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California Supreme Court Rejects Sampling Method for Determining Liability in Class Actions




by:
Andrea M. Weiss
Ruth Zadikany
Mayer Brown LLP - Los Angeles Office

Lori A. Zahalka
Mayer Brown LLP - Chicago Office

 
June 30, 2014

Previously published on June 24, 2014

Decision: In Duran v. U.S. Bank N.A., the plaintiffs sought to represent a class of loan officers who contended that they were improperly classified as exempt employees under the “outside salesperson” exemption to California’s overtime wage payment law, which applies to employees who spend more than half of their workday engaged in sales activities outside the office. The trial court devised a sampling method to determine the bank’s liability. The court selected a random sample of 21 class members, took evidence regarding their work habits and extrapolated liability (and the average award) to all 239 class members. In selecting this method, the court rejected US Bank’s proposal that all class members’ claims be examined, as well as plaintiffs’ proposal to select a representative sample of plaintiffs using methods devised by the parties’ experts. The court also precluded US Bank from presenting evidence that class members outside the sampled group were exempt. Based on the 21-person sample, the trial court found that the entire class had been misclassified. The court also adopted the calculations of the plaintiffs’ expert regarding the average overtime worked. This resulted in a verdict of approximately $15 million and an average recovery of over $57,000 per person.

In a unanimous decision, the California Supreme Court affirmed the Court of Appeal’s decision rejecting the trial court’s sampling method. The Supreme Court concluded the trial court’s “flawed implementation of sampling” must be reversed because it prevented US Bank from “showing that some class members were exempt and entitled to no recovery.” The Supreme Court noted that a “trial plan that relies on statistical sampling must be developed with expert input and must afford the defendant an opportunity to impeach the model or otherwise show its liability is reduced.”

Impact: While the Duran decision makes clear that use of sampling and statistics in the manner used by the trial court exceeded the permissible limits, the Supreme Court stopped short of indicating when sampling may be used to prove liability in a class action. The Supreme Court suggested that statistical sampling may be better suited to determining damages but provided little guidance as to where the line should be drawn when the methods are less extreme than those employed by the Duran trial court. As such, Duran may raise more questions than it answers.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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Andrea M. Weiss
Ruth Zadikany
Lori A. Zahalka
 
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