Denial of Class Certification as to Alleged wage and hour Violations Affirmed by Court of Appeal

In Daily v. Sears, the Fourth Appellate District, Division One, affirmed the trial court’s granting of the defendant’s motion to preclude class certification.

Plaintiff Dailey was a former employee of Sears, who asserted wage and hour claims individually and on behalf of a proposed class of similarly situated managers and assistant managers.

Dailey argued that Sears uniformly categorized Managers and Assistant Managers as exempt from overtime and meal/rest break requirements, but nonetheless implemented policies that had the effect of requiring the proposed class members to work at least 50 hours per week, spending the majority of their time on nonexempt activities. Sears argued that determining how the class members actually spend their time requires individualized evidence and cannot be proven on a classwide basis. The trial court granted Sears’ motion.

The Court of Appeal affirmed, ruling that the trial court had not abused its discretion in denying class certification.  As the Court of Appeal explained, class certification requires, among other things, “a well-defined community of interest.”  The “community of interest requirement,” in turn, embodies three factors:

  1. predominant common questions of law or fact;
  2. class representatives with claims or defenses typical of the class; and
  3. class representatives who can adequately represent the class.

For class certification purposes, the court went on to explain, Dailey was required to present substantial evidence that proving both the existence of Sears’ uniform policies and practices and the alleged illegal effects of Sears’ conduct could be accomplished efficiently and manageably within a class setting.  Dailey presented such evidence, and Sears presented contrary evidence, which showed that whether it misclassified Managers and Assistant Managers as exempt required individual inquiries.

The trial court, weighing evidence for both sides, found the evidence Sears presented more compelling, and thus ruled that Dailey had not satisfied his burden for establishing commonality.  Dailey argued on appeal that the trial court had improperly focused on the merits.  The Court of Appeal disagreed:

"Dailey is correct that the validity of the complaint’s allegations generally is not at issue on class certification. . . . By the same token, however, the focus of the class certification inquiry is on ‘the nature of the legal and factual disputes likely to be presented’ [citation omitted] as those disputes are framed not only by the complaint but also by defendant’s answer and affirmative defenses. . . . Critically, if the parties’ evidence is conflicting on the issue of whether common or individual questions predominate (as it often is and as it was here), the trial court is permitted to credit one party’s evidence over the other’s in determining whether the requirements for class certification have been met—and doing so is not, contrary to Dailey’s apparent view, an improper evaluation of the merits of the case."

Thus, the Court of Appeal affirmed, substantial evidence supported the trial court’s finding that common questions did not predominate.

In addition, among its other rulings, the Court of Appeal rejected Dailey’s argument that a random sampling methodology he proposed could have been used to managing the individual questions requiring adjudication. In particular, Dailey sought to use such a methodology to establish both liability and damages. As the Court of Appeal explained, sampling methodologies, while sometimes appropriate to establish damages, have never been accepted to establish liability on a class-wide basis. Such a method may not “be used to manufacture predominate common issues where the factual record indicates none exist.”  Indeed, the Court noted, “[i]f the commonality requirement could be satisfied merely on the basis of a sampling methodology proposal such as the one before us, it is hard to imagine that any proposed class action would not be certified.” (Emphasis in original).

This opinion affirms that a trial court may indeed credit one side’s evidence over another’s in the class certification context. This points to high importance, for both sides, of marshalling the best evidence at the class certification stage, since it can operate as a miniature bench trial.

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