachs & Co., No. 10-06950, 2011 U.S. Dist. LEXIS 73200, at *15 (S.D.N.Y. Jul. 7, 2011), citing In re American Express Merchants’ Litigation, 634 F.3d 187 (2d Cir. 2011). Chen-Oster thus has the unique distinction of generating significant interpretations of both of the Supreme Court’s two landmark class action rulings from 2011.

California’ Second Appellate District has issued a ruling underscoring the fact that orders denying class certification do not operate, by collateral estoppel, to prevent those other than the named plaintiffs from filing a subsequent class action alleging the same claims.  See Ellis v. Pacific Health Corp., No. B229609 (Cal. Ct. App. Jul. 24, 2012) (order re appeal from judgment of dismissal) (available here).

Ellis usefully summarizes and affirms the controlling authorities, foremost Bridgeford v. Pacific Health Corp., 202 Cal. App. 4th 1034 (2012).  In Bridgeford, the court adopted the United States Supreme Court’s holding in Smith v. Bayer Corp., “[n]either a proposed class action nor a rejected class action may bind nonparties.”  131 S.Ct. 2368, 2380 (2011).  Ellis demonstrates that the Bridgeford holding (“unnamed putative class members of a class that was never certified cannot be bound by collateral estoppel”) is not an idle doctrine.  Bridgeford at 1037.  In Ellis, the trial court had sustained Pacific Health’s demurrer on the ground that the plaintiff was within the class definition of an earlier putative class action (Larner v. Pacific Health Corp.), which alleged the same claims against the same defendant.  However, as to the pivotal privity requirement for the application of collateral estoppel, the unanimous three-judge panel held that the plaintiff, as merely one among the many unnamed prospective class members, was neither a party to the prior action nor represented by a party to the prior action.  Order at 7.  The court explained that, while the named plaintiffs in Ellis had economic interests that were “substantially aligned with Larner’s,” the prior decision cannot bind them; since the Larner case was never certified, the Ellis plaintiffs could not have been parties to it. Id.

On remand from the California Supreme Court, the Second Appellate District has directed the trial court to recertify a class of Liberty Mutual insurance claims adjusters and has held that they are not exempt from overtime pay under California’s “administrative exemption.”  See Harris v. Super. Ct., ___ Cal. App. 4th ___ (Cal. Ct. App. 2012) (available here).  Defendants had presented an affirmative defense based on the administrative exemption, which the court rejected because the adjusters’ primary work duties were not directly related to either management policies or general business operations.  The decision is viewed as a clear victory for workers, and a sign that overtime exemption analysis is being revitalized to make it more difficult for employers to argue that they have no obligation to pay purportedly “exempt” employees for overtime work.

The ruling was preceded by a complex procedural history.  The trial court certified the class, whereupon Liberty Mutual put forth the affirmative defense that the adjusters were exempt under Wage Order No 4’s administrative exemption, and the plaintiffs moved for summary adjudication of the affirmative defense.  In addition to opposing the summary adjudication motion, Liberty Mutual also moved to decertify the class.  In a mixed ruling, the trial court decertified the class as to all claims arising after October 1, 2000, the effective date of the new Wage Order 4-2001, insofar as the adjusters were only exempt under an earlier version of Wage Order 4 (Wage Order 4-1998).  Liberty Mutual then sought decertification of the part of the class that remained certified, but the trial court denied the motion.  Subsequently, Liberty Mutual filed a Writ of Mandate Petition, which the Court of Appeal denied, holding the adjusters to be non-exempt.  Thereafter, the California Supreme Court reversed, holding that the Court of Appeal’s analysis of the amended wage order was flawed, since the court relied on case law that predated the most recent amendment to the applicable wage order and failed to consider the language of the amended order.

The matter was remanded to the Court of Appeal, which again denied the defendants’ writ petition, but with more thorough reasoning, per the direction of the Supreme Court.  In particular, the court further clarified the “directly related” requirement of the administrative exemption.  Harris at 25-26.  The court found that the primary responsibility of the Harris employees was adjusting individual insurance claims, a task which is not at the level of management policy or general operations.  Id.  Thus, their work was not directly related to administering the business and, as such, the administrative exemption did not apply.  Id. at 26. The Court of Appeal ordered the trial court to vacate its prior orders and deny defendants’ motion to decertify the post-2000 class, since the adjusters would be non-exempt under either Wage Order 4-1998 or Wage Order 4-2001.  Id.  The Court of Appeal’s reasoning is expected to be influential in other misclassification cases.