Filed 1/17/18
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION ONE
SAMUEL DURAN et al.,
Plaintiffs and Appellants,
A148817
v.
U.S. BANK NATIONAL ASSOCIATION, (Alameda County
Super. Ct. No. 2001-035537)
Defendant and Respondent.
In our second encounter with this class action case, plaintiffs Samuel Duran and
Matt Fitzsimmons appeal from the trial court’s order denying class certification. This
case is a wage and hour class action challenging whether defendant U.S. Bank National
Association (Bank) had properly classified its business banking officers (BBOs) as
exempt employees under the outside salesperson exemption. This exemption applies to
employees who spend more than 50 percent of their workday engaged in sales activities
outside their employer’s place of business. The trial court concluded plaintiffs failed to
demonstrate that the case is manageable as a class action. We affirm.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
I. Background
The factual background behind plaintiffs’ claims and the procedural history of this
case from its inception are well known to the parties and this court, and we will not repeat
it here. In brief, the case centers on plaintiffs’ allegations that they were misclassified as
outside salespersons when they allegedly actually spent the majority of their working
hours inside Bank offices.1 Like the court below, we incorporate by reference pages 13
through 24 of the Supreme Court’s opinion in Duran, supra, 59 Cal.4th 1.) That decision
affirmed our opinion reversing the judgment entered in favor of plaintiffs after a bench
trial, leaving open that the trial court could “entertain a new class certification motion.”
(Duran, at p. 50.) That new motion is the subject of the present appeal.
On July 7, 2014, the remittitur from Duran was filed and the case was reassigned
to a new judicial officer on September 8, 2014, following the Bank’s challenge to the
original trial judge.
II. Motions Regarding Certification
On December 18, 2014, the Bank filed a motion to deny class certification.
On January 21, 2015, the trial court denied plaintiffs’ request to reopen discovery,
finding that the prior discovery was “very extensive.”
Plaintiffs retained survey expert Jon A. Krosnick in connection with their
opposition to the Bank’s motion. On February 1, 2015, Krosnick sent an “ ‘advance
letter’ ” to putative class members, alerting them to an impending survey and the fact that
they might be contacted. The letter enclosed $2 as a “thank you” and promised an
additional $25 to $35 for answering a 20-minute phone survey that would be “completely
confidential.”
On February 13, 2015, Ted Biggs, a senior vice president of the Bank, sent a letter
to putative class members informing them of the Bank’s belief that Krosnick’s letter had
been sent in connection with the pending lawsuit. Among other things, Biggs disputed a
statement in Krosnick’s letter promising respondents that their identities would be kept
confidential.
1
An outside salesperson is one who “customarily and regularly works more than
half the working time away from the employer’s place of business” on sales duties. (See
Industrial Welfare Com., Wage Order No. 4-2001, subd. (2)(m).) Here, there is no
dispute that BBOs were primarily engaged in “sales.” (Duran v. U.S. Bank National
Assn. (2014) 59 Cal.4th 1, 26 (Duran).)
2
On February 27, 2015, the trial court granted, in part, plaintiffs’ ex parte
application seeking, among other things, the authority to send a corrective mailing.2 The
court denied the Bank’s corresponding ex parte application seeking to halt the survey and
to bar further “ ‘unapproved’ ” communications with putative class members. The court
found plaintiffs had a right to conduct the survey in order to support their opposition to
the Bank’s motion. At the same time, the court observed it was unclear “how a survey of
putative class members in this unique context could help resolve the manageability
issues” identified by the Supreme Court in Duran.
On April 30, 2015, plaintiffs filed an opposition to the Bank’s motion to deny
certification, characterizing their opposition as a cross-motion for class certification.3 In
support of their motion, plaintiffs included, among other things, an April 2015 survey
report prepared by Krosnick (2015 Survey). In his report, he indicated his task had been
“to conduct a survey of members of the Duran class with which to generate a menu of
margins of errors for various possible numbers of witnesses who could testify at trial and
answer questions to reveal the average number of hours they worked per week, the
proportion of their work hours that were spent performing sales-related activities, and the
proportion of their work hours that were spent performing outside sales-related
activities.” The 2015 Survey is described in more detail below.
On June 5, 2015, the trial court granted, in part, a motion to compel filed by the
Bank, ordering plaintiffs to produce the identities of the 2015 Survey respondents and
their survey responses. The court also ordered plaintiffs to produce the identities of those
respondents to an earlier Krosnick survey (2008 Survey) who had also responded to the
2
Apart from allowing plaintiffs to depose the Bank’s senior vice president “in
order to get to the bottom of what happened,” the trial court denied plaintiffs’ request to
reopen discovery.
3
The parties submitted extensive evidence to the trial court in connection with the
class certification issue, much of which the court found to be “incredibly redundant.”
3
2015 Survey, together with the 2008 Survey responses of those respondents.4 In its
order, the court observed plaintiffs had failed to provide a “separate detailed trial plan,”
even though this was “one of the most important take-aways from the Supreme Court’s
decision in this case.”
On August 21, 2015, plaintiffs submitted an expanded trial plan. Plaintiffs
proposed a bifurcated trial, with the liability phase focusing on “ ‘the ultimate question’ ”
of whether the Bank had “realistic” expectations that BBOs could perform their job
duties and meet the production goals of their position while spending more than half of
their working time away from the office. As statistical evidence, they proposed using
representative testimony with sample sizes ranging from 15 to 50 BBOs, having
associated respective margins of error ranging from 11 percent to 5.53 percent. This
liability phase would be followed by a restitution phase to determine the amount of
money owed to the class, “[b]ased on the court’s findings of the average hours worked
per week by the randomly chosen BBOs who testify at trial.” Plaintiffs proposed
allowing the Bank to litigate its affirmative defense by calling BBOs outside the random
sample, subject to the trial court’s discretion to cut off the Banks’ presentation of
evidence under Evidence Code section 352.
On October 2, 2015, the Bank filed its reply brief, expanding the evidentiary
record to include 66 additional declarations from BBOs who testified that they regularly
spent the majority of their time outside Bank locations. The Bank also included a
declaration prepared by its expert, Andrew Hildreth, which criticized the 2015 Survey
and its methodology. In brief, Hildreth concluded the survey suffered from self-selection
bias, as well as serious measurement and estimation errors.
4
The 2008 Survey was ruled inadmissible during the first trial.
4
On November 13, 2015, plaintiffs filed their reply in support of their cross-motion
for class certification, along with a third Krosnick report that addressed Hildreth’s
criticisms.
On March 25, 2016, the trial court, pursuant to Evidence Code section 730,
appointed an independent expert, Kent D. Van Liere, to advise it on the survey science
underpinning the parties’ motions.5
5
Evidence Code section 730 provides, in part: “When it appears to the court, at
any time before or during the trial of an action, that expert evidence is or may be required
by the court or by any party to the action, the court on its own motion or on motion of
any party may appoint one or more experts to investigate, to render a report as may be
ordered by the court, and to testify as an expert at the trial of the action relative to the fact
or matter as to which the expert evidence is or may be required. The court may fix the
compensation for these services, if any, rendered by any person appointed under this
section, in addition to any service as a witness, at the amount as seems reasonable to the
court.” In a footnote in its order, the trial court asked that we give “further guidance on
the use of [Evidence Code] Section 730 to appoint an expert as a court technical
consultant,” citing to Diaz-Barba v. Superior Court (2015) 236 Cal.App.4th 1470, 1490.
The use of experts to assist the court as consultants can be beneficial in complex
cases. We note Federal Rules of Evidence, rule 706 also applies to court-appointed
expert witnesses. Cases addressing this rule may prove helpful to our trial courts. As
was observed in Leesona Corp. v. Varta Batteries, Inc. (S.D.N.Y. 1981) 522 F.Supp.
1304, 1312: “[A] court expert serves not only as a witness on whose opinion the Court
can rely for assistance, but also as both a second set of ears for the court and a teacher
who, unaffected by his having been called as a witness by one side or the other, can
explain the technical significance of the evidence presented. [¶] Naturally a court will
rely heavily on and give great weight to the testimony of its own expert . . . .
Nevertheless, although a scientifically difficult patent case such as this is ideally suited to
the appointment of a court expert pursuant to Rule 706, the appointment of such an expert
does not remove from the trial court’s shoulders the burden of understanding and
becoming fully familiar with the technical questions in the case. The court expert serves
to enhance the trial court’s understanding, but it is the court, and not its expert, that
decides the case.”
California courts have acknowledged the value in court-appointed assistance from
experts, especially in complex cases presenting issues beyond a trial judge’s knowledge.
(People ex rel. Brown v. Tri-Union Seafoods, LLC (2009) 171 Cal.App.4th 1549, 1573–
1574; Mercury Casualty Co. v. Superior Court (1986) 179 Cal.App.3d 1027, 1032.)
5
On March 29, 2016, the Bank submitted a second declaration from Hildreth
addressing new material contained in the third Krosnick report.
III. Denial of Class Certification
On May 19, 2016, the trial court filed its order denying class certification. In its
order, the court concluded plaintiffs had failed to carry their burden of showing that
common questions predominated. The court observed, “A primary factor in the Duran
court’s finding that the class may have been improvidently certified the first time around
was its conclusion that the trial court had ‘received no evidence establishing uniformity
in how BBOs spent their time.’ ” The court concluded that, apart from shoring up
plaintiffs’ trial plan, their statistical evidence “continues to fall short of the kind of
showing of uniformity that the Duran court found necessary.” In spite of the voluminous
evidence submitted by both parties, the court found “[t]he only new material of any
importance lies in the disputes between Krosnick and Hildreth” (italics added). The court
determined the certification issue based on its resolution of those disputes.
Relying on Hildreth’s analysis, the trial court concluded that two central flaws in
the 2015 Survey operated to defeat plaintiffs’ certification efforts: (1) “the issues arising
from the differences between the responses to the 2008 Survey and the responses to the
2015 Survey,” and (2) “the related issue of Krosnick’s use of total average hours worked
per week rather than average overtime hours worked per week.” As to the second point,
the trial court surmised that Krosnick had failed to understand plaintiffs’ theory of
liability.
In setting forth its reasoning, the trial court also indicated it was “initially
satisfied” with how plaintiffs’ trial plan proposed addressing the Bank’s affirmative
defenses. However, upon finding the 2015 Survey data to be unreliable “for any
purpose” (italics added), the court determined plaintiffs could not rely on the survey
instrument in establishing a prima facie case. Additionally, the court observed that
representative sampling could not be used to establish an aggregate restitution award
6
because the proposed sample sizes were not scientifically supportable for that purpose.
The court also found it would not be able to adequately manage the Bank’s affirmative
defense—that at least some class members worked most of their time outside the office—
because the 2015 Survey failed to eliminate the need for “a host of ‘mini trials.’ ” In
sum, the court concluded the pertinent factual questions “present severe manageability
problems.” The court thus denied certification on the grounds that plaintiffs had failed to
demonstrate common issues would predominate or that individual issues could be
effectively managed. This appeal followed.
DISCUSSION
I. Standard of Review for Class Certification
The party seeking class treatment must show (1) an ascertainable and sufficiently
numerous class, (2) a well-defined community of interest, and (3) substantial benefits
from certification that render proceeding as a class superior to the alternatives. (Ayala v.
Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522, 529–530 (Ayala); Brinker
Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1021 (Brinker).) The
“community of interest” requirement encompasses three factors: predominant common
questions of law or fact; class representatives with claims or defenses typical of the class;
and class representatives who adequately represent the class. (Ayala, at p. 530; Brinker,
at p. 1021.)
The certification question is a procedural one that does not focus on the merits of
the case. (Brinker, supra, 53 Cal.4th at p. 1023; Sav-On Drug Stores, Inc. v. Superior
Court (2004) 34 Cal.4th 319, 327 (Sav-On).) In evaluating predominance, our Supreme
Court explained: “[A court] must determine whether the elements necessary to establish
liability are susceptible of common proof or, if not, whether there are ways to manage
effectively proof of any elements that may require individualized evidence.” (Brinker, at
p. 1024; accord, Ayala, supra, 59 Cal.4th at p. 533.) “The ‘ultimate question’ the element
of predominance presents is whether ‘the issues which may be jointly tried, when
7
compared with those requiring separate adjudication, are so numerous or substantial that
the maintenance of a class action would be advantageous to the judicial process and to
the litigants.’ ” (Brinker, at p. 1021; accord, Duran, supra, 59 Cal.4th at p. 28.) In
addition, the trial court must consider whether individual issues, including those arising
from affirmative defenses, can be managed fairly and efficiently. (Duran, at pp. 28–29;
Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 922–923; Martinez v.
Joe’s Crab Shack Holdings (2014) 231 Cal.App.4th 362, 378 (Martinez).)
We review the class certification ruling for an abuse of discretion. (Ayala, supra,
59 Cal.4th at p. 530; Brinker, supra, 53 Cal.4th at p. 1022.) Trial courts are afforded
great discretion in granting or denying certification because they are ideally situated to
evaluate the efficiencies and practicalities of permitting group action. (Brinker, at
p. 1022; Sav-On, supra, 34 Cal.4th at pp. 326–327.) Generally, the trial court’s ruling
will not be disturbed unless it is unsupported by substantial evidence or rests on improper
criteria or erroneous legal assumptions. (Ibid.; Linder v. Thrifty Oil (2000) 23 Cal.4th
429, 435–436.) In Ayala, our Supreme Court explained: “We review the trial court’s
actual reasons for granting or denying certification; if they are erroneous, we must
reverse, whether or not other reasons not relied upon might have supported the ruling.”
(Ayala, at p. 530; accord, Alberts v. Aurora Behavioral Health Care (2015)
241 Cal.App.4th 388, 399; Martinez, supra, 231 Cal.App.4th at p. 373.)
II. Duran
In Duran, our Supreme Court discussed the use of surveys and statistical sampling
as evidence to prove class action claims. “[I]f sufficient common questions exist to
support class certification, it may be possible to manage individual issues through the use
of surveys and statistical sampling. Statistical methods cannot entirely substitute for
common proof, however. There must be some glue that binds class members together
apart from statistical evidence. While sampling may furnish indications of an employer’s
centralized practices [citation], no court has ‘deemed a mere proposal for statistical
8
sampling to be an adequate evidentiary substitute for demonstrating the requisite
commonality, or suggested that statistical sampling may be used to manufacture
predominate common issues where the factual record indicates none exist.’ ” (Duran,
supra, 59 Cal.4th at p. 31; accord, Martinez, supra, 231 Cal.App.4th at p. 379; see Tyson
Foods, Inc. v. Bouaphakeo (2016) 136 S.Ct. 1036, 1049 [“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.”].)
Our Supreme Court in Duran noted that “the outside salesperson exemption has
the obvious potential to generate individual issues because the primary considerations are
how and where the employee actually spends his or her workday.” (Duran, supra,
59 Cal.4th at p. 27.) The court stressed that “a statistical plan for managing individual
issues must be conducted with sufficient rigor.” (Duran, at p. 31; accord, Mies v.
Sephora U.S.A., Inc. (2015) 234 Cal.App.4th 967, 985 (Mies).) The court noted that “[i]f
the variability [in the class] is too great, individual issues are more likely to swamp
common ones and render the class action unmanageable.” (Duran, at p. 33.)
III. The Trial Court’s Conclusions Regarding the 2015 Survey
A. The 2015 Survey and Hildreth’s Criticism
Plaintiffs’ theory of liability is that the Bank’s uniform classification of the BBO
position as exempt was unlawful because the position allegedly was designed as an inside
sales/telemarketing job, and realistically could only be performed by spending the
majority of time inside the bank. In its order denying certification, the court noted that
plaintiffs’ trial plan reported “[t]he stated purpose of the Krosnick survey was to
determine the appropriate size of a sample group of witnesses needed to testify at trial in
order to prove, by statistical inference [citation], Plaintiffs’ theory of liability and an
aggregate amount of restitution.”
The trial court found plaintiffs satisfied the requirements of ascertainability,
numerosity, and adequacy of representation. But the court ruled plaintiffs failed to show
9
common questions of law or fact predominated over individual issues. In addition, the
court concluded class treatment was not superior to other means of resolving the claims
because individual issues could not be properly managed. We find these conclusions are
supported by substantial evidence, primarily in the form of Hildreth’s declarations.
Krosnick reported that 160 class members were randomly selected for the survey.
A total of 87 interviews were completed6 and the response rate for the survey was 54
percent. He indicated that 95.45 percent of the respondents reported spending 50 percent
or less of their work time performing outside sales-related activities. Ninety point ninety-
one percent of respondents who stated they spent 50 percent or more of their work time
performing sales-related activities also reported that they worked an average of 63.18
hours per week. Using the survey data, confidence intervals and margins of error were
estimated for sample sizes relating to these findings, ranging from 15 to 50 people, with
the results set forth in chart form. For example, as to the issue of time respondents had
spent performing outside sales-related activities, a sample size of 15 people resulted in a
margin of error of 11.01 percent, whereas a sample size of 50 people had a margin of
error of 5.53 percent.
Hildreth summed up his opinion of the 2015 Survey by concluding Krosnick’s
“proposed ‘menu’ of potential sample sizes and accompanying margins of error is
completely inaccurate. In reality, far larger sample sizes than those proposed would be
required to approach the margins of error presented by Dr. Krosnick . . . .” Hildreth
faulted the survey for having various forms of bias and error, as well as for its improper
use of survey data. For example, Hildreth opined that the 2015 Survey was “a textbook
example of self-selection bias” because it is based on a self-selected sample of
respondents. By subtracting 40 hours from Krosnick’s weekly hour figures, Hildreth also
6
As the trial court noted, most of the tables in the technical appendix show the
number of respondents as 66 rather than 87.
10
showed that the 2008 Survey produced estimates alternatively calculated at 13.82 or
14.39 overtime hours per week, whereas the 2015 Survey produced estimates of 23
overtime hours per week. Hildreth observed: “This significant difference between the
two surveys, from the same population, is of an order of magnitude that illustrates the
degree to which the statistics produced by the Krosnick surveys are not reliable.” He also
concluded that Krosnick had not offered any scientific or tested explanation as to why
such a dramatic difference would have been produced by surveying the same population
with the same questions.7
Hildreth opined that by comparing the total hours worked per week instead of
average overtime hours per week, Krosnick had masked the extent to which the values in
the two surveys differed. Krosnick’s methodology minimized the difference between the
two surveys’ results and the associated estimated margins of error. Hildreth’s analysis
demonstrated that a statistical comparison of the overtime hours only (versus total hours
worked) showed that the responses given by the same respondents “are so different they
might as well be completely unrelated.” He concluded that if Krosnick’s methodology
were used to estimate the average hours of overtime worked per week, “testimony from
the whole putative class would potentially be required to produce an acceptable relative
or absolute margin of error . . . .”
B. The Trial Court’s Reasoning
The trial court started from the premise that in the absence of a viable “trial ready”
trial plan, “certification must be denied.” The court first noted the need for plaintiffs to
show predominance, which was contingent on the 2015 Survey data: “Plaintiffs need the
survey to support selection of a sample size for the liability phase, to provide a basis for
7
Hildreth also reported that 18 individuals responded to both the 2008 Survey and
the 2015 Survey. The average for the 18 matched responses from the same individuals
shows an increase in the purported average hours worked per week by an average of 5.8
hours. All but two individuals had changed their estimates, with six people reporting
fewer hours and 10 others increasing the hours they worked.
11
an aggregate restitution determination and also, in this case, to provide some comfort to
the court that [the Bank’s] affirmative defense will not lead to a proliferation of mini[]
trials in the first phase of the case.”
The trial court then focused on manageability, specifically, on the need for the trial
plan to adequately address both liability with respect to plaintiffs’ prima facie case, as
well as the Bank’s affirmative defense of the outside sales exemption. While initially
satisfied with the manner in which the proposed trial plan had anticipated addressing the
Bank’s affirmative defense, the court concluded plaintiffs could not establish a prima
facie case as to liability because the 2015 Survey data was unreliable for any purpose.
Second, even if the liability phase was allowed to proceed, the trial court
determined that there was no manageable way to determine an aggregate restitution
award using representative sampling because “the sample size is not scientifically
supported for this purpose.” The damages phase of the trial would thus require testimony
from each class member, leading to a “host of ‘mini trials.’ ” Finally, because of the
unreliability suggested in the comparison between the 2008 and 2015 surveys, the court
concluded that, as with the issue of restitution, “the affirmative defense [that at least some
class members in fact worked most of their time outside the office] would [also] appear
to require a host of ‘mini trials.’ ”
The trial court found the differences between the responses to the 2008 Survey and
the responses to the 2015 Survey, along with Krosnick’s use of total average hours
worked per week rather than average overtime hours worked per week, to be dispositive
of the certification issue. The first court noted that the 2008 Survey solicited essentially
the same information as the 2015 Survey with respect to the total hours worked per week,
yet the responses to the 2008 Survey yielded an average of 53.76 hours, whereas the 2015
Survey yielded an average of 63.18 hours. We concur with the court’s observation that
“[e]ven a non-mathematician can readily see that this is a difference of nearly ten hours
per week, which is a large number in this context.”
12
The trial court found this discrepancy to be “tangible evidence” supporting
Hildreth’s arguments regarding self-interest bias, tainting subject matter areas that were
covered by the 2015 Survey only, namely, whether respondents spent most of their time
inside or outside of the office. The bias identified by Hildreth could have skewed all the
survey results upwards, potentially requiring a larger sample size for plaintiffs to prove
their liability theory, as well as increasing the number of class members the Bank would
call to establish its affirmative defense.
The trial court found that a separate problem arose from plaintiffs’ proposal to use
the same randomly selected witness group for the fixing of aggregate damages. The
court noted that Krosnick had used average total hours worked per week rather than
average overtime hours worked per week in his calculations. This choice was
problematic because the difference in total hours worked “yields significantly different
variation calculations than a comparison between far smaller numbers—here, the
overtime hours derived by subtracting 40 from the total hours.” The court agreed with
Hildreth that in the context of restitution, the focus had to be on overtime hours, not total
hours worked. The variation within the class would be much greater in the overtime
context, and “the necessary sample size needed to achieve the relative margin of error
found acceptable by the court in [Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th
715 (Bell)] is driven up dramatically.”8
The trial court concluded that the 2015 Survey results “do not support the
conclusion that—given the small class size in this case—a sample group of any size
smaller than the entire class could ever yield an aggregate restitution award ‘as a matter
of just and reasonable inference.’ [Citation.] In other words, the experience of each class
member would need to be tested not only to determine his or her individual share, but
8
In Bell, the parties’ experts estimated average weekly overtime hours at 9.4
hours, with a plus/minus 0.9-hour margin of error. Bell involved a random sample of
nearly 300 individuals. (Bell, supra, 115 Cal.App.4th at pp. 753, 755–756.)
13
also to arrive at an aggregate amount of restitution in the first place. This, of course, has
severe manageability implications.” Although the court found that a survey like the 2015
Survey could theoretically be used to support a finding as to whether the Bank’s policy of
classifying all class members as exempt employees was lawful, it concluded that a
comparison between the overlapping portions of the 2008 and 2015 surveys
“demonstrates that the data from the 2015 Survey is not sufficiently reliable for
Plaintiffs’ intended use.”
We agree with the trial court that, at this point, the viability of plaintiffs’ motion to
proceed as a class action is critically dependent on the evidentiary value of the 2015
Survey. As the Duran court noted, the lower court in the prior trial “received no evidence
establishing uniformity in how BBOs spent their time.” (Duran, supra, 59 Cal.4th at
p. 32.) The disparity between the estimated overtime hours worked per week as reported
in the 2008 and 2015 surveys (approximately 14 hours in 2008 versus 23 hours in 2015)
is more than enough to convince us that substantial evidence supports the court’s decision
to deny certification. The overtime figure nearly doubled in the 2015 Survey, with a
difference of almost 10 hours per person per week on average. Plaintiffs do not
satisfactorily explain this discrepancy, which the lower court found to have “taint[ed] the
use of the 2015 Survey not only on the subject matter where the two surveys overlap but
also on the subject matter covered only by the 2015 Survey—to wit, where respondents
say they spent most of their time, whether it was inside or outside the office.” We
conclude the court did not abuse its discretion in ruling that the 2015 Survey is unreliable
for the purpose of showing that common issues would predominate at trial. We proceed
to specifically address plaintiffs’ arguments on appeal.
IV. Plaintiffs’ Arguments
A. Whether the Trial Plan Adequately Manages the Affirmative Defense
As part of its ruling, the trial court stated that plaintiffs’ trial plan “fails to resolve
the manageability issues posed by the affirmative defenses, and specifically the argument
14
that at least some of the class members in fact worked most of their time outside the
office.” Plaintiffs assert this passage indicates the court erroneously believed that a
liability determination in a misclassification case must identify which class members
were misclassified. They claim their theory of the case, that the Bank did not have a
realistic expectation that its BBOs would primarily engage in outside sales activities, is
fully consistent with Duran, and assert any finding of liability on this point would be
equally applicable to all BBOs.
Plaintiffs rely heavily on Justice Liu’s concurrence in Duran, supra, 59 Cal.4th 1
and on Martinez, supra, 231 Cal.App.4th 362 in asserting that “ ‘the ultimate question is:
what are “the realistic requirements of the job?” ’ ”9 Plaintiffs argue that liability in a
misclassification case is determined based not on how employees actually spend their
time, but rather on whether the employer realistically expected employees to spend the
majority of their time on exempt duties. In their view, if an employer did not realistically
expect employees to spend the majority of their time on exempt duties, then its
classification of the position as exempt is unlawful and liability is thereby established for
the entire class, even for those class members who actually spent the majority of their
time on exempt duties.
Justice Liu’s concurrence did not alter the Duran court’s conclusion that “the
question is ‘first and foremost’ how the employee’s time is actually spent.” (Duran,
supra, 59 Cal.4th at p. 27.) Instead, the concurrence was drafted “to further elucidate the
proper inquiry at the class certification stage of an employee misclassification case and
the duty of the trial courts to manage individual issues in a class action trial. (Id. at
9
Indeed, in their reply brief plaintiffs assert that their appeal is centered on “how
to interpret Justice Liu’s statement in Duran that an employee who exceeds the 50%
outside-sales threshold should be classified as non-exempt—i.e., eligible for overtime
pay—if devoting that much time to outside sales is not a realistic requirement of the job.”
A concurrence is not the opinion of the court and is not binding. (People v. Amadio
(1971) 22 Cal.App.3d 7, 14.)
15
p. 51.) Justice Liu sought to reemphasize that in some cases, an employer’s “realistic
expectations” or the “realistic requirements of the job” may be shown by common proof.
(Id. at pp. 52–53.) Specifically, he sought to address “[w]hat would it mean to ‘manage
individual issues’ in the context of an employee misclassification case?” (Id. at p. 55.)
He then set forth two ways for a trial court to frame a representative sampling approach
to proving class liability. First, he advised that consideration of individual issues should
inform the design of any sampling or similar statistical approach. Second, he
acknowledged that a defendant is entitled to raise individual issues that challenge the
results of a valid sampling plan as implemented. (Duran, at pp. 55–56.) It does not
appear to us that the concurrence is inconsistent with the majority opinion or that it
suggests a different standard should apply when analyzing certification motions.
In Martinez, the appellate court concluded the trial court abused its discretion by
denying the plaintiffs’ motion for certification of a class of salaried managerial
employees who had allegedly been misclassified. The plaintiffs alleged that the
employer’s operations, hiring, training, and other practices were uniform throughout the
restaurant chain. Because the restaurants were typically understaffed, managers routinely
filled in where needed, working as cooks, servers, bussers, hosts, stockers, bartenders,
and kitchen staff. (Martinez, supra, 231 Cal.App.4th at pp. 368–369.) Each of the
plaintiffs’ declarants estimated he or she had spent the majority of time performing such
hourly tasks, but later admitted they were unable to estimate the amount of time spent on
exempt versus nonexempt tasks. (Id. at pp. 369, 371.) The trial court found all putative
class members performed similar duties and responsibilities pursuant to a finite task list.
(Id. at p. 371, fn. 12.) But it concluded the plaintiffs’ claims were not typical and they
were inadequate class representatives because they were unable to estimate the number of
hours spent on individual exempt and nonexempt tasks and their job duties varied from
day to day. Common questions did not predominate because there were “significant
individual disputed issues of fact relating to the amount of time spent by individual class
16
members on particular tasks,” and such variability would require adjudication of the
affirmative defense of exemption for each class member. (Id. at pp. 371–372.)
The Court of Appeal reversed. Citing Ayala, supra, 59 Cal.4th 522, Martinez
cautioned that courts should “avoid focusing on the inevitable variations inherent in
tracing the actions of individuals and to instead focus on the policies—formal or
informal—in force in the workplace.” (Martinez, supra, 231 Cal.App.4th at p. 380.) The
plaintiffs’ theory of liability—that by classifying all managerial employees as exempt, the
employer had violated overtime laws—was “ ‘by its nature a common question eminently
suited for class treatment.’ ” (Ibid.) Significant common issues pervaded: the employer
operated a chain of restaurants governed by the same policies and procedures; exempt
employees were expected to work at least 50 hours per week; and the parties had
identified a finite task list, suggesting jobs were “ ‘highly standardized.’ ” (Ibid.) The
“gist of plaintiffs’ claim” was that “regardless of the patina of managerial discretion
expressed in their job description, they functioned consistently as utility workers, cross-
trained in all tasks, who could be assigned to fill in where needed without affecting the
labor budget or requiring overtime compensation. The crux of the matter, therefore, lies
in whether a typically nonexempt task becomes exempt when performed by a managerial
employee charged with supervision of other employees.” (Id. at p. 381, fn. omitted.)
Martinez also reasoned that under Sav-On, “courts in overtime exemption cases
must proceed through analysis of the employer’s realistic expectations and classification
of tasks rather than asking the employee to identify in retrospect whether, at a particular
time, he or she was engaged in an exempt or nonexempt task.” (Martinez, supra,
231 Cal.App.4th at p. 382.) “The court here must ask whether [the employer’s] realistic
expectations and the actual requirements of the job resulted in the exercise of
supervisorial discretion by managerial employees or instead relegated employees to [a]
utility role.” (Id. at p. 383.) By focusing on the employees’ inability to identify what
tasks they performed and for what purpose, Martinez concluded the trial court had failed
17
to consider Sav-On’s explicit direction that courts need not assess an employer’s
affirmative exemption defense against every class member’s claim before certification.
(Ibid., citing Sav-On, supra, 34 Cal.4th at pp. 337–338.)
Martinez is distinguishable in that the central dispute here is where BBOs spent
the majority of their time, and not on whether they spent the majority of their time on
exempt tasks. Unlike Martinez, the crux of the matter here is not task classification.
Instead, the issue is how much time each putative class member spent outside the Bank’s
locations. As the trial court stated, “a declaratory judgment that the policy was unlawful
would resolve nothing because to determine restitution each claimant would have to be
called to testify as to where he or she spent most of their time and how much overtime
they worked. Thus a declaratory judgment on the policy, standing alone, serves no
purpose.” The court conceded that the result might have been different “if a bona fide
statistical survey provided reason to believe that only a few class members may have
been properly classified and those could be readily identified; but the survey evidence
here provides no such assurance.”
In our view, the trial court properly focused on manageability issues pertaining to
the affirmative defenses, while fully understanding plaintiffs’ theory of liability.10 In the
10
The trial court accurately described plaintiffs’ theory of the case as follows:
“Plaintiffs assert that because the BBO position was designed, managed and monitored as
an inside sales job, and as a consequence that is how the BBOs uniformly spent their
time, Defendant violated mandatory overtime wage laws by classifying all BBOs as
exempt. They intend to show, if given the chance, that it was not realistic for Defendant
to expect that putative class members would be able to perform the duties and meet the
production goals of the BBO position by ‘customarily and regularly work[ing] more than
half the working time away from the employer’s place of business selling tangible or
intangible items or obtaining orders or contracts for products, services or use of facilities’
[citation]. In other words, Plaintiffs intend to show that Defendant ‘had a consistently
applied policy or uniform job requirements and expectations contrary to a Labor Code
exemption.’ [Citation.] Under this theory, the focus of the liability inquiry would be on
the ‘realistic requirements of the [BBOs] job’ [citation], i.e., whether it was realistic for
Defendant to expect that the BBOs would be ‘outside’ more than half of the time, given
18
portion of the court’s decision about which plaintiffs complain, the court observed that if
“the vast majority of the class sample would credibly testify that most of their time was
spent inside the office and the confidence interval was relatively narrow, then one might
infer that the number of witnesses the defense would call on its affirmative defense would
be relatively small. But if the results relied upon by Krosnick are as unreliable as
suggested by a comparison of the 2008 and 2015 surveys, then the court cannot take
much comfort in the notion that Plaintiffs’ trial plan adequately manages the affirmative
defenses. As with the issue of restitution, the affirmative defense would appear to require
a host of ‘mini trials.’ ”11
Even if the trial court did err in its assessment of plaintiffs’ theory, in the same
section of its decision containing the passage quoted above, the court also faulted their
trial plan because, given the overall unreliability of the 2015 Survey, there was no way
for plaintiffs to establish a prima facie case on the issue of liability. Additionally, the
court concluded that even if the liability phase were to proceed, plaintiffs would not be
able use representative sampling to establish an aggregate restitution award. Thus, the
court found multiple flaws in plaintiffs’ trial plan.12
the nature of their job duties and performance expectations. Such a finding would be
based on evidence of the actual experiences of putative class members who were ‘getting
the job done’ as to where they spent their time doing so.”
11
Trial courts must determine whether individual issues, including those arising
from affirmative defenses, can be managed fairly and efficiently. The Supreme Court in
Duran stated: “If statistical evidence will comprise part of the proof on class action
claims, the court should consider at the certification stage whether a trial plan has been
developed to address its use. A trial plan describing the statistical proof a party
anticipates will weigh in favor of granting class certification if it shows how individual
issues can be managed at trial.” (Duran, supra, 59 Cal.4th at pp. 31–32.) However, the
court cautioned, “a class action trial management plan may not foreclose the litigation of
relevant affirmative defenses, even when these defenses turn on individual questions.”
(Id. at p. 34.)
12
To the extent plaintiffs criticize the trial court for relying on Teamsters v. United
States (1977) 431 U.S. 324, we find no error. The court did not rely on Teamsters in its
19
It is established that even when the party proposing a class asserts “the employer
consistently imposed a uniform policy or de facto practice on class members, the party
must still demonstrate that the illegal effects of this conduct can be proven efficiently and
manageably within a class setting.” (Duran, supra, 59 Cal.4th at p. 29; see Koval v.
Pacific Bell Telephone Co. (2014) 232 Cal.App.4th 1050, 1060 [“existence of a uniform
policy does not limit a trial court’s inquiry into whether class action treatment is
appropriate”] and Arenas v. El Torito Restaurants, Inc. (2010) 183 Cal.App.4th 723, 734
[“trial court concluded plaintiffs’ theory of recovery—that managers, based solely on
their job descriptions, were as a rule misclassified—was not amenable to common proof”
given evidence employees’ “duties and time spent on individual tasks varied widely”].)
“To the contrary, ‘courts have routinely concluded that an individualized inquiry is
necessary even where the alleged misclassification involves application of a uniform
policy. ” (Mies, supra, 234 Cal.App.4th at p. 984.)
Plaintiffs also fault the trial court for rejecting its proposal to address how to
proceed if evidence on the average hours worked produced an unacceptable margin of
error. In that case, they had proposed the parties could continue to submit evidence “until
the margin of error reached an acceptable number.” The trial court rejected this proposal,
stating that “it is too late in this litigation for another ‘provisional’ certification order that
is subject to a further development of a trial plan.” Given that this case has lasted well
over a decade and that one trial has already occurred and been reversed, and that two
appellate court decisions on this matter have already been issued, we fully support the
trial court’s sentiment on this point. Additionally, the Supreme Court in Duran
specifically stated: “The trial court is of course free to entertain a new certification
motion on remand, but if it decides to proceed with a class action it must apply the
decision, but instead was simply quoting a passage in Duran in which the Supreme Court
criticized plaintiffs for relying on Teamsters.
20
guidelines set out here,” including assessing manageability of affirmative defenses.
(Duran, supra, 59 Cal.4th at p. 33, italics added.)
B. Variation in Restitution
Plaintiffs also claim the trial court erred by finding that variation in restitution
defeats certification. They start off on the wrong foot, however, by asserting that the trial
court “held that plaintiffs satisfied the requirements for predominance and manageability
with respect to liability.” Actually, the court found that the 2015 Survey, if it had been
the only survey, might have been used to measure the extent of variation within the class
on the issue of whether BBOs spent more than half of their time in the office. However,
this observation was tempered by the court’s acceptance of Hildreth’s opinion that
self-interest bias caused respondents to overestimate the time spent inside the office.
This bias, the existence of which was supported by the discrepancies between the two
Krosnick surveys, suggested to the court that individual variations would necessitate a
larger sample size than plaintiffs suggested. Thus, even apart from restitution, the court
did not find that the 2015 Survey supported a finding of predominance and manageability
with respect to liability.
On the issue of restitution, plaintiffs assert the trial court erred in concluding the
survey was going to be used as the sole basis for fixing the amount. However, even
plaintiffs admit that the testimony of the randomly drawn sample “would have been a
substantial factor in the court’s ultimate determination of the amount of restitution.”
Plaintiffs proposed establishing aggregate restitution by using the trial court’s finding of
average overtime hours worked by a representative witness group (the size of which
would be based on the flawed 2015 Survey), which would then be extrapolated and
applied in the second phase of trial to the individual BBOs’ payroll records to determine
each individual’s recovery.
We cannot conclude the trial court committed legal error in its assessment of the
impact the 2015 Survey evidence would have in the manageability of the restitution
21
phase of trial. Whether the court was correct in concluding that no sample of any size
less than the entire class could ever yield an aggregate restitution award, the fact remains
that the 2015 Survey evidence offered by plaintiffs was seriously flawed, leaving the
court with no alternative except to anticipate that every class member would need to
testify.13 The court properly rejected Plaintiffs’ plan for determining aggregate restitution
because the plan rested on a survey that was wholly unreliable.
Plaintiffs also contend the trial court erred by holding them to a higher standard
than required by law with respect to the determination of an aggregate restitution award.
Contrary to plaintiffs’ argument, the court was not holding them to a higher standard.
Instead, it was stating its view of the state of the evidence, specifically, that the 2015
Survey was worthless as a sampling tool, necessarily requiring each class member’s
testimony as to restitution.
V. Rejection of 2015 Survey
Plaintiffs use the final arguments in their opening brief to address the central issue
in this appeal, namely, whether the trial court erred in rejecting the 2015 Survey. They
first assert that the survey “satisfied all of Duran’s conditions for the use of statistical
evidence in a class action.” As they note, however, one of these requirements is that the
margin of error cannot be “intolerably high.” (Duran, supra, 59 Cal.4th at p. 46.)
The trial court rejected the 2015 Survey because of the difference between the
average hours worked as reported in the 2008 Survey versus the 2015 Survey. Again, the
2008 Survey reported an average of approximately 54 hours per week, while the 2015
Survey reported an average of approximately 63 hours per week. Because the court
could not reconcile the differences between the two surveys, it concluded the 2015
13
Plaintiffs’ related argument that the burden should have been on the Bank as the
employer to come forward with evidence as to the number of hours worked because it
had kept inaccurate or incomplete records has been addressed previously in Duran,
supra, 59 Cal.4th at p. 41.
22
Survey estimate of the amount of time BBOs were engaged in outside sales work was
also unreliable. Plaintiffs argue that in doing so “the trial court exercised its discretion in
a way contrary to the internal rules governing statistical analysis.” Their arguments are
not persuasive.
Plaintiffs first attribute the discrepancy in the memories of the class members to
“the passage of time,” noting the class period goes back to December 1997. Thus, in
2015, members were being asked to recall events up to 17 years earlier.14 Plaintiffs
appear to urge the differences do not matter here because these same discrepancies will
occur whether the trial proceeds on an individual basis or a class action basis.15 We
disagree. In individual actions, the effects of the passage of time upon each witness’s
memory can be explored by the fact finder. In a class action, it is impossible to do so,
and plaintiffs do not advance any scientific principles suggesting that statistical evidence
can be used to accurately reflect the impact of the passage of time on survey respondents
in a manner that can be extrapolated to the class as a whole. While plaintiffs argue again
that the burden of uncertainty should not be shifted to them because the Bank failed to
keep accurate records, the fundamental inquiry here is whether this matter can proceed as
a class action, not which party is to blame for the fact that plaintiffs’ evidence fails to
support a finding of commonality.
Plaintiffs also argue that the difference between the average hour estimates from
the two surveys is not important because the estimates independently have low relative
margins of error. They note the 2008 Survey had a relative margin of error of 13.50
percent while the corresponding margin of error in the 2015 Survey was 14.96 percent,
14
The trial court was well aware of this point, noting the “gaps in the passage of
time between the underlying events and the surveys and between the surveys themselves
are unusually large . . . . Some of the problems here may be traced to this circumstance.”
15
As an aside, this argument does little to inspire confidence in the 2015 Survey
results.
23
observing that we approved a 9.57 percent relative margin of error in Bell, supra,
115 Cal.App.4th 715. However, the margins of error are artificially low because they are
based on the total hours worked, and not overtime hours. Further, it is the comparison of
the two surveys that reveals the inconsistency, irrespective of whether each survey is
internally consistent within itself.
Plaintiffs’ final argument—that the Bank and its attorneys skewed the results of
the 2015 Survey by sending the Biggs letter to putative class members—is not well taken.
Plaintiffs do not cite to any evidence in the record suggesting that the letter “infuse[d] the
survey with bias.”
In sum, the trial court did not abuse its discretion in concluding that the wide
discrepancy between the 2015 and 2008 survey results demonstrated that the 2015 Survey
was unreliable, and served as tangible evidence that the survey results were tainted by
bias. Accordingly, substantial evidence supports the court’s finding that the survey data
was unreliable as evidence of uniformity in how BBOs spent their time, and unreliable as
statistical support for selecting a representative witness group to testify as to liability or
restitution without causing the inquiry to devolve into a multiplicity of individual mini
trials, especially in light of the Bank’s right to call witnesses outside the sample to
establish its affirmative defense.16
16
After oral argument and the submission of this case, plaintiffs requested this
court to consider an appellate case, now published, on employment class actions. The
case is ABM Industries Overtime Cases (Dec. 11, 2017, A132387, A133077, A133695)
___ Cal.App.5th ___ [2017 WL 6887032] (ABM Industries). We have decided to review
the case and find it clearly distinguishable from our matter.
First of all, ABM Industries involved the denial of class certification where the
employees’ witness, Woolfson, the sole expert on either side concerning the issue of class
certification, was found by the trial court to be unqualified. The employer had offered no
expert to challenge the employees’ witness. Indeed, “ABM had failed to lodge a formal
objection to the evidence [of the employees’ expert], move to strike the [expert’s]
declaration, depose Woolfson on his credentials or conclusions, and/or provide their own
contrary expert opinion.” (ABM Industries, supra, ___ Cal.App.5th ___ [2017 WL
24
DISPOSITION
The order denying class certification is affirmed.
6887032, at p. 5].) Based on the record, the appellate court concluded the trial court had
engaged in an abuse of discretion in excluding the employees’ expert evidence. (Id. at
p. 6.)
In our case, the trial court did not exclude Krosnick’s expert evidence.
Importantly, the trial court fully considered the evidence offered by both sides’ expert
witnesses. In a lengthy opinion, the court found the certification issue focused on the
credibility of expert testimony and concluded the Bank’s witness was more credible, as
noted in our discussion.
Additionally, in ABM Industries, the trial court rulings on the admissibility of the
expert Woolfson’s testimony had a serious impact on the certification question. “[W]e
conclude that the trial court’s denial of class certification—including its decision
regarding the admissibility of the Woolfson materials—rested on improper criteria and
erroneous legal assumptions, amounting to an abuse of discretion.” (ABM Industries,
supra, ___ Cal.App.5th ___ [2017 WL 6887032, at p. 18].)
In contrast, our ruling enjoys the benefit of full review of the employment issues at
U.S. Bank not only by this court on two occasions, but also the full assessment by our
Supreme Court. In a word, we find the circumstances of the BBOs to be easily
distinguishable from the circumstances of the janitors employed by ABM Industries
discussed in plaintiff’s latest authority.
25
_________________________
Dondero, J.
We concur:
_________________________
Humes, P. J.
_________________________
Margulies, J.
A148817 Duran et al. v. U.S. Bank National Association
26
Trial Court: Alameda County Superior Court
Trial Judge: Hon. Wynne Carvill
Counsel:
Wynne Law Firm, Edward J. Wynne, for Plaintiffs and Appellants.
Carothers Disante & Freudenberger LLP, Timothy M. Freudenberger, Alison L.
Tsao, Kent J. Sprinkle, Robin E. Largent, Teresa W. Ghali, for Defendant and
Respondent.
A148817 Duran et al. v. U.S. Bank National Association
27