Statistical Evidence in Wage and Hour Class Actions: Implications of Tyson Foods for Certification and Trial

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A Statistical Evidence in Wage and Hour Class Actions: Implications of Tyson Foods for Certification and Trial Disputing or Leveraging Representative Sampling to Prove Classwide Liability and Damages WEDNESDAY, JUNE 14, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: James M. Finberg, Partner, Altshuler Berzon, San Francisco Bradley J. Hamburger, Esq., Gibson Dunn & Crutcher, Los Angeles The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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4 Statistics and Representative Testimony in Wage & Hour Class and Collective Actions after Tyson v. Bouaphakeo BY: JAMES M. FINBERG ALTSHULER BERZON LLP

5 Facts of Tyson v. Bouaphakeo The class and collective action members in the Tyson case all worked at Tyson Food s pork processing plant in Storm Lake, Iowa. The class and collective action members alleged that Tyson violated the Fair Labor Standards Act ( FLSA ) and Iowa Wage Payment Collection Law by not paying them for the time spent putting on and taking off (i.e. donning and doffing ) protective equipment, to the extent that adding the time they spent donning and doffing to the time they spent performing other compensable work activities exceeded 40 hours per week. 131 S. Ct. at Until 1998, employees of the plant were compensated only for the time spent at their work stations, but not for any time required to don and doff protective gear, which occurred both before and after shifts, as well as mid-shift during unpaid meal breaks. Id. In 1998, Tyson began paying an additional four minutes per day to cover time spent donning and doffing required protective equipment. In 2007, Tyson changed to a policy of paying some employees for between four and eight minutes to don and doff, but paying nothing to other employees for time spent donning and doffing. Id. Employees in the Kill, Cut or Retrim departments were required to wear slightly different protective equipment depending on the tasks they performed. The average time required to don and doff equipment varied somewhat both between departments and within departments. 136 S. Ct. at 1055 (Thomas dissenting). 5

6 Class Certification/Collective Action Decisions in Tyson v. Bouaphakeo The District Court certified an Iowa state law class under Federal Rule of Civil Procedure 23, finding that common questions susceptible to class-wide resolution included (1) whether the donning and doffing of protective gear is considered work under the FLSA and Iowa state law; (2) whether such work is integral and indispensable under Steiner v. Mitchell and Iowa state law standard for preliminary and postliminary work that is compensable; and (3) whether any compensable work was de minimis. 136 S. Ct at (Citing Judge Bennett s class certification decision, 564 F.Supp.2d 870, 899 (N.D.Iowa 2008).) The District Court also designated the FLSA claim as a collective action. The Rule 23 Class contained 3,344 members; 444 employees opted into the FLSA collective action. 136 S. Ct. at The Supreme Court s opinion states that the parties do not dispute that the standard for certifying a collective action under the FLSA is no more stringent than the standard for certifying a class under the Federal Rules of Civil Procedure. This opinion assumes, without deciding, that this is correct. Id. at

7 Issues for the Jury in Tyson Before trial, the parties stipulated that employees were entitled to be paid for donning and doffing certain equipment worn to protect from knife cuts. The jury was left to determine (1) whether the time spent donning and doffing other protective equipment was compensable; (2) whether Tyson was required to pay for donning and doffing during meal breaks; and (3) the total amount of time spent on work that was not compensated. Id. at

8 Evidence Submitted in Tyson v. Bouaphakeo Since Tyson did not keep records of time spent donning and doffing, the employees offered expert testimony on that topic at trial. Plaintiffs industrial relations expert, Dr. Mericle, conducted 744 videotaped observations of approximately 54 different employees and analyzed how long various donning and doffing activities took. He then averaged the time taken in the observations to produce an estimate of 18 minutes a day for the Cut and Retrim departments and minutes for the Kill department. Id. Plaintiffs damages expert, Dr. Fox, then estimated the amount of uncompensated overtime by adding those estimates of time spent donning and doffing to time worked on other compensable activities and subtracting any time paid for donning and doffing. In that way, Fox estimated damages of $6.7 million. Id. at Tyson did not challenge the admission of this evidence. Instead, Tyson argued to the jury that Mericle s study overstated the average donning and doffing time. Id. Once a distinct court finds evidence to be admissible, its persuasiveness is, in general, a matter for the jury. Id. at

9 Jury Decision in Tyson The jury found that (1) time spent donning and doffing at the beginning and end of the work day was compensable time; but (2) time spent donning and doffing before and after meal breaks was not. Id. The jury returned a verdict of $2.9 million in unpaid 9

10 Tyson v. Bouaphakeo What the Supreme Court Held In Tyson the Supreme Court addressed whether a class and collective action should have been certified. 136 S. Ct. at In a 6-2 opinion, with Justice Kennedy writing for the majority, the Supreme Court affirmed the decision of the Eighth Circuit, which had affirmed the District Court s certification decision. In affirming class certification, the Supreme Court emphasized that the parties do not dispute that there are important questions common to all class members, the most significant of which is whether time spent donning and doffing the required protective gear is compensable work. Id. at

11 Tyson v. Bouaphakeo What the Court Declined to Do The employer and its amici had asked the Court in Tyson to announce a broad rule against the use in class actions of what the parties call representative evidence. Id. at The Supreme Court declined that request: A categorical exclusion of that sort, however, would make little sense. A representative or statistical sample, like all evidence, is a means to establish or defend against liability. Its permissibility turns not on the form a proceeding takes be it a class or individual action but on the degree to which the evidence is reliable in proving or disproving the elements of the relevant cause of action. Id. The Court went on to note that in many cases, a representative sample is the only practicable means to collect and present relevant data. Id. (Quoting Manual of Complex Litigation , p. 102 (4th ed. 2004)). The Court stated that it would reach too far were it to establish general rules governing the use of statistical evidence, or so-called representative evidence, in all class-action cases. Id. at

12 Tyson v. Bouaphakeo: Mt. Clemens is Re-Affirmed The Court expressly reaffirmed Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946): In FLSA actions, inferring the hours an employee has worked from a study such as Mericle s has been permitted by the Court so long as the study is otherwise admissible. Mt. Clemens, supra, at 687, 66 S.Ct. 1187; see also Fed. Rules Evid. 402 and S. Ct. at

13 Tyson v. Bouaphakeo: When is Statistical and Representative Proof Appropriate in a Class Action The Court concluded by stating the following about the use of representative evidence and statistical proof in class action cases: Whether a representative sample may be used to establish class-wide liability will depend on the purpose for which the sample is being introduced and on the underlying cause of action the fairness and utility of statistical methods in contexts other than those presented here will depend on facts and circumstances particular to those cases. 136 S. Ct. at

14 Tyson v. Bouaphakeo: The Court s Treatment of Wal-Mart v. Dukes Broad Interpretations Rejected In Tyson, Justice Kennedy, who joined Justice Scalia s majority opinion in Wal-Mart v Dukes, expressly noted that the employer s reliance on, and broad reading of, Wal-Mart v. Dukes and its No Trial by Formula language was misplaced. Wal-Mart does not stand for the broad proposition that a representative sample is an impermissible means of establishing classwide liability. Id. at The Tyson opinion distinguished Wal-Mart as follows: while the experiences of the employees in Wal-Mart bore little relationship to one another, in this case each employee worked in the same facility, did similar work, and was paid under the same policy. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), is distinguishable. In Wal-Mart plaintiffs failed to show a common policy and could not use representative evidence to overcome this absence of a common policy. Id. at As Mt. Clemens confirms, under these circumstances the experiences of a subset of employees can be probative as to the experiences of all of them. Id. at In short, because the employees in Wal-Mart were not similarly situated, evidence about the claims of one employee was not relevant to the claims of others, but because the employees at the Tyson plant were similarly situated, use of representative testimony was appropriate. 14

15 The Impact of Tyson Foods v. Bouaphakeo on Comcast: Differences in Damages Do Not Defeat Class Certification The Tyson decision does not mention Comcast v. Behrend, 133 S. Ct (2013), by name. That said, the Tyson decision may be read as rejecting an overly broad reading of Comcast that variance in class member damages requiring individual fact-finding categorically precludes class certification. As Chief Justice Roberts wrote in his concurrence in Tyson, such individual fact finding is not required for an aggregate award against the defendant: A class may be certified under Federal Rule of Civil Procedure 23(b)(3) only if questions of law or fact common to class members predominate over any questions affecting only individual members. A common question is one in which the issue is susceptible to generalized, class-wide proof. Ante, at 9 (quoting 2 W. Rubenstein, Newberg on Class Actions 4:50, pp (5th ed. 2012)) (internal quotation marks omitted). To prove liability and damages, respondents had to establish the amount of compensable (but uncompensated) donning and doffing time for each individual plaintiff. The Court properly concludes that despite the differences in donning and doffing time for individual class members, respondents could adequately prove the amount of time for each individual through generalized, class-wide proof. That proof was Dr. Mericle s representative study. 136 S. Ct. at (Roberts, C.J., concurring). 15

16 The Impact of Tyson Foods v. Bouaphakeo on Comcast: Differences in Damages Do Not Defeat Class Certification Comcast caused some to question whether difference in class member damages would preclude class certification or modify the practice of bifurcating class action trials into separate liability and damages phases. Several circuit court decisions have addressed those issues and have concluded that differences in class member damages do not preclude class certification and that bifurcation of a trial into liability and damages issues continues to be an appropriate method of resolving common liability issues in a single trial using common evidence, while finding ways to address the individual issues raised by difference in damages. See, e.g. In re Whirlpool Front-Loading Washer Products Liability Litigation, 722 F.3d 838, 860 (6 th Cir. 2013); Butler v. Sears, 727 F.3d 796 (7 th Cir. 2013). 16

17 The Impact of Tyson Foods v. Bouaphakeo on Comcast: Differences in Damages Do Not Defeat Class Certification The Comcast case was a federal antitrust action involving cable companies. The district court certified a liability and a damages class under Federal Rules of Civil Procedure 23(a) and (b)(3). The class was composed of more than two million Comcast subscribers. The district court found that only one of the plaintiffs four theories of antitrust impact could be pursued in a common manner: that Comcast engaged in anticompetitve clustering conduct, the effect of which was to deter the entry of overbuilders in the Philadelphia Designated Market Areas. 133 S. Ct. at & n.3. The plaintiffs expert calculated damages for the entire class using a model that failed to isolate the damages resulting from the one theory the district court approved. The district court nonetheless certified the class and the Third Circuit affirmed. The Supreme Court reversed, holding that the model serving as evidence of damages must measure only those damages attributable to that theory. Concluding that the model failed to do that, the Court held that the predominance requirement of Rule 23(b)(3) was not satisfied. 17

18 The Impact of Tyson Foods v. Bouaphakeo on Comcast: Differences in Damages Do Not Defeat Class Certification In light of Comcast, the Supreme Court subsequently vacated class certification decisions in In re Whirlpool and Butler v. Sears and directed the Sixth and Seventh Circuits to reconsider their decisions in light of Comcast. Both did so and concluded, that their prior decisions certifying classes were correctly decided. In In re Whirlpool, a case involving allegations that mold and mildew grow in frontloading washing machines, Circuit Court Judge Stranch emphasized that the district court had certified only a liability class and reserved all issues concerning damages from individual determinations. 722 F.3d at 860. The Sixth Circuit held that certification of liability issues under Rule 23(c)(4) is appropriate post-comcast. Similarly, in Leyva v. Medline Industries Inc., 716 F.3d (9 th Cir. 2013), the Ninth Circuit held that certification is appropriate after Comcast if the class can show that damages stemmed from the defendant s actions that created the legal liability. See also Pulaski &Middleman, LLC v. Google, Inc., 802 F.3d 979 (9 th Cir. Sept. 21, 2015) (individual damages determination cannot defeat class certification; Comcast stands for the proposition that plaintiffs must be able to show that their damages flow from defendant s actions that created the legal liability.) In Butler v. Sears, 727 F.3d 796 (7 th Cir. 2013), Judge Posner explained why class certification was appropriate. Butler v. Sears, like Whirlpool, involved alleged defects in washing machines. The Seventh Circuit held that Comcast did not change its analysis because there is no possibility in this case that damages could be attributed to acts of the defendants that are not challenged on a class-wide basis; all members of the mold class attribute their damages to mold and all members of the control-unit class to a defect in the control unit. The court expressly re-affirmed that the proof of individual damages does not defeat class certification. 18

19 The Impact of Tyson Foods v. Bouaphakeo on Comcast: Differences in Damages Do Not Defeat Class Certification Tyson confirms that those types of differences in class member damages do not preclude class certification: When one or more of the central issues in the action are common to the class and can be said to predominate, the action may be considered proper under Rule 23(b)(3) even though other important matters will have to be tried separately, such as damages or some affirmative defenses peculiar to some individual class members. 136 S. Ct. at 1045 (quoting 7AA C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure 1778, pp (3d ed. 2005)). 19

20 Tyson Foods v. Bouaphakeo: Issue of Uninjured Class Members Not Addressed In addition to arguing that certification of the class was improper because the amount of time spent donning and doffing by class members varied and required individual issues, Tyson s petition for certiorari raised the question of whether a class may be certified if it contains members who were not injured and have no legal right to any damages. 136 S. Ct. at 1049 (quoting Petition for Certiorari). In its briefing, however, Tyson concluded that [t]he fact that federal courts lack authority to compensate persons who cannot prove injury does not mean that a class action (or collective action) can never be certified in the absence of proof that all class members were injured. Id. (quoting Brief of Petitioner). As a result, the Court decided not to address the question raised in the Petition for Certiorari: In light of petitioner s abandonment of its argument from the petition, the Court need not, and does not, address it. Id. 20

21 Tyson Foods v. Bouaphakeo: Issue of Uninjured Class Members Not Addressed As for Tyson s argument that plaintiffs ensure that uninjured class members do not contribute to the overall size of the award and do not recover, the Court concluded that it was premature to reach the issue, since damages have not yet been disbursed in the case. Id. at The Court was influenced in its decision by the fact that Tyson had rejected Plaintiffs proposal that the trial be bifurcated into liability and damages phase, noting that the problem appears to be one of petitioner s own making. Id. In his concurring opinion, Chief Justice Roberts raised a concern that the District Court will not be able, on remand, to determine which class members were not injured. Such a result could easily be avoided in future cases by bifurcating the trial into separate liability and damages phases. Not clear why no argument that Iowa law does not require 40 hours for liability. 21

22 Decisions Citing Tyson v. Bouaphakeo: Villapando v. Exel Direct, Inc. Plaintiffs are delivery drivers for Exel Direct, Inc. who were classified as independent contractors U.S. Dist. LEXIS 53773, *4. Court concluded that decision reaffirmed the principle of Mt. Clemens that, where employer had statutory obligation to maintain records but did not, remedial nature of the FLSA militate against making the burden of proving uncompensated work an impossible hurdle for employees, and permitting use of representative samples. Id. at *

23 Uses of Statistical Evidence and Representative Testimony Uses of Employment Discrimination cases to prove liability, Hazelwood School District v. United States, 433 U.S. 299 *1977) (can draw inference of discrimination from disparity of 2-3 standard deviations) Use Statistics to Prove Damages Bell v. Farmers Insurance Exchange, Inc., 97 Cal. App. 4th 85 (2001). Representative Testimony used for Liability and Damages Morgan v. Family Dollar Stores, Inc. 551 F.3d 1233, 1279 (11th Cir. 2008) 23

24 Statistical Evidence in Wage and Hour Class Actions Bradley J. Hamburger June 14, 2017

25 Overview Challenge the Use of Trial By Formula Attack sampling, averaging, and extrapolation as a violation of the Rules Enabling Act and due process. Impact of Tyson Foods, Inc. v. Bouaphakeo (2016) Focus on whether sampling would be permitted in an individual action under the governing substantive law. Challenges to Expert Testimony and Methodologies Engage in rigorous analysis of expert testimony. Comcast Corp. v. Behrend (2013) Application of Tyson Foods Courts have begun to apply Tyson Foods. 25

26 Dukes on Trial by Formula Rule 23(b)(2) class consisting of all of Wal-Mart s female employees 1.5 million class members across the nation. Plaintiffs sought backpay under Title VII as monetary relief incidental to the injunction. Whether monetary relief was incidental hinged on avoiding individualized proceedings. Proposal to replace individual Teamsters hearings with sampling and extrapolation. 26

27 The plan: Dukes on Trial by Formula A sample set of the class members would be selected, as to whom liability for sex discrimination and the backpay owing as a result would be determined in depositions supervised by a master. The percentage of claims determined to be valid would then be applied to the entire remaining class, and the number of (presumptively) valid claims thus derived would be multiplied by the average backpay award in the sample set to arrive at the entire class recovery without further individualized proceedings. Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2561 (2011) 27

28 Dukes on Trial by Formula The Supreme Court unanimously rejects the proposal to replace individualized proceedings with sampling, averaging, and extrapolation. We disapprove that novel project. The Rules Enabling Act forbids interpreting Rule 23 to allow certification of a class on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims. Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2561 (2011) 28

29 Trial by Formula Revisited Tyson Foods Small Rule 23(b)(3) class and FLSA collective action limited to a single pork processing plant. Claims based on allegation that Tyson Foods failed to pay sufficient overtime for time spent donning and doffing protective gear. Plaintiffs relied on an expert s average based on 744 observations of donning and doffing. Another expert combined this average with payroll records to generate an aggregate damages award. 29

30 Trial by Formula Revisited Tyson Foods The Supreme Court declines to announce a broad rule regarding the use of statistical sampling: A categorical exclusion... would make little sense. Whether and when statistical evidence can be used to establish classwide liability will depend on the purpose for which the evidence is being introduced and on the elements of the underlying cause of action. Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1046 (2016) 30

31 Trial by Formula Revisited Tyson Foods The Court reiterates that, while petitioner, respondents, or their respective amici may urge adoption of broad and categorical rules governing the use of representative and statistical evidence in class actions, this case provides no occasion to do so. Whether a representative sample may be used to establish classwide liability will depend on the purpose for which the sample is being introduced and on the underlying cause of action. Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1049 (2016) 31

32 The Tyson Foods Framework The Rules Enabling Act requires an assessment of what would be permissible in an individual action. In a case where representative evidence is relevant in proving a plaintiff s individual claim, that evidence cannot be deemed improper merely because the claim is brought on behalf of a class. To so hold would ignore the Rules Enabling Act s pellucid instruction that use of the class device cannot abridge... any substantive right. Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1046 (2016) 32

33 The Tyson Foods Framework If the sample could have sustained a reasonable jury finding as to hours worked in each employee s individual action, that sample is a permissible means of establishing the employees hours worked in a class action. Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1047 (2016) 33

34 Importance of Anderson v. Mt. Clemens Why was sampling allowed in Tyson Foods? Because of the substantive rule adopted for FLSA claims in Mt. Clemens. This Court s decision in Anderson v. Mt. Clemens explains why Mericle s sample was permissible in the circumstances of this case. Mt. Clemens rule applies where employers violate their statutory duty to keep proper records, and employees thereby have no way to establish the time spent doing uncompensated work. Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1047 (2016) 34

35 Tyson Foods on Dukes Since the Court held that the employees were not similarly situated, none of them could have prevailed in an individual suit by relying on depositions detailing the ways in which other employees were discriminated against by their particular store managers. By extension, if the employees had brought 1½ million individual suits, there would be little or no role for representative evidence. Permitting the use of that sample in a class action, therefore, would have violated the Rules Enabling Act by giving plaintiffs and defendants different rights in a class proceeding than they could have asserted in an individual action. Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1048 (2016) 35

36 Due Process and State Court Class Actions Dukes and Tyson focused on the federal Rules Enabling Act and did not address due process. But sampling, averaging, and extrapolation can also violate a class action defendant s right to due process. Due process requires that there be an opportunity to present every available defense. Lindsey v. Normet, 405 U.S. 56, 66 (1972) [F]undamental requisite of due process of law is the opportunity to be heard. Mullane v. Cent. HanoverBank & Tr. Co., 339 U.S. 306, 314 (1950) 36

37 Due Process and State Court Class Actions Duran v. U.S. Bank Nat l Ass n (Cal. 2014) California Supreme Court overturns verdict in misclassification case that was based on sampling and extrapolation. Recognizes defendants due process right to raise defenses beyond a sample group. The decision to extrapolate classwide liability from a small sample, and its refusal to permit any inquiries or evidence regarding class members outside the sample group, deprived [the defendant] of the ability to litigate its exemption defense. Duran v. U.S. Bank Nat l Ass n, 59 Cal.4th 1, 35 (2014) 37

38 Due Process and State Court Class Actions Duran v. U.S. Bank Nat l Ass n (Cal. 2014) Under Code of Civil Procedure section 382, just as under the federal rules, a class cannot be certified on the premise that [the defendant] will not be entitled to litigate its statutory defenses to individual claims. Duran, 59 Cal.4th at 35 (quoting Dukes, 131 S. Ct. at 2561) These principles derive from both class action rules and principles of due process. Id. (citing Lindsey v. Normet, 405 U.S. 56, 66 (1972)) 38

39 Challenges to Expert Testimony and Methodologies Does Daubert apply at the class certification stage? The district court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings. We doubt that is so.... Dukes, 131 S. Ct. at In Comcast Corp. v. Behrend, 133 S. Ct (2013), the Court granted review on this issue, but did not ultimately reach it. Tyson Foods shows the importance of preserving Daubert challenges to sampling experts. 39

40 Challenges to Expert Testimony and Methodologies Even if Daubert does not apply, defendants can still challenge expert testimony at class certification. Comcast makes clear that damages models cannot be arbitrary and must measure only those damages attributable to [the] theory plaintiffs have advanced. Comcast, 133 S. Ct. at 1433 The Ninth Circuit has held that as part of the rigorous analysis required by Dukes, courts must judg[e] the persuasiveness of the evidence presented, including expert testimony. Ellis v. Costco Wholesale Corp., 657 F.3d 970 (2011) 40

41 Challenges to Expert Testimony and Methodologies California Supreme Court s guidance in Duran Even when statistical methods such as sampling are appropriate, due concern for the parties rights requires that they be employed with caution. Here, the process failed. Why? The sample size was too small. The sample was not random. Large margin of error. Duran, 59 Cal.4th at

42 Application of Tyson Foods Important opportunity for both plaintiffs and defendants to shape the law. Relatively few Court of Appeals decisions applying Tyson Foods so far. Defendants should challenge the notion that Tyson Foods is a blanket endorsement of the use of statistical sampling in class actions. Emphasize how an individual action would be tried. Contest whether Mt. Clemens applies. 42