The case of Duran v. U.S. Bank National Association has become controversial for a few reasons — the main of which is the case’s use of statistical sampling to prove liability. The decision issued by the California Supreme Court is likely to shape the future of class action lawsuits in the state, as the court found that the trial court had improperly certified a class of employees.
The case surrounds the claim that came from bank officers who sued on behalf of a supposed class of 260 employees. They alleged that they had been misclassified as exempt employees under the California Labor Code and thusly deserved compensation for their overtime wages. The trial court performed a liability proof test using 20 randomly selected plaintiffs to testify, and used that number of plaintiffs to determine that the entire group of 260 employees should be classified as having been denied overtime. The first phase of the trial resulted in the court then turning to damages owed to these employees, which amounted to $15 million that U.S. Bank had to fork over. After the case was appealed, the Court of Appeal reversed the trial court’s decision, citing the “trial by formula” in error as the employer was unable to access its due process of rights and raise individual challenges to the class members’ claims who had not been present.
A few important points have come from the Supreme Court of California’s decision: Clarity will come to lower courts in the state when determining that a case contains class-action groups. The trial plan must permit litigation of individual defenses as part of the defendant’s right to due process. Predominance of common issues is not enough to certify a class. And the trial court’s flawed methodology has been severely criticized.
Partner Will Stern of Morrison & Foerster in San Francisco, in an interview with InsideCounsel, shed some light on why this decision is such an important one for both employers and class action defendants:
“A damages model cannot include unharmed persons in the multiplier. Rather, people without claims have to be subtracted out from class wide damages. This applies in all California class action cases, whether employment or not, and whether statistics are used to prove liability or even simply to prove damages.”
Stern also commented on the use of statistical sampling in future cases — that the use of trial by formula is an acceptable methodology in categories of cases where the liability determination — the variable being tested — is objective. For example, cases in which gadgets might have defects. In order to test that, the parties could sample a small group of the gadgets or devices in order to subject them to testing and determine whether they are all faulty. But certain cases are more difficult than others. Stern notes:
“The harder cases are where the thing being tested is the ultimate question of liability: How many hours did you work outside the branch? What is the percentage of hours you work that involve professional skills? Were you misled by the advertising statement ‘x’? Those are controversial because it is perilous to assume that all [employees] [purchasers] [patients] [website visitors] [credit card users] [etc.] had the same motivation. Those are individual issues…It means that the class action is being used to get money (or assess a defendant) on behalf of people who, outside of a class action, would not have had a claim.”
The Duran case appears to serve to determine which class action factors are now clearer in the state of California, and that the parameters for determining a class have been more clearly prescribed to lower courts.