California Court of Appeal: Certify 'Em All!

The California Supreme Court has to clarify class action standards again.  If there were any doubt, the Court of Appeal's decision in Hall v. Rite Aid, opinion here, seals it.  Strong words, I know.  But read on and you'll see what I mean.

In Hall,  the Rite-Aid cashiers sued because they claim they were denied "suitable seating" under the California wage orders:

Kristin Hall filed this action, on behalf of herself and similarly situated persons, alleging defendant Rite Aid Corporation did not provide seats to employees while the employees were operating cash registers at Rite Aid check-out counters in violation of section 14 of Wage Order 7-2001 (section 14) (Cal. Code Regs., tit. 8, § 11070(14)), promulgated by California's Industrial Welfare Commission (IWC). Section 14 requires an employer to provide employees with suitable seats "when the nature of the work reasonably permits the use of seats." (Cal. Code Regs., tit. 8, § 11070(14)(A).)

Hall moved for class certification arguing the following:

(1) all Cashier/Clerks are covered by the same job description and have similar job duties, including check-out work; (2) on average, Cashier/Clerks spend a 4 majority of their hours working at the register; (3) most check-out work (which largely involves scanning and bagging merchandise, processing payments, and handing the bags and receipt to the customer) can be done while seated, but Rite Aid required its Cashier/Clerks to stand while performing check-out work; and (4) Rite Aid's standard counter configurations could accommodate a seat with minimal modifications.

Rite-Aid pointed out in opposition to class certification:

(1) its stores differed in size, sales volume, number of Cashier/Clerks, and sales counter configurations; (2) when Cashier/Clerks are not performing check-out counter work they are tasked with duties that varied among the stores; and (3) the percentage of time each Cashier/Clerk spent behind the check-out counter varied from 2 percent to 99 percent (with an average of about 42 percent) and the time spent on stockroom or floor duties was equally varied. Rite Aid's evidence also showed that, even when performing duties at the check-out counter, the distance Cashier/Clerks had to move away from the register (to retrieve controlled items such as tobacco and liquor) varied depending on the specific configuration of each store, and they often or very often performed tasks requiring them to lift, bend, twist, lean over, or move around while working at the check-out register. Because of the variety of tasks, 69 percent of surveyed Cashier/Clerks reported they spent at least half their time moving behind the counter, and 31 percent reported they spent at least 3/4 of their time moving behind the counter.

So, do common issues predominate (making class certification appropriate)?  Or do individual issues predominate, making class certification inappropriate?  To answer this question, don't you have to know what the "nature of the work" means under the Wage Order?  You would have to know whether the common issues, if decided in the plaintiff's favor, would lead to victory for the plaintiff, wouldn't you?  For example, don't you need to know whether suitable seating is required even if significant parts of the job involve moving around?

That's what the trial court did. It looked at the term "nature of the work," and decided that the variances in employees duties made it impossible to generalize on a class wide basis.

Specifically, it concluded, contrary to Hall's postulated theory, that section 14 does not mandate the provision of suitable seats when the nature of a substantial task within an employee's range of duties would reasonably permit the use of seats, but instead mandates the provision of suitable seats only when the nature of an employee's work as a whole would reasonably permit the use of seats. Based on that construction of section 14, the trial court concluded decertification was proper because individual issues as to each class member's "job as a whole" would predominate over common questions.

Wrong, said the Court of Appeal.

Our review of Brinker, which is binding on this court (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450), compels the conclusion the trial court erroneously based its decertification order on its assessment of the merits of Hall's claim rather than on the theory of liability advanced by Hall.

The Court went even further:

Rite Aid asserts the trial court properly reached the merits of (and correctly rejected) Hall's theory of liability when it ruled on the decertification motion because Brinker cannot be read to permit a plaintiff to "invent a class action by proposing an incorrect rule of law and arguing, 'If my rule is right, I win on a class basis.' "

* * *

We read Brinker to hold that, at the class certification stage, as long as the plaintiff's posited theory of liability is amenable to resolution on a class-wide basis, the court should certify the action for class treatment even if the plaintiff's theory is ultimately incorrect at its substantive level, because such an approach relieves the defendant of the jeopardy of serial class actions and, once the defendant demonstrates the posited theory is substantively flawed, the defendant "obtain[s] the preclusive benefits of such victories against an entire class and not just a named plaintiff." (Brinker, supra, 53 Cal.4th at pp. 1034, 1033.) For these reasons, Brinker has concluded "[i]t is far better from a fairness perspective to determine class certification independent of threshold questions disposing of the merits, [because] defendants who prevail on those merits, equally with those who lose on the merits" (id. at p. 1034) have the benefits of their substantive legal victory applied to the class as a whole.

So, the Court of Appeal now held that trial courts must rely virtually exclusively on whether the plaintiff's "theory" presents common questions.  But a class action is not a lawsuit to prove a plaintiff's theory.  It's a lawsuit to prove something illegal happened to a group.   As the U.S.  Supreme Court put it in the Wal-Mart v. Dukes case,

That common contention, moreover, must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.

Frankly, the California Supreme Court in Brinker also did not go as far as the Court of Appeal in Hall.  In Brinker, the Supreme Court recognized:

Presented with a class certification motion, a trial court must examine the plaintiff's theory of recovery, assess the nature of the legal and factual disputes likely to be presented, and decide whether individual or common issues predominate. To the extent the propriety of certification depends upon disputed threshold legal or factual questions, a court may, and indeed must, resolve them.

The Hall court even quoted this language - repeatedly - but appeared to have ignored its significance.

Let's put the Hall court's holding into practice with a (rather extreme) example:  Let's say a plaintiff files a class action that alleges:   the Defendant law firm has a policy of requiring its lawyers  to wear red ties. Therefore, the law firm  misclassified the lawyers as exempt from overtime.  Under the Hall decision, the class must be certified, because under the plaintiff's "theory," the red-tie policy is common to all members of the class and can be resolved on a class wide basis.  True, but answering that common question proves nothing. The red-tie policy will not determine the employees' exempt status.  Lawyers are exempt because they are licensed professionals.  The legal standard for who is exempt does not take into consideration tie color.  Therefore, red ties and the policy requiring them to have red ties are common, but have no bearing on the relevant legal issue.

Four thoughts. First, the Court of Appeal's theory is an abdication of the trial court's role to protect defendants from unmeritorious class actions as a gatekeeper.  Certify now, ask questions later is no way to ensure due process.  When certification happens, cases settle out of fear.

Second, the Court of Appeal's suggestion that defendants can rely on summary judgment motions and motions for judgment on the pleadings to defeat unmeritorious class actions is cold comfort.  Anyone who litigates in state court lastly knows that the odds of winning summary judgment are low, even in the best of cases  And losing summary judgment is not appealable.  If there's anything less likely than winning summary judgment, it is obtaining writ review of summary judgment rulings.  Perhaps the courts of appeal will consider more writs. But that remains to be seen.  As for judgment on the pleadings, they are based on the four-corners of the complaint.  The plaintiffs' bar is capable of developing a complaint that will survive a motion for judgment on the pleadings.

Third thought:  Easy certification means that attorneys' fees for class actions will climb precipitously, as will employer commitment to discovery and depositions. Depending on how the Supreme Court rules in the upcoming Duran case, class action litigation may end up focusing on expert witnesses and motions for summary judgment. Or mediation.

Fourth thought:  When the legal theory is frivolous, despite the commonality of factual issues, Defendants will have to strongly consider motions for sanctions under Civ. Proc. Code section 128.7 to stop class action claims that simply have no substantive merit.  Those motions are granted less frequently than summary judgment motions.  But perhaps when the stakes are this high, superior courts will begin taking these motions more seriously.

So, I know this is a long post, but if your company or clients face class actions, this case is a game-changer.  Perhaps the Supreme Court will take it up. I'm hoping Rite-Aid is preparing its Petition for Review.

DGV