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California Employment Law Blog

Court of Appeal Rejects “Trial by Formula,” Reverses Multimillion Dollar Verdict and Orders Class Decertified

Posted in Class Actions, Exempt Employees, Overtime, Wage and Hour

Duran v. U.S. Bank Nat’l Ass’n, No. A125557, 2012 WL 366590 (Feb. 6, 2012)

In a decision destined to have significant statewide ramifications, the California Court of Appeal for the First District reversed a trial court’s certification of a wage-hour class and determination of liability, concluding that the trial court had failed to follow “established statistical procedures” in adopting the trial management plan under which class-wide liability was determined by the testimony of only a relative handful of the class members.

Four current and former U.S. Bank Business Banking Officers (BBO) filed suit on behalf of themselves and all current and former BBOs within the relevant period, alleging that they had been misclassified as exempt outside sales people and therefore illegally deprived of overtime pay. After certifying the class, the trial court, over U.S. Bank’s strenuous objections, adopted a trial management plan in which a random sample of 20 (out of 260) class members would testify as representatives of the class, and the court would use this testimony to determine class-wide liability. After bench trials, the court awarded the class members $15 million in unpaid overtime and prejudgment interest, as well as $18 million in attorney’s fees.

On appeal, the Court of Appeal agreed with U.S. Bank that the plan was seriously flawed and reversed the judgment. The court held that the trial court had exceeded acceptable due process parameters by limiting the presentation of evidence to the testifying BBOs only. Rather, the court held, due process principles require individualized inquires where the applicability of an exemption turns on the specific circumstances of each employee. Pointing to the U.S. Supreme Court’s recent decision in Wal-Mart Stores, Inc. v. Dukes, [discussed in our Blog entry of 7/1/11], the Court of Appeal rejected what it (and the U.S. Supreme Court) termed as a “Trial by Formula.” Instead, it ruled, U.S. Bank should have been permitted to introduce the evidence it claimed to have challenging the claims of the other 239 class members that they were non-exempt. The Court of Appeal reversed the judgment and, in addition, ordered the case decertified as a class action.

Duran, particularly when considered in conjunction with Dukes,strikes a serious blow to the efforts of the plaintiffs’ bar to establish class-wide liability on the basis of statistical sampling, expert testimony and limited testimony from class members. Duran has already touched off a spate of motions in the trial and appellate courts and almost certainly will be the source of further litigation.