Trial of Class Actions With Statistical Evidence: California Court of Appeal Follows Wal-Mart v. Dukes In Rejecting "Trial By Formula"
Issues regarding the use of statistical evidence at trial of a class action were recently addressed by the California Court of Appeal, First Appellate District, in Duran v. U.S. Bank Nat’l Ass’n, 2012 Cal. App. LEXIS 107 (Cal. Ct. App. Feb. 6, 2012). The court concludes that the trial of an employment class action (seeking unpaid overtime) through the use of statistical evidence, where the court refused to allow the defendant to put on evidence of defenses to individual claims (such as that particular employees qualified as exempt), was not only contrary to California’s class action standards but a violation of due process. The appellate court found the error here sufficiently egregious that it decertified the class and did not send the case back for another trial. The court discussed Wal-Mart v. Dukes at some length, finding that “[t]he same type of ‘Trial by Formula’ that the U.S. Supreme Court disapproved of in Wal-Mart is essentially what occurred in this case.” Id. at *102. In Wal-Mart, the Supreme Court disapproved of a proposed trial plan whereby a sample set of class members’ claims for backpay would be tried, and the result extrapolated to the entire class. The Supreme Court concluded, unanimously, that “[a] class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims.”
A recent article by Judy Greenwald in Business Insurance suggests that this decision will have broad implications for class actions in California and beyond:
The ruling by an appellate court in California that dismisses a class action wage-and-hour lawsuit by bank employees is expected to lead to a dramatic reduction in the number of class actions filed in the state and could be highly influential nationally, observers say.
The Business Insurance article may be going a bit too far. In my view, this decision is certainly important, but I don’t think it’s a surprising result that a defendant should be entitled to put on its defenses, and I don’t think it means the end of class actions (and after all, this is only one intermediate appellate court in one jurisdiction).
What I think this decision means is that courts need to pay more attention to defenses in deciding class certification, and defendants should highlight defenses prominently in opposing certification. Here is a key part of the opinion:
Class action lawsuits are intended to conserve judicial resources and to avoid unnecessarily repetitive litigation. Efficiencies must be maintained, sometimes resulting in imperfect results. A certain amount of variability can be tolerated. However, the trial management plan followed here prevented USB [the defendant] from submitting any relevant evidence in its defense as to 239 class members out of a total class of 260 plaintiffs. Whether the trial court would have given credence to such evidence is beside the point. A trial in which one side is almost completely prevented from making its case does not comport with standards of due process.
Id. at *114-15.
If plaintiffs think that defendants are conjuring up meritless defenses to defeat class certification, they can move to strike them or seek summary judgment on them. But if a defense is valid and a defendant would be entitled to put on evidence in support of it in an individual trial, under this decision (and Wal-Mart), the defendant must have the right to put on its defense, in some reasonable manner, in a class action trial. The California Court of Appeal made clear that they did not see their decision as making it impossible to try this kind of class action, nor was the court saying that statistical methods could never be used, but such a trial would have to be conducted in a manner that adequately protected the defendant’s rights to present individual defenses. Because this is a due process requirement, it is not something the trial court has any discretion over.
I also found interesting that the parties and the court agreed here that, while a ruling on class certification is reviewed for abuse of discretion, the court “review[ed] de novo the legal issue of whether a trial plan violated a party’s right to due process.” Id. at *74. That by itself is an important reason to make due process arguments in opposing class certification, and in motion practice relating to how a class action trial will be conducted.