Posts belonging to Category Certification Rulings

On June 16, 2011, Central District Judge Gary Allen Feess granted the plaintiffs’ certification motion in McKenzie v. Fed. Express Corp., No. 10-cv-02420, 2011 U.S. Dist. LEXIS 65278 (C.D. Cal. June 16, 2011) (order granting class certification) (available here).  In McKenzie, the plaintiffs alleged violations of three of the nine Section 226(a) requirements: total hours worked (Cal. Lab. Code § 226(a)(2)), the pay period inclusive dates (Cal. Lab. Code § 226(a)(6)), and overtime rates (Cal. Lab. Code § 226(a)(9)).  Such claims are an archetype for class treatment, since wage statements or pay stubs tend to be identically formatted for all employees (and thus contain identical defects).

This ruling rebuffed the commonality defense most frequently offered by wage statement defendants (that Section 226(e)’s injury requirement gives rise to individual questions that destroy commonality and render class treatment inappropriate), situating the injury discussion as part of the damages phase, where it is well established that variation in damages among class members is not an impediment to class certification.  See McKenzie at *2, *25.  Moreover, although the ruling adhered to a California Court of Appeal holding in Price v. Starbucks Corp., 192 Cal. App. 4th 1136 (Ct. App. 2011) (stating that Section 226(e) requires an injury separate from but causally related to the violation of Section 226(a)(1)-(9)), Judge Feess adopted a minimalist approach, whereby the injury requirement is satisfied if the wage statement recipient must “engage ‘in discovery and mathematical computations’” to determine if wages were correctly paid.  McKenzie at *10 (citing Price at 1143).

Judge Feess noted that “even the declarations submitted by FedEx in opposition to McKenzie’s motion for class certification indicate that common issues predominate” because the declarations stated that employees use FedEx’s computer system and consult their own handwritten notes “to determine whether they have been paid correctly every pay period.”  McKenzie at *30-*31. In an apparent declaration–drafting blunder, “one employee even stated in his declaration that he initially found FedEx’s wage statements confusing and had to consult his manager to understand the paystub.”  Id. at *31.  As such, the declarations submitted by FedEx were directly responsive to the “confusion” threshold for satisfying the Section 226(e) injury requirement, and, as with most admissions against interest, were likely fatal to the FedEx certification opposition.

Southern District of New York Judge Jed Rakoff, long recognized as an innovative thinker on matters concerning class actions, has granted certification in a class action brought by investors concerning residential mortgage-backed securities initially valued at $16.5 billion. See Public Employees’ Retirement System of Mississippi v. Merrill Lynch & Co., Inc., No. 08-cv-10841 (S.D.N.Y. June 16, 2011) (order granting certification) (available here). The plaintiffs allege that the $16.5 billion valuation was massively overstated, as it was premised on unrealistic assumptions about the ability of individuals to repay home loans, and that Merrill Lynch knew but failed to disclose that fact to investors. Judge Rakoff’s ruling is the first certification of a class of mortgage-backed securities purchasers, and the case is expected to be closely watched not only as to developments in the still-inchoate substantive law around mortgage-backed securities, but also as to procedural devices proposed or actually employed for the determination of liability and damages.

Although titled with a Mississippi-based public employee pension plan as the first-named plaintiff, this action was brought on behalf of several similar plans in Wyoming, Connecticut, and California, including the massive Los Angeles County Employees Retirement Association. The plaintiffs are represented by the Bernstein Litowitz Berger & Grossmann firm, while Merrill Lynch is represented by Skadden Arps.

In opposing class certification, the Skadden lawyers followed a familiar formula: focusing on a purported lack of commonality and urging Judge Rakoff to follow a colleague’s certification ruling in a similar case. They argued that the plaintiffs failed to establish that common issues will predominate, and frequently pointed Judge Rakoff toward the order denying certification in New Jersey Carpenters Health Fund v. Residential Capital, LLC, No. 08-cv-8781(S.D.N.Y. Jan 18, 2011) (order denying certification).

Judge Rakoff declined to adopt the reasoning of the earlier mortgage-backed securities action, but did not elaborate, opting to save his explanation for “a forthcoming written opinion” which has yet to be issued. Order at 2. Though not expressly stated in the Order, it seems likely that Judge Rakoff was deferring the issuance of a fully-reasoned order until the Supreme Court’s issuance of its Dukes v. Wal-Mart decision (which occurred a mere four days later). It is notable that, while Judge Rakoff implicitly acknowledged that Dukes is likely to alter the terms of certification, the fact of certification is presumed to be unaffected.

In another 5-4 ruling as unsurprising as it is consequential, the U.S. Supreme Court today reversed the Ninth Circuit’s affirmance of a district court’s grant of class certification, and in doing so likely set more difficult standards for prospective class actions to meet the Rule 23 commonality requirement. Like the AT&T v. Concepcion decision before it, today’s decision in Dukes v. Wal-Mart has attracted considerable notice in the popular press as well as specialized legal publications, and prompted the New York Times to organize reader comments around the query “A Death Blow to Class Action?”

As to whether “there are questions of law or fact common to the class,” the Court divided along the identical ideological lines in its five-to-four array as in AT&T v. Concepcion. Writing for the majority, and elevating an argument frequently advanced by defendants opposing class certification to the status of controlling law, Justice Antonin Scalia reasoned that the only corporate policy that the plaintiffs’ evidence convincingly showed was Wal-Mart’s policy of giving discretion to its local supervisors over employment matters, about which he stated, “[o]n its face . . . that is just the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices.”

Companies are widely expected to adopt policies against having uniform employment practices that violate the law. Finding that somewhat unsatisfactory, Patricia A. Barasch, President of the National Employment Lawyers Association, reacted to the decision by noting that “[t]oday’s judgment will make discrimination more prevalent unless Congress acts to reverse yet another misguided opinion by the Court.”

The full Dukes v. Wal-Mart decision is available here.

Building on the trend in which consumer class actions increasingly adopt a doctrine of presumed reliance, Northern District Judge Jeffrey White recently certified a nationwide class in Wolph v. Acer, No. 09-01314 (N.D. Cal. filed Mar. 25, 2009). Other courts have embraced the same presumption of reliance, which as a practical matter typically defeats defendants’ most potent predominance arguments, to the effect that class treatment would be too unwieldy were it to entail an individualized inquiry into each class member’s motivation for buying the product. See, e.g., Fitzpatrick v. General Mills, No. 10-11064, 2011 U.S. App. LEXIS 6047 (11th Cir. Mar. 25, 2011) (adopting presumption of reliance as to purported health benefits of yogurt); Cole v. Asurion Corp., 267 F.R.D. 322 (C.D. Cal. 2010) (granting certification on omission-based liability theory); Wolin v. Jaguar Land Rover North America, 617 F.3d 1168 (9th Cir. 2010) (reversing denial of certification where district court abused discretion; common questions predominated as to defendant’s duty to disclose information a reasonable consumer would deem material).

By obviating the individualized causation inquiries that the defendants had argued precluded certification, the Fitzpatrick, Cole, Wolin and, now, Wolph courts have articulated what can fairly be called an established doctrine, at least as to consumer class actions.

The Wolph v. Acer plaintiffs alleged that the notebook computers they bought from Acer frequently froze, crashed, and required re-starting (which was typically slow), owing to an inherently deficient memory capacity. See cert. order at 1-2. The defendant’s opposition to certification argued a lack of ascertainability, typicality and adequacy, each of which was dispatched with relative ease. See Id. at 3-12. It was the defendant’s predominance argument, and specifically that the plaintiffs were not entitled to a class-wide presumption of reliance or causation under California’s consumer protection statutes, that plainly engaged the bulk of Judge White’s consideration, as he ultimately rejected the predominance defense, holding that individualized reliance on specific misrepresentations is not required, and that the standard for demonstrating class-wide reliance is presumed from a showing that the misrepresentation is material. Id. at 14.

The certification order is available here.